FRANCE

French Republic

République Française

COUNTRY OVERVIEW

LOCATION AND SIZE.

France has the largest land area of any Western European nation and lies between the Mediterranean Sea on the southeast and the Bay of Biscay and English Channel to the north and west. France has a total land area of 547,030 square kilometers (211,208 square miles) and a coastline of 3,427 kilometers (2,130 miles). It shares borders with Andorra, Monaco, Belgium, Luxembourg, Germany, Switzerland, Italy, and Spain. Its area is about four-fifths of the size of Texas.

Paris, the capital city, is the largest city in France and Europe (excluding Russia), and accommodates about one-sixth of the country's population. Other cities with over a million people including surrounding areas are Lyon, Marseille, and Lille.

POPULATION.

France's population was estimated to be 59,329,691 in 2000, with a slow growth rate of 0.38 percent. The French population is about one-fifth of Europe's total population and ranks third in Europe and sixteenth in the world. It has about 106 inhabitants per square kilometer (or about 275 people per square mile). Roughly one-sixth of the entire population lives in the Greater Paris area. France's ethnic groups include Celtic and Latin strains, with Teutonic, Slavic, North African, Indochinese, and Basque minorities. Foreigners comprise 6.3 percent of the population.

While the majority of the population (65 percent) falls between the ages of 15 and 64, about 16 percent are older than 65 years of age. The remaining 19 percent are 14 years old and younger. At the turn of the 19th century, France was the most populous country in Europe. But by the late 19th and early 20th century, France experienced the lowest birth rate in the continent. Due to government efforts and the post-World War II baby boom, however, France reached a birth rate of 21 per 1,000 people in the post-war era. This growth declined to 18 and 13.6 per 1,000 in 1963 and 1989, respectively. Currently, France's birth rate stands at 12.27 births per 1,000 population according to 2000 estimates. (France had 9.14 deaths per 1,000 population during the same year.) The influx of immigrants into France at the last quarter of 20th century, though, has moderated the trend toward a shrinking population. It is estimated that France has received 0.66 net immigrants per 1,000 people in 2,000. The ratio between males and females is nearly oneto-one in almost all age strata of French population, with the exception of those over age 65, where there are 0.68 males per each female. This is mainly because the life expectancy for females at birth is about 83 years while it is only 75 for males. Life expectancy for the total population averages 79 years.

In 2000, France was the sixteenth most populous nation in the world. The French population is expected to decline by the year 2025 when France will rank twenty-fifth in the world. The United Nations Development Program (UNDP) estimates that the population will reach 61,662,000 in 2025 but drop to 59,883,000 in 2050, with 30 percent of the population over 80 years of age. (This number was 16 percent in 2000.) This means that the potential support ratio (the number of people aged 15 to 64 for each person aged 65 years or older) in 2050 will be half of its 1999 level. In other words, every 2 working people will be supporting a retired person in 2050, which doubles the burden on the society from 1999 to 2050 in providing care and benefits for the elderly.

Archaic immigration policies make France somewhat unattractive for foreigners who seek work or asylum, even though the need for more workers has been recognized by many. The government provides generous family and health support programs, though these have not necessarily encouraged population growth. Individuals with health problems, the unemployed, and the retired are protected from bankruptcy by the social security system. Some cities even tried to implement their own programs to encourage population growth, but they were aimed at French or European races, and thus quickly denounced as racist. Overall, the government's efforts to address the serious under-population problem of the near future have not been successful.

OVERVIEW OF ECONOMY

By the 18th century, France was one of the richest nations of the world. The potential for industrial development made France a rival to England, perhaps the most powerful country on Earth at the time. But it was its agricultural potential at the beginning of the Industrial Revolution (the period during the 18th and 19th centuries when Europe changed from agrarian, handicraft economies to the those dominated by industry and machine manufacture) which made France a world power. However, its sluggishness in moving from agrarian to industrial modes of production, together with several other factors such as a declining population, left France behind in an industrializing world in the 20th century. As this process continued, and due in part to nationalist sentiment, France largely closed its doors to foreign competition in order to protect its own industries. The nationalization of major industries in France took place in the late 1930s in railways, coal, natural gas, electricity, and the banking sector. Flagship companies in various transportation sectors, such as Renault and Air France, also came under the state control. Although a capitalist country, France made many socialist adjustments such as heavy government control over the economy, which included strict government regulation of many industries or powerful representation of the government in sectors considered essential to the national economy. As part of its statist economic policies, France implemented national economic development plans.

Despite its mixed economic system, France has also recognized since the early post-World War II era that economic integration with Europe is in its own best interests. To this end, France has been the major impetus in the formation of such bodies as the European Coal and Steel Community (in the early 1950s) and the European Economic Community. These organizations were the first steps toward both economic and political union in Europe.

Currently the government's role in the economic sphere is much less than before, especially because of the requirements of the European Union (EU). Since the early 1990s, French companies have faced competition from their European counterparts with less help from the government. In an effort to privatize the state-owned industries, the government is selling off its shares in France Telecom and Air France, along with companies from the insurance, banking, and defense industries.

Because of its fertile and vast land, France has become a major agricultural producer of Europe, making use of modern agricultural technology. The agricultural sector enjoys generous government support in the form of subsidies . This policy sometimes becomes a point of contention with France's EU counterparts. Three-fifths of the land is devoted to agricultural-related economic activities. Besides wine, France is famous for its beef, veal, poultry, and dairy products. Various types of grains also make France the leader among European nations in agricultural production. Overproduction of the world-renowned French wine and competition from foreign producers have conspired to bring about decreases in its price, although the government as of 2001 has tried to discourage overproduction in an attempt to reverse this alarming trend.

France has a long seashore, but fishing is not one of the major components of the economy, except in coastal areas such as Normandy and Brittany, the southern Atlantic coast, and the Mediterranean, where it employs a significant local labor force . France has few fishing ports used in shipment of fish products and ranks 20th in the world in total fish production.

