high-level industry conference
Marignane, March 4, 2010
France has to remain a great industrial nation. She owes it to her history, she owes it to her economy, she owes it to her people. (…)
I’m utterly convinced that a country without industry has nothing to sell and ends up getting poorer. I dispute the idea that it’s right to give absolute priority to the service industries and abandon manufacturing, because once it’s gone, who will the service industries work for? Every nation developing today is building its growth on industrial development. (…)
This Etats Généraux has been a first. Incidentally, why a first? Because for too long in France people have associated the industrial sector with pollution, and factories with aggravation. We forgot to get the French to love industry. And we hadn’t had a comprehensive discussion on the future of industry. We hadn’t ensured that the debate on the future of industry penetrated the whole of society.
France will have no sustainable growth without a strong industrial sector. (…)
From 2000 on, France began a massive de-industrialization. It’s very simple: since then we’ve lost half a million jobs in industry. I give you these figures, anyone can come back to me with evidence to the contrary and I’ll be very happy to respond. Half a million industry jobs lost. Today, 13% of the French working population is employed in industry, it was 16% only ten years ago. Worse, we’re the most de-industrialized major European country. To anyone telling me this is happening in every country, no. Industry produces 16% of added value in France’s economy compared to 23% in Italy and 30% in Germany.
Would you care to explain to me why the added value of Germany’s manufacturing industry is fated to be twice as high as France’s? And how our Italian friends are doing so much better than us?
In 2007, our trade balance, excluding energy, became negative for the first time in 20 years! Our share of European exports has fallen by a quarter since 2000, i.e. our share compared with our European neighbours. I’m not talking about China, India, Mexico or Brazil. Since 2000, we have lost a quarter of our share of European exports. (…)
Personally I think there’s nothing inevitable about it. I think that for years our country has deliberately hindered its own industrial development. I say this, it’s serious, but I take responsibility for what I say. I try to look at the situation as it is, realistically. Yes, we have hindered our own industrial development first of all with the 35-hour week, even if this fact doesn’t please everyone. I respect everyone’s opinion, but, since the 35-hour week was imposed only on French industries and businesses, people shouldn’t be surprised at the result obtained! (…)
SOCIAL CHARGES/EXCESSIVE REGULATION
And we have second problem, the level of compulsory deductions from wages and salaries which is unique in Europe. The fact that the whole of our social protection is funded on the back of labour is an issue we can’t evade. If you increase labour costs, you outsource work. (…) And then I have to say a third thing – I accept my share of responsibility here – [there’s been] an uncontrolled accumulation of regulations in every sphere.
On top of all this, as Jean-François Dehecq has diagnosed, we have an industry which is innovating too little: 7% of our added value, whereas it’s over 19% in every country where industry is strong, Germany, Sweden and Finland. (…)
In France, industrial investment fell by 35% between 2000 and 2009. And it had already fallen before the crisis. I take an example: the car industry, that’s 10% of the French working population – I’m giving a global figure, i.e. including dealers and second-hand-car salesmen – that’s 2,100,000 jobs, I’m not talking just about the people on the shop floor. Do you realize that, in France, car industry investment has fallen every year, without exception, since 2000? (…)
Christine Lagarde is making the recovery of industry an absolute priority, because, let me make it clear: speeches aren’t what are going to get industry back on its feet. That’s for sure. What have we tried to actually do?
R&D TAX CREDIT
The R&D tax credit [designed to increase firms’ competitiveness by bolstering their R&D effort] is now 30%. Two thirds of this R&D tax credit goes to industry. And the R&D tax credit figured in the famous TEPA [Act in favour of labour, jobs and purchasing power] – and you know how controversial that was. It raised the R&D tax credit to 30% and, thanks to this, R&D expenditure in French industry hasn’t fallen in the crisis. So it’s working. The other day, I was talking to the Minister for the Budget and he was saying, “Oh dear, if you knew what the R&D tax credit is costing me”. I told him, “So much the better! 2.2 billion, so much the better because it proves it’s working ! If it’s reimbursed, it proves it… Because French industries are at last reinvesting in France!”
