France Lose Decade

French competitiveness: France's lost decade | The Economist

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French competitiveness

France's lost decade

A once-great industrial power looks for inspiration across the Rhine

Feb 3rd 2011 | from the print edition

AS GERMANY powers ahead, France is feeling blue. Its share of European merchandise exports has fallen from 15.7% to 13.1% in a decade. Last month a study comparing French exporters with German ones landed on the desk of France’s economy minister. It makes grim reading. In 2000 French exports were 55% of Germany’s; now they are barely 40%. France is more competitive (a measure of price, quality and demand) in only three industries: aerospace, drinks and information technology. German cars, trucks and a host of other manufactured goods are streets ahead (see article). Why? Until around 2003 France was holding its own, making up in pricing what it lacked in quality. However, there was a “rupture” in competitiveness from around 2000, says the report. Germany was battered by the dotcom bust; that made France complacent. It clung to its 35-hour working week and saw the minimum wage creep up by 17% between 2002 and 2005. The social costs of Another hard day at work labour borne by French employers are among the highest in the euro zone: €50.3 for every €100 paid to a worker, compared with €28 in Germany, according to Medef, a French employers’ lobby. France has more industrial companies than Germany, but many are little more than a man, a workshop and a dog. Fewer than a third of them spend money on research and development (R&D); nearly half of those in Germany do. France lacks the German knack of meshing big companies with their suppliers. It has no equivalent of Germany’s Fraunhofer and Max Planck research institutes, which collaborate closely with industry. Its companies have also made less use of cheap central European labour: the region supplies France with only 5.5% of its imports of base and intermediate goods, compared with 18%...