Even though France has a highly-educated labor force, unemployment—which stood at 9.2 percent in December 2000, according to the International Labor Organization (ILO)—is still a major problem, mainly because of the slow growth of the economy. Employment opportunities for college graduates were especially lacking. A 35-hour work week was introduced in 1999 by the government in order to create more jobs. Small companies especially objected to the measure as burdensome, for it forced them to hire more workers. Larger firms are more comfortable with the shortened work week, arguing that participation in the European Monetary Union and a common currency have brought new flexibility into the market and hence has eliminated the costs brought by the shortened work week.

France still maintains its ties with many of its former colonies, especially those in Africa, such as Algeria, Benin, and Senegal. France provides support in the form of French francs in order to stabilize some African currencies. It also provides other types of aid to some of its former colonies, totaling US$6.3 billion in 1997.

As of the end of the 20th century, the capital goods sector was one of the fastest-growing sectors of the economy, followed by automobiles and services. The French government predicts continuing stable growth in the first few years of the 21st century, largely due to investments in technology and the promise of structural reforms. France's infrastructure is modern in all respects.

POLITICS, GOVERNMENT, AND TAXATION

A democratic republic with a constitution approved by referendum in 1958, France is both economically and politically a hybrid of many systems. Economically, it is a capitalistic country with a socialist outlook, exemplified by property rights and a capitalistic concept of private ownership on one hand and an extremely generous social security system and a socialist approach to solving the society's problems on the other. France has a presidential system combined with a more typical European parliamentary arrangement.

The president of the republic, as the head of state, is elected by direct suffrage every 7 years, and appoints the prime minister as the head of government. However, the president must choose the prime minister from a party or a group of political parties determined by the National Assembly, which is the lower house of the French Parliament. It is quite possible that the president and the prime minister may come from different, and even rival, political parties. This is known as cohabitation. Following the 1995 presidential elections, President Jacques Chirac, who represents the center-right side of the political spectrum, cohabits with a center-left government headed by Prime Minister Lionel Jospin, who was his rival in 1995 presidential elections. Prime Minister Jospin is the head of the Socialist Party, and his coalition government includes representatives from the Communist and Green parties.

The French parliament is bicameral (a representative system with 2 houses in the parliament or legislature, as in Germany or the United States). Representatives are elected to the National Assembly (the lower house of parliament) by direct universal suffrage, and senators are elected indirectly by an electoral college which is comprised of approximately 145,000 representatives of city councilmen. Representatives serve for 5 years, whereas senators are elected for 9 years. The main power brokers in the French political spectrum can be classified from right to left as National Front (FN), Rally for the Republic (RPR), Rally for France (RPF), Union for French Democracy (UDF), the Socialist Party (PS), Green Party, and the Communist Party of France (PCF). The extreme left parties support continued state control over the economy with big spending programs, while the right-wing parties want to end most forms of state support. The right-wing parties also wish to see far less immigration and more people of European origin populating the country. The high level of unemployment and rising nationalism, expressed also in the form of xenophobia (enmity against foreigners and immigrants), have fueled the popularity of the extremist National Front. President Chirac is from RPR. Both that party and the RPF are neo-Gaullist parties (parties supporting the policies and principles laid down by former French statesman Charles de Gaulle, which call for greater European and French power, prestige, and independence, especially from the United States). The UDF is relatively moderate. There are other small parties which may play roles, sometimes influential ones, at the local but not the national levels. Left-leaning parties, especially the socialists, usually advocate implementing a domestic agenda aimed at fighting unemployment and promoting social programs.

Because of pressure from the EU, more budgetary discipline has been emphasized in governmental affairs. Protectionist policies have been abandoned against other members of EU countries. There is strong support for the EU amongst the French people as well as from the president and prime minister. In fact, France is among the most prominent supporters of a unified Europe. Some believe the basis of this support is France's effort to counter the power of the United States in the world's economic and political affairs.

French governments changed hands between left and right in the last quarter of the 20th century, and sometimes political movements changed course. After the influential General de Gaulle's right-leaning government in 1960s, President Francois Mitterand broke with tradition when he came to power in early the 1980s. De Gaulle held the office of the president between 1959 and 1969, and Mitterand served 2 terms as president (1981-95). Catering to the demands of the powerful Communist Party, which supported Mitterand, his socialist government increased government spending by engaging in several public projects and increased taxes in order to pay for the spending. While most of the capitalist world recognized the virtues of the free market economy, the Mitterand government embarked on nationalization efforts. This policy soon led the country into economic turmoil with higher levels of inflation coupled with lower values for the French franc. This tendency forced the government to reverse some of its previous policy decisions, even if it meant adopting policy suggestions of political rivals. Mitterand's prime minister (Chirac) lost the presidential election in 1988 only to win it in 1995. However, the solutions to the economic problems on which Chirac based his campaigns have not yet been completely achieved. With one of the highest levels of unemployment in the EU and its president battered by corruption charges, France saw a general strike in December 1995 that brought the country to a virtual economic standstill. The French government still has a strong presence in the economy, especially in such industries as aeronautics, defense, automobiles, and telecommunications. Even though a great deal has been achieved in privatization, the government can still exert its influence on privatized companies via its large minority stakes in such companies. Nevertheless, after a policy decision of the president in 1996 to streamline defense industries, a wave of mergers and restructuring took place among French defense companies.

France prefers to continue with a large government budget financed mainly by taxes rather than to curtail its spending. Currently, France ranks highest in broadly defined tax categories among G8 countries (a group of the most industrialized countries of the world consists of the United States, Japan, Germany, France, Italy, Canada, Russia, and the United Kingdom). The basic corporate tax rate is 33.33 percent. The largest tax burden in France, though, is income tax , which in the highest income bracket runs to 54 percent. (By comparison, U.S. federal taxes range from 15 to 33 percent.) The highest tax bracket starts at only about US$40,000, so the middle and upper classes in France pay a significant portion of their salaries in taxes. This rate is one cause, some economists believe, of unemployment, because high taxation together with generous government spending programs discourages working. Incomes of less than 26,100 French francs (approximately US$3,500) a year are not taxed at all, while all income levels above US$20,000 are taxed of a rate of at least 40 percent.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