The taxe professionnelle [local business tax] has been abolished, this means industry is paying €2 billion less tax. My dear compatriots, ladies and gentlemen, the taxe professionnelle existed only in France. This tax was costing a company like Eurocopter just under €5 million in tax every year. What point can there be in wanting to defend industry and keep the taxe professionnelle? I say this to those who are my friends as well as to those who aren’t! I know that by abolishing the taxe professionnelle I haven’t pleased everyone. But do you know why I chose industries rather than local authorities? I’ll tell you. Because industries outsource, local authorities don’t. And that’s an enormous difference! (…)
The National Loan is going to allocate €6.5 billion specifically to industry, the car industry, aerospace, the digital sector, health and green chemistry. (…)
UNIVERSITY AUTONOMY/US NOBEL PRIZEWINNER
I’m not forgetting university autonomy. You know for me, as Head of State, when I see that Paris VII has attracted an American Nobel Prizewinner to its university, I tell myself that at last something is happening in French universities! (…) I’m pleased when I see teachers, researchers, foreign Nobel Prizewinners coming to France! And that was kick-started by university autonomy.
The key issue of the burden of French social contributions. Every manufacturer located near the Swiss, German, Belgian or Spanish border will tell you: on the other side of the border, an employee earns more and costs less. (…) You must understand that I’m not in any way at all advocating calling into question this reduction of the charges – which is very costly for the State budget – but at least ensuring that these cuts go first to our businesses most exposed to competition. And you see, 21% of employees are in manufacturing industry, and 14.7% of the cuts are for them.
We can no longer remain deaf to these facts. The way we fund our social protection is a major issue which we have to think more deeply about. We mustn’t confuse speed with excessive haste, but we can no longer go on basing our whole system exclusively on taxing labour, given the risks of outsourcing this presents. (…)
EXCESSIVE REGULATION/INDUSTRIAL MACHINERY MODERNIZATION
I’m thinking, for example, of the explosion of red tape. Public administrations love dealing with industry so much that every day they invent new constraints. So this month, March, we’re going to launch a mission to review industry’s regulatory framework and in September 2010 we’ll propose some concrete measures to lighten the burden and simplify things. (…) I can also tell you that we’re going to invest €500 billion of the National Loan to support companies’ investment in improving their production tools, in particular to make them less polluting. (…)
We’re also going to create a think-tank for strategic discussion for every major sector. We rescued the car industry because we applied our minds to the car sector. I’m asking Christian Estrosi, together with the major players in each sector, big companies, sub-contractors and competitiveness clusters, to form, and play an active role in, these strategic committees. For every sector, the Industry Ministry must be able to finance and provide detailed analyses. €300 million from the National Loan will be specifically earmarked for investment in this policy. Make no mistake about this, had General de Gaulle not wanted nuclear energy, there wouldn’t have been nuclear energy today. Had the State not taken a 33% stake in Les Chantiers de l’Atlantique, France would no longer have any shipbuilding. And if I hadn’t bought back 22% of Alstom in 2004, our country would no longer be building high-speed trains. I’m not saying that we’ve got to be present in every major sector, I’m saying that we are going to use €300 million from the National Loan so that sector by sector, with your minister, you look at what you need and what we’re going to do to help you. (…)
Also, we have to get European policy moving. I know from experience that it’s difficult. When I look at China, Brazil, India and the United States, they aren’t ashamed of having an industrial policy. It’s only in France that people say “heavens, how interventionist this president is!” But what are they talking about? Do you think the Chinese don’t care about their industry’s future? And do you think that the world’s greatest free-market nation, the United States, doesn’t care about the situation of its industry? That Mr Obama isn’t behind Boeing and so many others? It’s only in our country that people are surprised about a President of the Republic taking an interest in industry and wanting to defend industry. I’m going to ask Herman Van Rompuy and Manuel Barroso to take initiatives to promote a genuine European industrial policy.
It’s time; it just needs serious thought. First of all, I want to see a change in the way we look at European competition. There’s a European market, so competition has to be analysed in the context of the European market and not just in that of each of the 27 markets. Otherwise, how can major European groups be created? What major group can conquer export markets across the world without dominating its home market? And what’s the point of having built a European market, if we analyse competition in the context of the French market, German market and British market? It’s a big mistake. We need a European industry. So we have to analyse market shares in order to free competition in the context of the European market. I might add that it’s nevertheless unbelievable that Europe prohibits support for exporting industries. Europe prohibits it! But its Asian competitors spend massively on assisting their companies in their home as well as global markets. Go and ask President Jintao if he isn’t supporting his companies!
