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Economic diplomacy

Published on January 13, 2014
Interview given by M. Laurent Fabius, Minister of Foreign Affairs, to the daily newspaper Les Echos (excerpts)

Paris, January 10, 2014

Q. – What assessment can be made of economic diplomacy?

THE MINISTER – It’s had positive results, which I think are recognized as such. The relations between companies and diplomatic missions are good. Joint work with them has allowed us to facilitate a lot of contracts. The special representatives I’ve appointed for several countries are carrying out invaluable activities, in a voluntary capacity.

The Quai d’Orsay’s open day for companies [in April 2013] was a success and will be repeated. Visas are starting to be issued more smoothly.

The coordination of the French representation, under the ambassadors’ authority, has improved. For example, in Mexico our special representative has established with the Mexicans a $500-million fund to invest in medium-sized French aerospace companies. Of course there’s still progress to be made, but this is all undeniably useful.

Q. – What projects do you intend to initiate in 2014?

THE MINISTER – We’re going to continue our economic diplomacy – which is inseparable from our cultural diplomacy, by the way – and add activities to it, focusing particularly on three high-potential industries:

sport, a huge area, for which an experienced ambassador, Jean Lévy, has been appointed; the energy transition, in parallel with the preparation of the global climate conference in Paris at the end of 2015; and finally, tourism, which can be a veritable goldmine of money and jobs. Some concrete examples: France already welcomes 1.2 million Chinese tourists, who spend an average of €1,600 here. If we welcome five million of them in the next few years – it’s within our grasp –, we’ll reduce our trade deficit by about 10%! The aim each time is to be effective. And all the ministers are focused on this task. (…)

Q. – Isn’t there a problem with exported French products being expensive?

THE MINISTER – In the past 10 years, France has unfortunately lost ground in certain foreign markets. There’s a problem of competitiveness, very well analysed by Louis Gallois – hence the CICE [competitiveness and employment tax credit]. In the past, we haven’t always been very active, either, on certain goods and services with high added value – unlike Germany. We’ve been slow to focus on several promising markets in Asia and Latin America. Our major groups must also give SMEs and mid-cap companies more of a helping hand. All this is known and is now being fought for.

Q. – The trade deficit is still very high, and exports fell in November…

THE MINISTER – Foreign trade is indeed the litmus test. The situation is still difficult, despite everyone’s efforts. It’s clear that economic diplomacy depends on our general economic situation, and I fully share the direction set by the President in his New Year greetings: it’s what I call the “recovery triangle”.

Q. – Which means…?

THE MINISTER – The first side of the triangle is our companies’ competitiveness, price and non-price competitiveness: it’s absolutely essential. It’s companies that create wealth and jobs, although there must also be social support measures, which are useful for employment.

The second side is the attractiveness of France as a location. We have strengths – our central location geographically, our demography, our technologies, our brands etc. – but we also have our weaknesses: the tax burden, rigidities, complexities etc. We must listen in particular to what we’re told by the representatives of foreign groups established in France. Finally, the third side of the triangle: the necessary restraint in our public expenditure, a condition for easing taxes and other deductions. If we act strongly on these three levers, as we’ve started doing – public and private [sectors] together –, I guarantee you the country will recover.

Q. – In the meantime, a reduction in unemployment isn’t on the cards…

THE MINISTER – However you look at the problem, in order to reduce unemployment in the long term – it’s clearly the number one challenge –, you must have more growth. A rise of about 1% is envisaged for 2014.
That’s better than in 2013, but it’s not yet enough. To exceed that, you must seek out growth wherever it is, which means in particular being more competitive, attracting more investment in France and using every source of growth, particularly the energy transition.

Q. – In proposing a pact with companies, is François Hollande taking a liberal turn?

THE MINISTER – As far as I know, the reformist left’s aim has never been to increase taxes systematically or challenge competitiveness! For example, we practised tax reduction at the very beginning of the 2000s; France did rather well out of it. So adaptation, acceleration or amplification? The semantics don’t matter much; I believe the Head of State is setting out the economic strategy essential today for France’s recovery. (…)

Q. – Must household taxes also be reduced? And do we have the means?

THE MINISTER – In the present economic situation, a fiscal strategy can succeed only if it aims, among other goals, to reduce taxes. But deficits, which are too burdensome, must also be reduced. So the expenditure savings effort must be carried out all the more robustly.

Q. – How?

THE MINISTER – It’s state expenditure that attracts the most attention, although paradoxically it’s perhaps the least tough to secure. Local authorities, state-controlled operators and social security systems must also be looked at. This must be achieved while maintaining social justice and carrying out useful modernizations to government activity.

Q. – David Cameron recently seemed to cite France as an example of how not to do things…

THE MINISTER – Let’s avoid arguments. To stick to the facts, the British – for whom we have great respect – have a structural deficit more than twice as big as ours (5.7% of GDP in 2013, compared to 2.7%) and a higher public debt, not to mention the issues of spending power and inequalities. Let me add that if, as is sometimes mentioned, our British friends unfortunately decided to leave the European Union, we’d most probably roll out the red carpet for their business people./.

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