France enjoys one of the most sophisticated infrastructures in the world, developed through the govern-ment's heavy investment in the field and made possible by advanced technology. A network of various modes of transportation blankets the whole country, including air, land, and rail transportation. Transportation is also possible via rivers. The technologically advanced rail system— utilizing some of the fastest trains in the world—is operated by the French National Railways (SNCF), a state-owned company. There are a total of 31,939 kilometers (19,846 miles) of rail lines in the country. There are approximately 828,000 kilometers (514,605 miles) of roads in France, all of which are paved. About 47 per cent of the waterways are heavily used. There are a total of 474 airports in France, many of which serve international traffic. The major airline is Air France, which provides service to all corners of the globe. Many of the ports and harbors are equipped to handle the needs of freight as well as passenger ships. The major port cities are Dunkirk, Bordeaux, Marseille, Nantes, Rouen, Le Havre, Boulogne, Cherbourg, Dijon, La Pallice, Lyon, Mullhouse, Paris, Saint Nazaire, Saint Malo, and Strasbourg.

The communications infrastructure of France also ranks high among advanced countries. There were about 35 million main telephone lines in use by the end of 1998, with mobile cellular phone usage at about 35 percent of that figure. About 218 newspapers were sold in France per 1,000 people in 1996. This number slightly exceeds EMU member countries' newspaper circulation rate for the same period but falls behind the high income countries' average of 286. The number of radios per 1,000 people in 1997 was 937, which shows the same pattern with respect to the EU and high income countries' averages. Radios broadcasting in AM, FM, and short wave cater to domestic and international clienteles. Television set ownership is somewhere in the middle of EU countries. Cable TV is not as widespread in France as it is in either high-income or EU countries as a whole. France's ratio of 27.5 cable subscribers per 1,000 is a far cry from Europe's 110.3 and that of the wealthiest nations' 184. In spite of its vast mobile phone usage, France also lags behind both EU as a whole and its wealthiest countries. There are fewer Internet service providers (ISPs) in France

than in many other EU nations, but there is easy access to the Internet via both domestic and foreign ISPs. The dominant domestic telecommunications company, Mini-tel, is run by the government-owned France Telecom, which has a proprietary electronic commerce service. Even though it lags behind its counterparts in the developed world in some electronic communications industries such as the Internet, France is quickly catching up.

Nevertheless, France is a very conservative country, deeply committed to its own distinct national information infrastructure, which makes the country cautious in approaching innovations that do not originate within France. The government makes special efforts to prevent English, which is by far the most widely used language on the Internet, from taking over in communications. A law was even passed in the early 1990s in an attempt to bolster the use of French in the communications field, thanks to efforts of the Ministry of Culture. The French Internet industry and other communications sectors are more heavily regulated than those of Germany and Britain, and some economists maintain that this has significantly impeded developments in the Internet and related industries in the country. On the other hand, government is promoting the usage of information technology and began in 1999 to deregulate some aspects of the industry.

France is not rich when it comes to fuel resources, so it imports three-quarters of the fuel it needs, especially oil. The same does not hold true for electrical energy production, though. Electricity production reached over 480 billion kilowatt hours (kWh) in 1998. The biggest source of electrical power is nuclear energy, which supplies about 76 percent of the country's needs and making France the second largest supplier of nuclear energy after the United States. The next largest source of electrical power is hydroelectric, which supplies about 13 percent, which is produced by plants operating on the Isére, Durance, Rhine, Rhône, and Dordogne rivers. Additionally, a tidal power plant is located on the Rance River in Brittany. Fossil fuel represents about 11 percent of electrical power in France and supplies about 389 billion kWh of energy. France exports about 62 billion kWh of fossil fuel energy and imports 4 billion kWh more.

ECONOMIC SECTORS

The French economy is competitive on a global scale in many goods and service sectors. In 1998, about 3.3 percent of the GDP was contributed by the agricultural sector, and 26.1 percent by the industry. But the major portion of the GDP is accounted for by the service sector, which makes France a typical modern industrialized country. While most employment is provided by this sector (about 66 percent), agriculture employs only 7 percent and services 27 percent. Historically, France has been the capital of Europe with its vast expanses of farm land. French wine and cheese are famous throughout the world. For historical and cultural reasons, French farms have generally been small and family-owned, and worked with traditional tools and methods. Globalization, which involves the opening of France to the market forces of Europe, has led the country to think about modernization in agriculture, which has only partially adopted modern methods. Currently, the French economy is stronger and more competitive in world markets than before, even though many business enterprises are still smaller than their counterparts in Europe, Japan, and the United States.

The leading industries are metallurgy, mechanical and electrical engineering, chemicals, textiles, and the manufacturing of airplanes and automobiles. The auto producers, Renault and Citroen, are household names in many European countries. The French are very proud of Airbus Industrie, which is the main competitor of the Boeing Company, the leading U.S. aircraft producer. Airbus has captured a sizable portion of the commercial airplane market, a domain which had belonged exclusively to Boeing and its smaller U.S. and British competitors before the rise of Airbus in the 1970s. The world famous Mirage and Concorde are also produced by French aviation companies. The tragic July 2000 crash of a Concorde in France marred the otherwise superb reliability of Concorde airplanes, but in 2001 the sleek jet was scheduled to go back into service with Air France. France is not very rich in natural resources other than bauxite, but the country processes imported material into commercial products and resells them domestically and to the rest of the world.

France has a diverse and important services sector. Paris has the fifth largest stock market in the world. France's 4 banks rank among the biggest 25 banks in the world. The insurance industry ranks fifth in the world. France has been, for much of the last century, the world capital in fashion, setting the trends in designer clothes. Although there is a threat from countries with lower labor costs, French textile products are among the best in the world. Perfumes produced in France are synonymous with high fashion. Paris is known all over the world for its cultural attractions, architecture, and cosmopolitan lifestyle. That is why France is 1 of the 3 most-visited countries in the world, along with Spain and the United States.