After losing out to the competition in consumer goods, Europe is today being rivalled in the big contracts.
We can’t be the only global economic area unilaterally applying the precepts of free trade, wholly ignoring the behaviour of its major competitors. In every big contract, every major country now requires a substantial proportion of the production to be located on its territory. The United States has ruled that a majority share of the spending on its economic stimulation plan must go to US companies. China accepts foreign technology only after carrying out such a comprehensive review of it that it no longer holds any secrets for the government.
While Europe is genuinely in favour of free trade, it must not accept these practices and has to give itself the means to enforce the rules.
The best situation for everyone would, of course, be for markets to be open on both sides, but the worst situation for Europe is the one where its market is open when the others are closed to it. So we need to strengthen Europe’s anti-dumping arsenal and apply a general principle of reciprocity to standards. Within the next three months, Christine Lagarde will make detailed proposals to the European Union on action along these lines. Don’t get me wrong, France isn’t in favour of protectionism; France demands reciprocity.
The environmental policy is a key issue. To date, Europe is the only major economic area to have given itself binding rules on reducing greenhouse gas emissions, but if it is the only one imposing this burden on its industry, Europe will soon no longer have any industry. That doesn’t mean it will deprive itself of steel, fertilizer or cement. But the steel, fertilizer and cement will be produced elsewhere under more polluting conditions than in France. So we will have outsourced the emissions and imported the unemployment. I don’t accept this reasoning, I will never accept it. So we must make the imports bear the carbon cost when they come from countries making no efforts. We will do so at the same price and on the same conditions as those applying to our own industries, wholly complying with WTO rules. France is demanding a carbon tax on Europe’s borders. Moreover, I go further.
What’s the point of imposing on our livestock farmers traceability rules and very strict animal welfare conditions, while importing massive quantities of meat from countries which ignore food safety and livestock traceability? That’s senseless. We must reject this path.
EXCHANGE RATES/NEW BRETTON WOODS
We have finally to deal with the issue of exchange rates and currencies.
(…) For months we had a euro worth $1.5 dollars. And – Louis Gallois will correct me if I’m wrong – when it comes to the whole area of French aerospace, we’re manufacturing in the euro area and selling in dollars. So that means that our manufacturers have lost, roughly speaking, 50% of their competitiveness, productivity, for the wholly artificial reason of the fall in the dollar compared with the rise in the euro. It’s unacceptable. No one can withstand that. And if we accept it, it means that in the euro area we’ll soon no longer be able to manufacture planes, helicopters, cars or trains because we will have been cheated by a malfunctioning of monetary relations which is paralysing our industry and our companies. It’s totally unacceptable!
We need a new Bretton Woods. Bretton Woods, this was in 1945, it was totally normal, the world’s leading nation, the United States of America, who had won the war. There was the Marshall Plan. We needed a single currency as there was a single power. Who can say that in the 21st century – Bretton Woods was 65 years ago – that the global monetary system doesn’t need rethinking? Who can say there aren’t new currencies which have come to the forefront of the global economic stage, like the yuan for example? So, as G20 and G8 president at the end of the year, France will propose the organization of a new international monetary system. (…) I note that when we had the crisis which almost swept the whole world away, the very people who were saying that we shouldn’t talk about currency – I’m talking about the bankers – suddenly rediscovered the addresses of the political leaders. Similarly, for years people had been explaining to us that companies no longer had nationalities. But when the crisis came, they didn’t go to the wrong window. I’m not saying this to be disagreeable, I’m saying it because it isn’t possible to have no nationality when everything’s fine, and have one when you need money, because that isn’t right. Then there are the global enterprises. Their location didn’t matter at all, but when the crisis came everyone remembered their country and no one got it wrong.
We’re going to create immediately a tool designed to bring industrial production back to France. We will create a repatriation bonus, in the form of €200 million of soft loans financed from the National Loan.
I’d like – with all that we’ve done – firms repatriated to France to receive a bonus, to be helped and encouraged. In fact, all this is designed to reconcile France with her industry.
