US embassy cable - 05PARIS8374

UNCLAS SECTION 01 OF 02 PARIS 008374 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/TPP, EUR/ERA, EUR/WE, EUR/PPD, EB 
STATE PASS USTR 
COMMERCE FOR ITA 
 
E.O. 12958:  N/A 
TAGS: ECON, EINV, ETRD, PREL, FR, EUN 
SUBJECT: FRANCE - BUSINESS UPDATE 
 
NOT FOR INTERNET DISTRIBUTION 
 
1.  (U) This message contains a series of updates on French 
trade and business news. 
 
U.S. Investment in France is Up 
---------------------------------- 
1. (SBU)  France's President of the French Agency for 
International Investment, Clara Gaymard, recently told a 
French business daily that U.S. investment was up 24 percent 
last year, ahead of all other foreign investment in France. 
She added that the Franco-American economic and trade 
bilateral relationship had not suffered from France's 
position on Iraq.  She concluded that although the "tone of 
the relationship is not improving," the economic 
relationship is `very good.'"  Gaymard further agreed with 
her Government's stance on "economic patriotism," claiming 
that it was not particular to France, and that it was an 
element of national pride in all countries except France. 
 
Redefining France's "Attractiveness" 
------------------------------------ 
2. (U)  Gaymard also presented a new scoreboard of the 
attractiveness on France, which she considers more relevant 
than existing studies, which are based on criteria of 
concern to economists rather than foreign investors.  As a 
result, the Invest in France Scoreboard has included 
categories in which France excells, such as the number of 
foreign students having received university education in 
France and penetration of broadband Internet.  France leads 
the EU in both areas but remains behind the U.S., Japan and 
Finland.  (Note: For more details on the scoreboard, and in 
English, go to http://www.investinfrance.org/France/?l=en. 
End Note). 
 
French Efforts to Select Foreign Students 
--------------------------------------------- 
3. (SBU)  France is proposing more overseas staff and a more 
rigorous selection process for foreign students wishing to 
study in France.   As part of a package of tighter 
immigration laws to be presented to Parliament for approval 
early next year, beefed up staff in French Embassies will 
screen students before their arrival in France and select 
the best of them according to four additional criteria: 
their targeted research/study plan, their resume, their 
linguistic skills, and the state of bilateral relations with 
the country of origin of the student.  With 50,000 new 
foreign students every year, France is currently the third 
global destination of foreign students, behind the U.S. and 
the United Kingdom. 
 
China's hard bargaining with Airbus 
------------------------------------ 
4. (SBU)  The Chinese apparently leaned hard on the French 
to obtain local assembly as part of their recent "historic" 
USD 9.7 billion Airbus deal -- the biggest single order from 
China.  In the run-up to Chinese Prime Minister Wen Jiabao's 
four-day visit to France December 4-7, Chinese negotiators 
pushed hard to associate a "precondition" to the order, i.e. 
that the European aircraft maker investigate the feasibility 
of opening an assembly plant in China.  Reflecting the 
ambivalent mood in France with regards to this deal, the 
official French news service AFP opined that any big deals 
with China "come with strings attached, namely the transfer 
of know how and technology to their country so it can be a 
heavy manufacturing powerhouse in the future."  This 
analysis was further substantiated when the Chinese Prime 
Minister told the French elite Polytechnic School that 
France should "offer more attractive conditions on 
technology transfer as well as price" if French nuclear 
group Areva is to win a massive contract to built third- 
generation nuclear reactors in China.  The big contracts 
have allowed France to become China's second largest 
technological cooperation partner in the EU and its third 
largest source of direct investment, although France remains 
far behind the UK and Germany.  In terms of bilateral trade, 
France's share of the Chinese market has dropped from 2.7 
percent five years ago to 1.4 percent.  France is China's 
fourth EU trading partner and 15th worldwide. 
 
Foreign Investment Offsets Outsourcing 
-------------------------------------- 
5. (U)  A recent study by the Assembly of French Chambers of 
Commerce and Industry (ACFCI) shows that a majority of the 
100 middle-sized French companies polled moved some 
operations to East European countries, China, and Maghreb 
countries, and that most companies noticed an immediate 
improvement in their financial situation.  The study, 
entitled "Fear of outsourcing is not a solution" shows that 
outsourcing has cost 10,000 jobs in France in 2004; however, 
foreign investment has led to the creation of 30,000 jobs. 
 
Pharmaceutical Industry angry at rise in tax 
-------------------------------------------- 
6. (U)  The recently adopted French Social Security 
Financing bill for 2006 means bad news for the 
pharmaceutical industry in France.  To bring the Social 
Security deficit down from an estimated 11.9 billion euros 
in 2005, to 8.9 billion euros in 2006, the new Social 
Security Finance bill calls for a rise on an "exceptional 
basis" from 0.6 to 1.96 percent in the tax on the 
pharmceutical companies' turnover, despite protests from the 
industry and the Embassy. (Note: this "exceptional" tax has 
been in existence for three years, and has risen every 
year.) 
STAPLETON