AGRICULTURE

France has been one of the most dominant agricultural centers of Europe for centuries. That gave France an important role in European and, to some extent world, affairs in the pre-industrial age. Currently, France still leads Europe in agriculture, excluding the Russian Federation. With about 730,000 farms, approximately 7 percent of the workforce is employed in agriculture or similar sectors such as fishing or forestry. When all people engaged in agriculture-related activities (including the processing of agricultural goods, for example) are considered, the percentage of the population engaged in agricultural production is much larger. As of 2001, many younger people tend to look for employment outside of family farms and help out only as part-timers. This trend, however, has generated an opportunity for others looking for jobs in agriculture. According to the French Ministry of Agriculture, the share of population actively involved in farming is decreasing. Nevertheless, new creative methods of marketing and agritourism have attracted some young talent to the sector. The sheer size of the land used for farming, about three-fifths of the total, indicates the place of agriculture in the lives of French people. In the post-World War II era, government has made a significant effort to modernize French agricultural production by switching to more scientific methods and modern equipment. In 1997, about 86 percent of farms owned at least 1 tractor, and farmers increasingly upgrade equipment. The size of irrigated land in 1997 is twice that in 1979.

The major agricultural products that place France among the top producers in the world market are sugar beets, wine, milk, beef and veal, cereals, and oilseeds. Producing 29 million metric tons of sugar beets, France leads the EU. It takes second place in both the EU and the world in the production of its highly popular wine varieties, with 5.3 million metric tons. Though fifth in the world, France ranks second in the EU in milk production, totaling 23.3 million metric tons. France is the major source of meat and veal in the EU with 1,815,000 metric tons. What is commonly known as "Mad Cow Disease" (an illness first discovered in British beef that causes death if it infects humans) created a rift among European countries, especially when France prohibited British beef from entering the country. In the cereals category, which includes soft wheat and grain maze, France leads the EU. With 4.1 million metric tons of production, France also holds the leading position in oilseeds in the EU.

The biggest export items among agricultural products are various types of beverages and alcoholic drinks. According to the Ministry's numbers, the value of alcoholic exports reached 56.6 billion francs in 1999. This amount registered a 6 percent increase over the previous period. Cereals and flour exports, which increased 12 percent, totaled 36 billion francs. Meat and other animal products experienced a shrinkage of 7 percent but were still valued at 28 billion francs. All categories of prepared food brought 27 billion francs into the country in the same year. However, this reflected a decline of 10 percent from the previous year. Dairy products also suffered a loss of 2 percent in the world market share, generating 24 billion francs. Demand for French sugar and sugar refineries declined sharply in the world market by about 8 per cent in 1999. The total export revenue obtained by this category was 11 billion francs. The economic crises in world markets played a role in the declines experienced by French exporters of agricultural products. The EU and the United States are France's principal customers for agricultural products.

France is also an importer of agricultural commodities. Prepared food tops the list of imported agricultural items. Figures from 1999 indicate that France imported 19 billion francs worth of meat and other animal products. Even though it has a sizable coastline, France imports a large segment of its fish demand from abroad, which was valued at 16 billion francs in 1999. Fruits, dairy products, and various beverages cost France 14, 12 and 10 billion francs respectively in the same year. All import categories experienced moderate shrinkage between 3 and 6 per cent, except meat, animal products, and fish-eries, all of which remained unchanged from 1997. France did most of its shopping from the same countries to which it sold its products.

Almost half of farm income in France is generated by livestock raising, and the other half is contributed by crops. Cattle are raised mainly in the north and west; sheep and goats primarily in the south and east, which is drier and more mountainous. Pigs and chickens are raised everywhere in France. The Paris Basin area is the source of wheat while some rice comes from irrigated fields of the Rhone delta. While Burgundy, Champagne, Bordeaux, and Alsace are well-known wine regions, wine is actually produced all over the country.

Fishing does not contribute to the French economy in comparison with the agriculture on the national scale. According to the data released by the Ministry of Agriculture, fish production in 1998 reached nearly 600,000 metric tons, a slight increase of 1.5 percent over the previous year. Because of favorable prices, though, the fish products sector exceeded 6.5 billion francs. The exports of the sector fall far behind imports, creating a trade deficit in fisheries which is more than double the exports. However, France still ranks twentieth in the world in total fish production. Locally, fishing plays an important role in such areas as Normandy and Brittany, the Southern Atlantic coast, and the Mediterranean. Concarneau, Boulogne-sur-Mer, Lorient, and La Rochelle are the main fishing ports of France.

France's forests are prized for both economic and ecological reasons. The National Forestry Service, founded in 1966, is responsible for managing the country's forests. From 1850 to 1900 a big reforestation campaign occurred, and as of 2001, about 27 percent of French land is covered by forests, making it the third-most forested country in the EU. Two-thirds of the forests are occupied by deciduous trees, and the rest are conifers. France's forests have grown 35 percent since 1945 and continue to grow by about 30,000 hectares each year. Close to 4 million people in France have private ownership of wooded areas. The marketed wood harvest was up in 1998 from its level in 1997 by about 1.6 percent. The rise in the wood industry is attributed to the renewal of activity in construction. As in many other countries, forests in France are utilized not only for wood production but as recreation as well. Hence, while supplying wood products and playing a role in a healthier environment, forests also contribute to the national economy by serving the tourism sector.

INDUSTRY

France is among the most industrialized countries of the world. It is a member of the G8, a group of countries which comprises the 7 largest industrial democracies, plus the Russian Federation. In 1999, the French GDP was almost identical to that of Great Britain and comfortably larger than that of Italy.

MANUFACTURING.

About 19.3 per cent of the GDP was generated by manufacturing in France in 1999, compared to 17.8 percent in the United States and 18.5 percent in Britain. Manufacturing contributes roughly 20 percent of the GDP in Italy, Germany and Japan. Investment in the industrial manufacturing sector was 141 billion francs in 1999. (These figures excluded the energy and agricultural manufacturing sectors.)

Firms operating in the industrial manufacturing sector produced a variety of goods such as consumption goods, items related to the auto industry, and equipment such as electronics, machinery, and intermediate goods . The well-established name for French products in the fashion world helps France in the export of perfumes and even flowers. The consumption goods industry made nearly 200 billion francs from sales abroad in 1999. The contribution of the auto industry to the French exports figures in 1999 was almost 300 billion francs. France is one of the largest producers of passenger cars and commercial vehicles in the world, along with Japan, the United States, and Germany.

