France Grapples with Globalization

"I VOTED `no' in the referendum because I don't like Jacques Chirac. He is the worst President we ever had," said the middle-aged gentleman vehemently. The till then mild-mannered doctor was chatting with us while enjoying a solitary lunch at a neighbouring table in an open-air Paris café. Smiling benignly and helping our Indian group select from the menu, the good samaritan turned out to be multi-lingual knowing languages ranging from Japanese to Russian. The conversation inevitably turned to politics, the European Union and the referendum on its new constitution. His warmth turned to anger as he declared Mr. Chirac to be responsible for all the ills currently facing France.

The strong reaction on the EU referendum reflected concerns closer home as the French are grappling with threats to their traditional way of life as a result of globalisation. The stinging `no' to the EU constitution, as our friend pointed out, had little to do with the EU and more with the government's management of the economy. Despite numerous public debates on the issue, even the most sophisticated and intellectual French citizens viewed a positive vote as a route to creating more inflation and inviting immigration from newly inducted members of the EU such as Poland, Hungary, and Slovenia. Turkey's entry into the EU is also perceived as a threat though few realise that negotiations for its entry are set to begin in October despite the setback to the new constitution.

High unemployment rate

One of the reasons for the French `no' has clearly been worry over low wage workers taking over French jobs in a country where unemployment is as high as 10 per cent. The constant examples being cited in the media are of the ubiquitous "Polish plumber" who will wipe out French plumbers by offering services at rock bottom rates. Fears have not been erased by EU stipulations that curb movement of workers from the new member-countries for up to seven years in many cases.

The EU's expansion from 15 to 25 has made this enlargement the scapegoat for the economic strains being faced by the original group. In addition, fears are rising over reports of emerging economies such as China and India forging ahead in outsourcing and creating even more job losses.

Judging by meetings with politicians, industry, and bureaucrats, France is deeply concerned over its role in a globalising world. Used to a relatively high standard of living with all the comforts of a welfare state, the French are anxious to prevent lifestyle changes that seem to be looming inevitably on the horizon. The huge subsidies of the welfare state have got them used to free and high quality education, a safety net for the unemployed and underemployed and lesser hours of work than many other countries.

These comfort levels are made possible only by high individual and corporate taxes. Even so, the country is facing domestic fiscal strains along with pressure from other members in the EU – notably the United Kingdom – to cut back on its traditionally high agriculture subsidies.

Many analysts are now suggesting that France must rethink economic policies and adopt the new economic model typified by Ireland, which has quickly become one of the most affluent European nations. Officials and executives, on the other hand, are quick to point out that though the French work less hours, the productivity is much higher than elsewhere in Europe. Besides, subsidies on education are perhaps the reason France has long been a centre for high technology in key areas, including nuclear power, aircraft, and pharmaceuticals.

The easy French environment for inward investment has also made it one of the top destinations for investors globally. The US, for instance, continues to be the largest investor in France despite the two countries' fluctuating political ties.

Interestingly enough, Indian companies have jumped onto the bandwagon and begun to take over French companies. The take-over route is quicker than fresh investment while efforts are being made to ensure that jobs are not only retained but increased which makes Indian companies more welcome now in the French market.

The "Invest in France" agency says Indian corporates are increasingly looking to French companies as a way of setting up a base from which to access the expanding EU market.

Interestingly, language is no longer a barrier for investments as most French executives are now multi-lingual, largely because of the need to operate in several countries in a more integrated Europe. Even the man on the street in major cities such as Paris and Lyons tends to know a smattering of English and is good humoured enough to help out the hordes of Indian tourists swarming his country in recent years.

Apart from tourists, France is keen on weaning Bollywood film-makers away from their fondness for Swiss locales. Lyons, capital of the Rhone-Alpes region, managed to have at least one film shot there last year; shooting for another was going on last month.

In spite of all the worries, France has begun to change slowly but perceptibly to meet the challenges of globalisation. Aggressively seeking inward investments to deal with the spectre of rising unemployment, it is taking a pro-active approach even with emerging economies such as India. It may not change its approach to economic policymaking but has definitely recognised the need to become a more flexible player in a globalising word.