Market Overview

France and the U.S. are long-standing, close allies. Despite occasional differences of

views, the U.S. and France work together on a broad range of trade, security and

geopolitical issues. French presidential and legislative elections in mid-2007 will

probably not change significantly the French-American relationship, though new

personalities and policies certainly carry the potential for at least some evolution.

France is the world’s sixth largest economy. With an annual GDP (USD 2.0 trillion in

2005) about one-fifth that of the United States, France was our ninth largest trading

partner, accounting for USD 50.6 billion of U.S. exports of goods, services and income

receipts in 2005, as reported in U.S. Department of Commerce data. France is a

member of the G-8, the European Union, the World Trade Organization and the OECD,

confirming its status as a leading economic player in the world:

• U.S. exports of goods to France in 2005 totaled USD 22.25 billion, up 5.2 percent

from 2004, accounting for 2.45 percent of worldwide U.S. exports of goods and

12.1 percent of U.S. exports of goods to the European Union.

• U.S. exports of services to France in 2005 totaled USD 13.23 billion, up 1.1

percent from 2004, accounting for 3.5 percent of worldwide U.S. exports of

services in 2005 and 10.2 percent of U.S. exports of services to the European

Union.

• U.S. income receipts from France in 2005 totaled USD 15.15 billion, up 29

percent from 2004, accounting for 3.98 percent of worldwide U.S. income

receipts in 2005 and 11.66 percent of U.S. income receipts from the European

Union.

U.S. imports of goods and services from France plus U.S. income payments to France in

2005 totaled USD 63.89 billion, up 13.5 percent from 2004 and accounting for 2.6

percent of overall U.S. imports and income payments in 2005.

The trade balance on all bilateral transactions between the United States and France

can be viewed at:

[http://www.bea.gov/bea/international/bp_web/simple.cfm?anon=71&table_id=10&area_i

d=19]

France’s population of 63 million people has a high disposable income of USD 33,855

per capita. In 2005, French GDP grew by 1.4 percent in real terms. GDP in 2006 grew

at about an estimated 2.1 percent, the best in several years. The outlook for is

continued modest growth. Inflation remains low and under control at 1.7 percent for

2006.

Market Challenges

The French economy continues to struggle to grow at its potential, estimated at 2.3

percent per year. Sustaining growth at that rate will require further deregulation and

reduction of the role of the state in the economy. The GOF succeeded in reducing its

budget deficit in 2006, but needs to sustain that effort and also overcome public sector

employees’ resistance to pension reform and decentralization initiatives. The

introduction of the euro and advancing globalization have increased competitive

pressures on French companies and the French economy.

Analysts, including those in the GOF, cite continued weak investment as evidence of the

need to increase competitiveness through reforms, including further corporate tax cuts,

simplification of administrative procedures, loosening of the highly inflexible labor

market, and increased research and innovation.

Widely publicized riots in the fall of 2005 in the suburbs of major French cities and

student demonstrations in the spring of 2006 have increased the stakes and led to a

number of proposals to fight unemployment, especially among youths, but have also

highlighted the difficulties in reforming labor laws and integrating earlier waves of

immigrants. Some progress, though partially through government employment

programs, has been achieved, with unemployment having fallen to 8.6 percent at yearend

2006 from 10 percent in June 2005, but obviously more needs to be done. The

current election cycle makes government actions difficult to predict as candidates jockey

for position in the 2007 presidential race, which includes a wide array of parties and

candidates in the first round.

France has a tradition of highly centralized administrative oversight of its essentially

market-based economy. Total general government outlays amounts to about 54 percent

of GDP, one of the highest ratios among OECD countries

Ensuring that France’s investment climate is attractive to foreign investors is a priority for

the French government, which sees foreign investment as a way to create durable jobs

and stimulate growth. Investment regulations are simple, and a range of financial

incentives for foreign investors is available. Foreign investors say they are attracted to

France by its skilled and productive labor force; its central location in Europe with its free

movement of people, services, capital and goods (aided by the euro); good

infrastructure; and its technology-oriented society. However, investors must contend

with extensive government economic regulation and taxation, high social costs and a

complex labor environment. Highly developed employee rights and benefits can make

exit costs high for investors seeking to leave France.

Market Opportunities

Leading non-agricultural products considered to offer “best prospects” for U.S. business

in France are (in order of market size): Aircraft and Parts, Computer Services, Computer

Software, Industrial Chemicals, Travel and Tourism, Safety and Security Equipment,

Computer and Peripherals, Telecommunications Equipment, Books & Publishing, Water

Resources Equipment and Services, Medical Equipment, Automotive Parts Equipment,

Telecommunications Services, Plastics, Agricultural Machinery and Equipment,

Construction Equipment, Cosmetics, Education Services, Textile, Direct Marketing and

E-Commerce Business to Consumer.

The French market for food products is mature, sophisticated and well served by

suppliers from around the world. Additionally, increasing interest in American culture,

younger consumers and changing lifestyles are contributing to France’s import demand

for food products from the United States. Generally, high quality food products with an

American image can find a niche in the French market, particularly if they can gain

distribution through stores and supermarkets that specialize in U.S. or foreign foods.

Significant market opportunities for consumer food/edible fishery products exist in a

number of areas: fruit juices and soft drinks (including flavored spring waters), dried

fruits and nuts, fresh fruits and vegetables (particularly tropical and exotic), frozen foods

both ready-to-eat meals and specialty products), snack foods, tree nuts, “ethnic”

products, seafood (especially salmon and surimi), innovative dietetic and health

products, organic products, soups, breakfast cereals and pet foods and treats. In

addition, niche markets exist in France for candies, chocolate bars, wild rice and kosher

foods that have shown rising demand. Market opportunities for U.S. exporters also exist

for oilseeds, protein meals and other feeds, as well as for wood products and grains.

Market Entry Strategy

In general, the commercial environment in France is favorable for sales of U.S. goods

and services. Marketing products and services in France is similar to the approach in

the U.S., notwithstanding some significant differences in cultural factors and certain legal

and regulatory restrictions. Local partners are readily available in most sectors and

product lines, although competition can be fierce.

In support of U.S. commercial interests in France, the U.S. Embassy in Paris uses the

combined resources of various U.S. Government agencies to promote exports of U.S.

goods and services. It also supplies information on trade and investment opportunities,

and serves as an advocate for U.S. firms.