The principal manufacturing companies are located in Ile-de-France, Rhone-Alpes, Nord-Pas-de-Calais, and Pays de la Loire regions. New industrial areas emerged around the English Channel and Mediterranean Sea in order to save shipment costs of imported raw materials. Even though some French companies, such as Renault and Airbus, are world famous, most French firms are characterized as moderate to small-sized. But small firms tend to be ineffective in the world market because of heavy competition from companies based in countries with cheaper labor costs or higher and better production technologies. The pressure of competition was felt heavily with the unification of the European markets under the umbrella of EU, in which movement of capital and labor is not constrained. Unless smaller and relatively inefficient French firms can adapt, labor and capital may move elsewhere. With the advent of the euro, many French companies have had to restructure and form mergers.

The major European airplane producing company is Airbus, which is based in France but also supported by Germany and Britain. With more than 4,200 aircraft orders placed by international customers as of April 2001, Airbus is the world leader in aircraft production. Airbus and Boeing of the United States are in competition, and they have conflicting ideas about the future of the world air travel. The perception of future demand and air travel habits shapes the design of aircraft to be produced. Airbus believes that huge aircraft with a short flight range will shape demand in the future. Boeing, on the other hand, believes that passengers will be flying long miles in smaller aircraft. Time will show which one is on the right track.

One other field where French companies are strong is construction and civil engineering. However, a recent declining trend in enrollment in science classes in the country is a major concern of education authorities. France is the second ranked producer and the leading exporter of agri-foodstuffs (processed food such as wine, cheese, and pasta) in Europe. It is the fourth-largest exporter in the world in chemicals, rubber, and plastics; and third ranked in pharmachemicals and pharmaceuticals.

MINING.

Mining is not a field in which France competes, and only a very minor fraction of the labor force (less than 1 percent) is engaged in mining. Regarding coal, 2 major fields produce most of France's coal: the Lorraine coal field near Metz and the Nord-de-Calais coal field near Lille. Most of these fields do not have economically viable reserves compared to other big producers because they lack sufficient amounts in some cases or are difficult to extract. Many coal fields have shut down since the 1950s.

France is among the biggest producers of bauxite in Europe and also plays a big role in the continent's natural gas production. France's position may be threatened, however, if some Asian companies acquire access to the European market, although the tariff -free regulations that EU member states enjoy put France in a strong position. France is an importer of petroleum but processes petroleum at home to produce several oil products which are sold domestically and abroad.

SERVICES

As with any other developed country, the services sector is an important component of the French economy. Out of over 2 million companies in France, roughly one-third operate in the various subsectors of the services industry. More companies are currently in the services sector in France than in any other part of the economy. The services industry (other than government) provides jobs to about 27 percent of the workforce, or 4.5 million people, and contributes 39 percent of the GDP. Investment in the industry is also significant.

FINANCIAL SERVICES.

France has a developed credit market which channels savings to investors very efficiently and in large volumes. The market capitalization of shares listed on the Paris Stock Exchange, the fifth largest in the world, accounts for about 32 percent of the French GDP. Market capitalization at the end of 1997 reached an extraordinary 4 trillion francs. The Paris Stock Exchange is an internationally used capital market, and foreign investors hold about 35 percent of French stocks. This puts Paris in an advantageous position to attract more international capital with the help of the euro, the common currency of the EU. In an effort to adjust to the introduction of the new currency, all asset management companies in France started to offer their services in euros as of January 1999, the date the euro was introduced as the common currency of Europe. Since not all EU, let alone the European countries, decided to adopt the euro as their currency, authorities in the Paris Stock Exchange believe it has a comparative advantage over the stock markets of these nations since it can offer more opportunities via its reach to wider international audience. The Paris Stock Exchange has gone through extensive technological and legal restructuring to become more investor friendly in the international market. According to the stock exchange's data, foreign investments in the Paris Stock Exchange have tripled in monthly trading since the beginning of 1998, due in large part to the restructuring of the exchange. The exchange has trade relationships with the Chicago Mercantile Exchange and the stock exchanges of Sao Paolo, Toronto, Brussels, Lisbon, Tunis, Casablanca, Warsaw, and Amman, among others. The French bond market is among the world's leaders and ranks second after its U.S. counterpart.

The French banking system is also quite competitive in the world market. Credit Agricole, Compagnie Financiere Paribas, Groupe Caisses d'Epargne, and Banque National de Paris rank among the top 25 banks in the world. In Europe, banks are allowed to engage in activities that would normally be reserved for either commercial banks or investment banks in the United States. In a unified Europe, there will be one central bank, while national central banks will be largely autonomous.

INSURANCE.

Like banking and the stock market, the French insurance sector is also a world player, ranking among the top 5 in the global insurance market. Although French insurance firms have a global presence, 60 percent of their total international activity is carried out within the borders of EU. Like other insurance industries, French insurers are institutional investors. The largest chunk of investments in the insurance industry is in the form of bonds, at 69 percent. Stocks account for only 15 percent of investment, and the rest is real estate, commercial paper and other assets. French insurers saw their overall value rise 16 percent from 1996 to 1997. The introduction of the common currency is expected to boost profits in the insurance industry.

TOURISM.

Over 60 million tourists visit France every year, making it one of the largest tourist centers of the world. Visitors are attracted to its high fashion (or haute couture ), beautiful scenery, historic heritage, and cultural activities. Paris, the center of France's tourist trade, offers attractions such as the Louvre (its famous art museum), fine restaurants, the Eiffel Tower, and the beautiful works of architecture along the Seine, its major river. With about 67 million annual tourists, France trailed behind only the United States and Spain in 1997. France has a surplus in tourism in its balance of payments accounts. The more than 100,000 businesses directly or indirectly involved in tourism in 1997 generated over 100 billion French francs. Investments in the sector came close to 15 billion francs in that same year. According to the Ministry of Tourism, there were about 634,640 people employed in the various categories of the tourism sector including travel agencies, restaurants, and hotels. About one-sixth of this figure is employed for less than full-time.