I’d like, moreover, to make you a suggestion: why not resuscitate the “Made in France” label. Is it really such a problem if consumers know when they buy a product that it’s been made in our country or elsewhere? There’s no protectionism in that; it’s transparency. Personally, I’d like us to be able to see what is made in France and what isn’t. I think it’s very important for a number of our compatriots.
The State is also going to revise radically its role of shareholder in the major industrial companies. Frankly, the State’s representation in companies it owns or co-owns is a major issue. I don’t agree with the choices which have been made. Let me explain: when the State is the owner, it is represented on the board by a technical expert – let me add an excellent one – from the Budget or some other government department. Personally, I’m keen to see on the board people who play their role, who are passionate about industry. When the State is a shareholder of a company, I’d like ministers, and particularly the Industry Minister, to have discussions twice a year on investment strategy with the State-appointed CEOs.
I don’t agree – I want to say this, because I feel so strongly about it – with the major private French PSA [Peugeot Citroën] car manufacturer having two thirds of its workforce in France and the other major car manufacturer, in which the State has a 15% stake, having only a third of its workforce in France. Don’t get me wrong: I’m fine about people setting up factories abroad in order to win market shares, but manufacturing cars abroad and bringing them back to France – it just pollutes somewhere else – I don’t accept. Otherwise why did the State spend €6 billion helping the French car sector survive? There’s an issue of balance and choice in the selection of board members. (…)
I’m well aware that there’s going to be controversy: “Is he in favour of the free market? Is he a Colbertian economic centralist? Is he interventionist? Is he socialist?” No, that isn’t possible. It isn’t a matter of ideology, it’s one of pragmatism. The others do it; if we don’t, we’ll wipe our industry off the map, and we haven’t got much time to react. The world is moving far faster than people imagine. You pay immediately for a strategic error, whereas a good decision takes years to produce its effects. We can’t delay the moment of choice. Moreover, in order to defend the State’s interests, I’d like to get directors on the boards who have great experience and can advise us. (…)
Les Chantiers de l’Atlantique and its future is a matter of concern to me. As is the CMA-CGM [leading container shipping group] and its future. I’m also struck by the fact that Deutsche Post created DHL and is one of Europe’s most modern companies and this influenced the change in the French Post Office’s status. We’re also looking at developing freight services for the SNCF [French railways]. (…)
I shall conclude, apologizing for speaking for such a long time, but as you’ve realized, I’m passionate about these issues. There’s the problem of mobilizing the savings of the French for industry. Life assurance – and this is the insurance product which receives the greatest State support – invests less than 25% in shares. It’s the height of inconsistency. Let me explain. When it comes to life assurance, the State gives tax incentives to attract long-term savings.
(…) But only a quarter of these savings are invested in the stock market. (…)
I’d like us to be able to attract capital for our companies and our industry. Proposals have been made. I’ve promised to talk to both sides of industry: should there be an industry savings account? I want to tell you that we’ll have decided all this by September. There will be a new savings vehicle to finance industry. (…)
I’ll end by just saying one thing about innovation: I’ll never tamper with the massive policy of supporting innovation which I have been building up since 2004. I say this to the CEOs. It’s a matter of principle for me, you can go ahead, and we’ll defend this.
I’ll just tell you about two measures which are going to supplement it: first of all I’d like to reform the absurd system of taxing patent income, which is encouraging the exploitation of our patents in foreign subsidiaries rather than in France. How coherent is that? We’re going to do this straightaway. Secondly, I believe it’s important for SMEs always to receive early payment of their R&D tax credit. It’s very important for your cash flows. Frankly, I want to tell you that our original idea wasn’t to make this early payment a structural feature of the mechanism, but we wanted to address the acute cash flow crisis firms suffered in 2009. That said, we’ve seen the degree to which early payment of the R&D tax credit has amplified the positive effect of the R&D tax credit for small companies who are constantly seeking to increase their cash flows. So we’re going to make early payment of the R&D tax credit a permanent feature of the mechanism for SMEs. (…)
I ask you to believe in my determination to provide structural answers to this issue. French industrialists aren’t the only ones facing the crisis and structural problems. I am sure there is a majority in Parliament, across all political families, who understand that France has to remain a manufacturing country and that we must direct all our energies to realizing this ambition. The aim isn’t to get everyone thinking the same way, it’s to deliver results.
I profoundly believe that the most valuable action our country can take is to engage this battle.