The following answers to questions posed by the California Chamber of Commerce are from Consul General Julie Duhaut-Bedos, Consulate General of France in Los Angeles, and Consul General Frederic Jung, Consulate General of France in San Francisco.
Please describe your thoughts on the unique relationship between France and California.
Our economies have in common their diversity: alongside a strong industrial sector, agriculture remains a major source of revenue while tourism is key for jobs. Our entertainment industries have a long-lasting history, and we also try to learn from your experience and know-how to make France a start-up nation.
Moreover, as the USA are a vital trade partner for France, California alone represents a bilateral trade worth more than $7 billion, which makes California our first American partner. While California exports mostly electronics, computers and medicine, France supplies California with electronics, food products and transportation goods.
But most important, France is the third largest foreign investor in California, representing 8% of total foreign direct investments.
All our major companies are present in California, because being part of California’s innovative environment is of utmost importance. They have created about 87,500 jobs.
To name just a few: Engie, Orange or Total—in the energy sector; LVMH, Pernod Ricard—food and luxury; Accord or Sodexo for tourism. They illustrate the diversity we have in common and our strong ties.
Impact of COVID-19
As countries all over the world feel the pandemic, what is the economic impact of COVID-19 on France?
Similar to the situation in most economies around the world, the Covid crisis had a major economic impact in France, causing a double supply and demand shock, with a 20% drop in activity in the first semester 2020. The closing of non-essential businesses and the impact of the pandemic on international travels during the peak tourist season undermined the economy, given the importance of this sector in the French economy.
The French government has been, since the first day of the crisis, dedicated to support its economy and especially its SMEs [small and medium-sized enterprises]. A set of emergency measures have been taken, the state unemployment scheme aimed at maintaining workers in place to limit the persistence of the effects of the crisis on the productive apparatus and skills, being its most important one.
Compared to other European economies, the recovery has been more vigorous post-lockdown, with a strong rise in consumption of goods and the resumption of industrial production at almost the same level as before the crisis.
Unfortunately,with the impact of the second Covid wave, the latest economic forecasts anticipated a 10% drop in 2020.
Our government remains more than ever dedicated to protect the French economy. Emergency measures are thus complemented by a massive €100 billion recovery plan over the next two years, which will be deployed in order to get the French economy back on its feet as quickly as possible and prepare it for 2030.
What are the challenges and opportunities facing France?
Beyond its economic recovery, France needs to continue its modernization in order to be even more attractive for foreign investors with the ambition to become and remain in the long term Europe’s No. 1 destination for foreign direct investments.
Since 2017, many reforms have been implemented to promote investment and employment and increasing purchasing power. A new tax environment for companies and individuals is being built, including a corporate tax rate decrease (from more than 33% to 25% in 2022), a massive reduction in production taxes, a limited flat tax on capital gains and a substantial reduction of the wealth tax now limited to passive immovable properties.
We are transforming our social model in order to restore flexibility to companies and promote education and professional mobility (adjusting pay and working time within a collective performance agreement, simplifying dismissals on economic grounds and making employment contract terminations less risky).
All these efforts have been rewarded: France was ranked the most attractive investment destination in Europe, according to the 2019 Ernst & Young attractiveness survey.
Our recovery plan is designed to continue this transformation: by supporting both supply (in activity, in competitiveness and in decarbonation) and demand, it supports job creation and gives all chances to restore, as soon as 2022, the level of economic activity and attractiveness of 2019.