INTERNATIONAL TRADE

France, with its developed economy, is one of the most active participants in world trade. After World War II, the French government saw that closer ties to Ger many would bring it political security and greater economic strength. Thus, the European Coal and Steel Community was formed, which brought the 2 countries and other European nations into a consultative body to discuss the production of steel and coal. The EU, which France was instrumental in creating, has helped it to diminish government intervention in economic affairs by privatizing several industries. In 1992, the Treaty of Maastricht was signed, which was the watershed event in bringing Europe into political and economic union. On a practical level, the lower trade barriers and fewer restrictions that integration has brought have opened doors to French products to be sold in many European countries and has allowed a wider freedom of movement of capital in Europe, all of which has benefitted France. The downside is that France, sharing common trade and tariff policies with the rest of the EU countries, has discussed the erection of trade barriers against non-EU companies and products. France will follow EU policy as a

whole whenever the EU erects trade barriers to foreign goods and firms. The EU has made it clear that it will erect such barriers in cases involving health, safety, and environmental issues, for instance.

France's share of exports to the world's top ten economies was 9.3 percent in 1997, 9.8 percent in 1998, and 9.4 percent in 1999, putting it in fourth place behind the United States, Germany, and Japan. France is also the fourth largest exporter to the world, with over 5 percent of the world export market. France is the world's second largest exporter of agricultural products as well as services, including tourism and financial transactions. In the durable goods market, France ranks fourth in the world exports. The biggest trade partners of France are members of the EU, with which France enjoyed an overall trade surplus of 79 billion francs in 1999. The only EU countries with which France has a trade deficit are Germany and Italy. It also had a trade surplus with the Organization for Economic Co-operation and Development countries (OECD, a group of countries which promotes free markets and contributes to the development of members' economies through cooperation) of 66 billion francs in 1999. Its deficit with some Asian countries and Russia can be attributed to the economic crises experienced in these regions, which led to lower demand for French products.

Of over 2 million companies located in France, less than 5 percent take part in activities directly related to export, according to the Department of Foreign Trade of France. While mostly French-owned, some of these companies are multinational corporations . Companies such as IBM, Michelin, Hewlett Packard, and Daimler Benz are among France's top 20 exporters, with the top 3 exporters being PSA, Renault, and Airbus Industrie. The top 20 companies export mainly vehicles and such items as tires, aircraft, electricity, office products, plastic goods, industrial equipment, food items, computer products, pharmaceuticals, and chemical goods.

The 4 top exporters account for 10 percent of French exports, which is more than what the 100,000 next smaller companies bring into the country. The top 10 exporters contribute 15 percent of exports, while the first 100 make up 35 percent of it. Since some of these companies are active in more than 1 production area and usually operate under different names using subsidiaries, the real contribution of the largest 10 companies probably amounts to half of France's total exports. Hence, even though they may not appear in the list of large exporters, some conglomerates, such as Alcatel-Alsthom, are among the largest exporters.

The contribution of smaller-scale enterprises to the French export picture has been on the rise since 1990. Almost half of total exported goods and services were produced by companies having somewhere between 10 to 499 employees. These types of companies are called Small-to-Medium Enterprises (SMEs). Firms hiring fewer than 10 people are called Very Small Enterprises (VSEs). Foreigners control about 27 percent of SMEs in France and about 33 percent of VSEs. SMEs concentrate in agricultural products such as agro-foodstuffs and consumption goods such as wood and leather.

Oil tops the list of French imports. In 1997, petroleum products made up 4.64 percent of all imports. Natural gas is also a major import. Various auto parts, some from French companies located abroad, are also high in the shopping list of France.

Foreign investment in France has steadily increased since 1990. Direct foreign investment in France, in the form of expansion or start-ups, created over 31,000 new jobs in 1999, up 8 percent from its level in 1998. This trend was most likely due to France's skilled labor force combined with the government's efforts to make France attractive to foreign investors. Some 29 percent of all foreign investment-related jobs created in 1999 were due to hiring in U.S. and Canadian firms. This was followed by German investors. The information technologies and communications fields created 15 percent of new jobs. A similar pattern was observed in consultant and service sectors, including call centers and logistics, accounting for 13 percent of the jobs. France is the world's fourth largest receiver of international investments.

Realizing the importance of operating in the country where the market is, French companies have extended their presence abroad. French companies have established a sizable presence in other countries which amounted to 239.7 billion francs in 1998. France is a net exporter of direct capital investments to the rest of the world. The balance of export and import of direct capital investment almost doubled in 1997 from its 1996 value and did not change much in 1998, standing at 74.4 billion francs. This rate was due largely to the increased volume of foreign direct capital investment in France, overall, a remarkable change from the 1990 deficit of 112.3 billion francs. Emerging economies is another reason why French capital opted to take advantage of new markets abroad. But despite new investment in the developing world, two-thirds of French capital in 1998 was invested in the EU and the United States.

MONEY

The French franc is one of the reserve currencies of the world. However, its influence is nowhere close to that of the United States dollar. In 1999 France, together with certain other countries, agreed to phase out its domestic currency in favor of a common currency in Europe, which will work like the U.S. dollar among U.S. states. The euro was launched at a value slightly above the U.S. dollar,

but by 2001 it had lost much of its value. The European Central Bank, with the help of the United States Federal Reserve and the Bank of Japan, undertook a salvage operation aimed at curbing further decline of the euro. The weaker euro made French products, along with other goods produced in the region that uses the euro (also known as the "Euro Zone"), cheaper with respect to the rest of the world. The sale of high-tech goods produced by U.S. firms, such as Intel and Boeing, has suffered during the process, which partly led to the U.S. central bank's participation in the joint effort to save the euro.

Not all EU member countries have opted to be part of the single monetary bloc. Great Britain's reluctance to join was a major blow to efforts to unite the monetary affairs of Europe. Though 10 countries initially joined, the Euro Zone now includes 12 countries (Austria, Belgium, Germany, Spain, Finland, France, Greece, Ireland, Italy, Luxembourg, Holland, and Portugal).

The euro is not yet a hard currency . However, it is used throughout the participating EU countries in non-currency financial transactions. Prices are quoted in both the domestic currency, such as franc, and the euro. Domestic currencies coexist with the euro in a fixed exchange rate regime. For example, 1 euro equals 6.56 French francs. However, the domestic currencies and the euro use market forces to determine their values on the world market in a flexible exchange rate regime (synonymous with a floating exchange rate ). The transformation to the single currency will start in July 2001 when the banks begin issuing checks in the euros. A single currency is expected to ease the movement of labor and capital in Europe and generate a common market encompassing 20 percent of the world's trade.

The French monetary system is governed by the central bank of France, the Bank of France. The reserves of the Bank of France amounted to 72.19 billion euros as of January 2001. Of this amount, more than half (39 billion euros) was in foreign exchange, and 27.6 billion euros was in gold. The Monetary Policy Council is the decision-making

arm of the Bank, similar to Federal Open Market Committee (FOMC) of the United States. The governor of the Bank and Minister of Economic Affairs and Finance cooperate in making policy decisions. However, with the common currency, a new monetary governing body will be introduced, the European System of Central Banks (ESCB), which includes the European Central Bank and the national central banks of each country.

POVERTY AND WEALTH

World War I and II, which were separated by a widespread depression, had a dramatic impact on the whole of Europe, including France. In addition to the loss of manpower, productivity, and wealth, the infrastructure of the European countries was largely destroyed. In the 1950s, only half of French families had running water in their houses, and access to television and automobiles was highly limited. Half a century later, the picture has changed drastically, at least for the larger part of society. France is an advanced industrial country in every respect, although there are pockets in French society that are still comparatively under-developed. The per capita GDP in 1995 U.S. dollars has increased from under US$20,000 in 1975 to just under US$28,000 in 1998, making France among the highest-income nations in the world. However, men tend to earn US$10,000 (1998 dollars) more than women per year. The educational system, though, is more egalitarian: 94 percent of females and 91 percent

of males have attended either a primary, secondary, or tertiary educational institutions. France spends about 6 percent of the GNP on public education, slightly higher than the average for OECD countries. However, only 5 percent of the students are in science in tertiary educational institutions, which is a concern to policy makers about the country's competitiveness in information age.

Standards of living are difficult to assess, and most economists group the Western European and North American countries close together at the top end of most "quality of life" scales. The United Nations Development Program ranked France as thirteenth on the "Human Development Index" in 2001, a testament to France's excellent health care, literacy, income, and life expectancy.

World Bank data show that the poorest 10 percent of the population receive only 2.8 percent of the national income in France. The poorest 20 percent receive only 7.2 per cent of the income. The highest 20 percent, on the other hand, possess 40.2 percent. Unemployment is a major problem, with a rate of 11.7 percent in 1998. Even though the unemployment rate decreased by 5 percent from 1994 to 1998, the rate is still high enough to cause concern among economists. Another related, but less apparent problem is the insecurity and low pay in

jobs which do not require special skills. Marginal increases in government aid programs have not alleviated the problem completely.

Worst hit by the economic inequalities in France are immigrants, who are often subjected to severe discrimination. Some authorities in certain parts of the country have tried to encourage the native population to have more children by offering child benefits while denying immigrants the same services. The EU, on the other hand, has special educational programs for minorities and immigrants.

The percentage of people living with AIDS (0.37 percent) is slightly above the OECD average (0.32 percent) according to UNDP statistics. Public expenditures on health increased from 6.6 percent of the GDP in 1990 to 7.1 percent in 1996-98.

WORKING CONDITIONS

Some 25.6 million workers were employed in France by the end of 1999. France's labor force resembles that of many advanced industrial nations and is one of the most highly-educated in Europe. The GDP per employee per hour was US$34, larger than Italy, the United States, Germany, and the United Kingdom. France ranks third in Europe in employee productivity, and fourth in labor costs.

Unionism in France has declined dramatically over time and currently stands at half the level of the United States and reached the lowest level in Europe in 1997. Traditionally, unionism is stronger in Europe than the United States, and unions fight for non-wage rights more than for issues such as job security and vacations. The major labor union in France is the Confederation Generale du Travail (CGT) with about 2.4 million members. It is controlled by communists. The independent labor union, Force Ouvriere, is estimated to have about 1 million members. Another independent union serving white-collar labor is Confederation Generale des Cadres with 340,000 members. Other labor unions are the Conseil National du Patronat Francais (Patronat National Council of French Employers, CNPF) and the socialist-leaning labor union Confederation Francaise Democratique du Travail (CFDT) with about 800,000 members.

The decline of unions in France has not left the labor force without protection. There are still strong laws and institutional arrangements that give workers a say in running the workplace. The labor code sets standards regarding issues ranging from the workweek to vacations. In companies with more than 10 employees, workers are represented at various decision-making levels and are free to file grievances, individually or collectively, with the courts against the employer. Worker-employer relations are peaceful overall. A total of 8.4 working days are lost per 1,000 working days in France, making it one of the lowest strike countries of Europe. The same number is well over 40 days in Spain.

Another challenge the French labor force faces is the eroding job security as a result of adjustment to the common market policies of the EU. Cheaper labor from such countries as Greece and Spain may drive unskilled French workers out of jobs. Adding to this problem is the possibility that France's skilled workers may find extended opportunities in other member countries. In 1999, the government introduced a 35-hour work week to ease the unemployment problem by creating more positions for the unemployed. (The 35-hour workweek is paid on a 39 hour basis.) Starting in the year 2000, companies gradually phased in the 35-hour workweek schedule. Businesses were vehemently opposed to the initiative, though some agreed to it after negotiations with the government. Firms that implement the rule earlier than they are required to are promised government aid based on the number of workers they employ, which is expected to be a significant burden on the national budget. The government has proposed dipping into the unemployment benefits fund to pay the costs of the new policy.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

843. The treaty of Verdun roughly determines the borders of France. Charles the Bald becomes first monarch.

1338. The Hundred Years' War with England begins.

1643. Louis XIV's reign begins.

1789. The monarchy is overthrown by French Revolution. First Republic is founded.

1804. Napoleon Bonaparte declares himself the first emperor.

1870. France is defeated by Prussia in Franco-Prussian War.

1914. France is invaded by Germany during World War I and suffers enormous losses before winning the war, with the Allies, in 1918.

1940. France is invaded again by Germans during World War II. Allies liberate France in 1944. General Charles de Gaulle becomes head of the provisional government.

1946. France joins NATO.

1951. France plays a key role in the formation of the European Coal and Steel Community (ECSC), the first step towards the eventual formation of the European Union.

1954. France withdraws from Indochina (Vietnam) after its military defeat there.

1967. The ECSC, the European Economic Community (EEC), and Euratom all merge to form the European Community (EC).

1968. Students and workers strike in Paris in opposition to government policies regarding the poor; De Gaulle resigns after losing referendum on constitutional reform.

1974. Conservative Giscard d'Estaing becomes president.

1981. Socialist Francois Mitterand becomes president; massive nationalization campaign by the government begins.

1986. Jacques Chirac becomes the prime minister of the center-right coalition; the government embarks on privatization efforts.

1988. Francois Mitterand is elected for a second term and brings France much closer to integration with the EU.

1991. Socialist Edith Cresson becomes the first woman prime minister of France.

1992. The Treaty of Maastricht is signed, which calls for the political and economic union of European countries. A common monetary policy and legal structure is announced.

1993. France tightens immigration requirements and makes it easier to deport foreigners.

1995. Jacques Chirac wins presidency on his third try, cements relations with Germany and the European union.

1997. Socialist Lionel Jospin becomes prime minister.

1999. EU adopts the euro as the currency.

FUTURE TRENDS

France suffered twice from war in the 20th century at the hands of its neighbor Germany. The 21st century, however, looks much brighter than the preceding one. France is part of a European coalition which may create a United States of Europe in the future. Not only is France one of the leading players in this effort, it also has strong relations with Germany, once its invader, which brings it security. By joining the common currency efforts in Europe, France has secured an influential role for itself in European affairs, both economically and politically. It has already started to reap the benefits of one of the largest markets in the world by receiving a large volume of foreign direct investment and exporting its agricultural and other products within Europe in a tariff-free environment.

Recent liberalization and privatization efforts of the government, which reversed an earlier course of the 1980s, both brought confidence to markets and increased efficiency to the government, which is now much smaller than before. Its main problems lie in its relatively high unemployment rate and low population growth. The EU may provide a solution to the unemployment problem, but with a more integrated Europe comes the possibility that France may lose many of its more talented workers if they leave for better jobs. Coupled with rigid immigration policies and xenophobia, France may experience a shortage of technically capable individuals. Germany, which has many of the same racial difficulties, recently initiated a program which is similar to the U.S. green card and may encourage technologically savvy people to come to Germany. France may soon have to confront the same problem. Decreasing population growth may seem to be an answer to unemployment in the short run, but it is a fact that the burden of supporting the retired will have to be shared by fewer working people as France's demographics change. This situation may mean the need for higher spending on health care and related services, which will drain government aid funds. Perhaps this problem is the biggest challenge France has to deal with in the 21st century.

DEPENDENCIES

France has no territories or colonies.

BIBLIOGRAPHY

Airbus. <http://www1.airbus.com>. Accessed April 2001.

Aron, Raymond. "The French Economy: A Study in Paradoxes." The Atlantic Monthly. June 1958.

Brogna, Brunner, editor. "France." Time Almanac 2000. Boston, MA: Time Inc., 2000.

Discover France. <http://www.discoverfrance.net>. Accessed January 2001.

Economist Intelligence Unit. Country Profile: France. London: Economist Intelligence Unit, 2000.

Ministry of Economy, Finance and Industry. Welcome to MINEFI. <http://www.minefi.gouv.fr>. Accessed February 2001.

Ministry of Tourism. Tourisme. <http://www.tourisme.gouv.fr>. Accessed April 2001.

National Institute for Statistics and Economic Studies (L'Institut national de la statistique et des études économiques). Insee. <http://www.insee.fr/en/home/home_page.asp>. Accessed January 2001.

United Nations Development Program. Human Development Report 2000. New York: Oxford University Press, 2000.

United Nations Development Program. World Population Trends. <http://www.undp.org/popin/wdtrends>. Accessed January 2001.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html>. Accessed July 2001.

U.S. Department of State. FY2001 Country Commercial Guide: France. <http://www.state.gov/www/about_state/business/com_guides/2001/europe/france_ccg2001.pdf>. Accessed November 2001.

—Ismail H. Genc

Emine U. Genc

CAPITAL:

Paris.

MONETARY UNIT:

French Franc (FRF). A franc equals 100 centimes. Coins are in denominations of 1, 2, 5, 10 and 20 francs, and 5, 10, 20 and 50 centimes. Paper currency is in denominations of FRF 50, 100, 200, and 500. In 1999, the European Union (EU), of which France is a member, introduced a new currency, called the euro, to be the common currency among the participating member countries. The euro is scheduled to circulate amongst the members of the European Monetary Union (EMU) by 2002. When this happens, it will be the sole currency in member states, including France. The exchange rate between the euro and franc is fixed at 6.56 francs per euro. Both the franc and euro currently float against all other currencies. The exchange rate for 1 U.S. dollar was 0.98 euros at the euro's inception, but it has lost substantial value since then. There are 100 cents in a euro. Coins will come in denominations of 1, 2, 5, 10, 20, and 50 cents, as well as 1 and 2 euros. Paper currency will be issued in denominations of 5, 10, 20, 50, 100, 200, and 500 euros.

CHIEF EXPORTS:

Machinery and transportation equipment, chemicals, iron and steel products, agricultural products, textiles and clothing.

CHIEF IMPORTS:

Crude oil, machinery and equipment, chemicals, agricultural products.

GROSS DOMESTIC PRODUCT:

US$1.373 trillion (in purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$304.7 billion (f.o.b., 1999). Imports: US$280.8 billion (f.o.b., 1999).