Cablegate: France's Sleek New Export and Investment Machine

DE RUEHFR #0214/01 0541200
P 231200Z FEB 10 ZDK





E.O. 12958: N/A
SUBJECT: France's Sleek New Export and Investment Machine

Ref: A) Paris 1553: B) Paris 1599

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1. (SBU) France is already world's fifth largest exporter, but
recently restructured its export promotion and investment machine to
stay competitive and increase assistance to small and medium
enterprises (SMEs). The new "French Export Team" streamlined the
roles of the major export promotion entities, and in September 2009,
launched "Programme France," a unified export promotion strategy and
architecture. Anchored by UbiFrance - France's export promotion
agency - and the public and private-sector chambers of commerce,
Programme France now includes partnerships with volunteer trade
advisors, lenders, credit guarantee agencies, and even the national
intellectual property office. Meanwhile, the Invest in France
Agency is boosting its leverage with similar but more limited
partnerships. Programme France will have some growing pains, but
France's aggressive approach to export promotion and inward
investment bode well for its future competitive stance and position
as a global economic leader. End summary.

France Favors Its Big Players Over SMEs

2. (SBU) France has traditionally -- and successfully -- marshalled
significant public, private, and political resources to boost its
largest companies (e.g., L'Oreal, Louis Vuitton-Moet Hennessy) and
national champions (e.g., Areva, Electricite de France, Gaz de
France, Renault, Alstom) as they compete in key sectors: aerospace,
energy, transportation, agriculture, luxury goods, etc. French
presidents and ministers conduct aggressive commercial diplomacy and
exploit cultural programs such as the "Year of France in Brazil" to
crack open new markets (Ref A). As a result, France has
consistently punched above its weight in the global marketplace and
its large companies have done well.

Drop in Exporter Companies Triggered Reform

3. (U) However, the number of French exporters began to drop in
2001, with a particularly steep decline between 2002 and 2005. SMEs
were noticeably absent from the export scene, and a Ministry of
Economy report showed that the majority of the top 1,000 French
exporting companies, responsible for 70 percent of total export
value, were large French industrial corporations or branches of
international firms. In general, SMEs were hampered by their size
and inability to innovate. The study found that 30 percent of
first-time exporters did not export in the following year. Many
firms exported to just one or two European countries.

4. (U) GOF and private sector sources readily admitted that the
diverse public and private services available to help fledgling
exporters were either duplicative and ferociously competitive with
each other, or unknown to the general public and disconnected from
each other. SMEs also complained that French embassies only helped
large corporations, and the Ministry of Economy concluded that the
Ministry of Foreign Affairs sidelined commercial objectives.
Friction between the major players in export promotion detracted
from their overall mission and hindered new and sustained export
activity. At the same time, France was grinding through the General
Revision of Public Policies (RGPP), which mandated a leaner central
government with fewer public servants and a rationalization of
France's often confusing public administration. The simultaneous
budget reform (la Loi organique relative aux lois de finances
(LOLF)) also demanded "accountability from the first euro" and
quantifiable objectives.

The French Export Team and Programme France

5. (U) In response, Minister of Economy Christine Lagarde and Junior
Minister for Trade Anne Marie Idrac created the "French Export Team"
in early 2008 to "simplify export assistance and increase
efficiency." In April 2008, the ministries of Economy and Foreign
Affairs, UbiFrance, and the public and private sector chambers of
commerce in France and overseas signed an agreement ("2008
Convention") to clarify their respective roles and set out the terms
of their future cooperation. In September 2009, the French Export
Team announced "Programme France," a unified export promotion
assistance strategy and architecture that focuses on SMEs.

6. (U) While the Ministry of Economy's General Directorate for
Treasury and Economic Policy (DGTPE) oversees Programme France in
general, UbiFrance has primary responsibility for the initiative.
But along with this robust new mandate and increased budget (through

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2011) come new quantified objectives that demand greater
accountability. Overseas, UbiFrance offices, French Embassy
Economic Sections, and French bilateral chambers of commerce are
meeting to deconflict their roles on the ground and streamline their
services. New agreements with volunteer trade advisors, financiers
and specialized service providers broaden the Programme's reach, and
the website,, provides a
one-stop shopping window, making the Programme's activities and
services more accessible, organized, and interconnected. Through
the "exporter" website, users can also access the site, which contains a catalogue of all the
export and outward investment promotion activities of every French
Export Team partner.

The New and Improved UbiFrance

7. (SBU) UbiFrance's main objective is to connect French businesses
with market opportunities overseas and help the companies export
their products successfully. Modeled on a private corporation, this
fee-for-service government agency often took a back seat in Paris
and overseas to political and macroeconomic priorities. Programme
France seeks to reverse this trend by giving UbiFrance lead
authority over export promotion and separating overseas UbiFrance
staff from French Embassy Economic Sections. UbiFrance must also
attain specific objectives over the next three years: 20,000
businesses assisted through trade missions, seminars, prospecting
trips, etc; 10,000 new businesses identified and brought to export
status through partnerships with the Chambers of Commerce and
Industry; and 10,000 business interns placed in companies overseas.
UbiFrance is accountable to the DGTPE and an administrative council
comprised of businesspeople and government advisors.

8. (U) By mid-2010, UbiFrance will have approximately 500 staff in
its Paris headquarters and 1,000 in 64 overseas offices in 44
countries. All staff have more flexible, private (i.e., not civil
service) contracts, which helps the GOF reduce its public servant
workforce as mandated by the RGPP. The majority of UbiFrance's
Paris staff are engineers or technical specialists organized into
various sectors such as agronomy, housing/health, marketing, etc.
UbiFrance has no official regional offices in France outside of
Paris, a situation that the domestic chambers of commerce fought
hard to maintain. UbiFrance has nine Economic Missions in the
United States, headquartered in New York. Each mission has both
geographic and sectoral responsibilities. For example, the Chicago
and Detroit offices cover thirteen Midwestern states and a wide
variety of industrial sectors including iron and steel, autos,
mechanical industry, agriculture, etc. Programme France also aims,
from 2009 to 2011, to improve the synergy between UbiFrance and the
domestic and overseas chambers of commerce, which tend to approach
this partnership warily, since their own fee-for-service structures
compete with UbiFrance's new primacy in the field.

Public and Private-Sector Chambers of Commerce and Their Uneasy
Relationship With UbiFrance

9. (SBU) Domestic chambers of commerce and industry (CCIs) operate
in each of France's 100 departments and are represented in Paris by
the Assembly of Chambers (ACFCI or Assemblee des Chambres Francaises
de Commerce et Industrie). The CCIs are public-sector entities that
finance up to 70 percent of their budget through various business
activities, a fact ACFCI highlights to bolster its claim of
independence from the central government. Due to historical
legacies, the CCIs manage all of France's airports (except in
Paris), many of the ports, large conference facilities and major
professional training programs (200,000 students), including many of
the top French business schools. The CCIs also receive 30-40
percent of their budget from a share of the so-called professional
tax (which is being phased out), but this tax revenue remains
outside the mainstream budget process, circumventing central
government oversight. Per the 2008 Convention, the CCIs' role in
export promotion is to seek out local French companies with export
potential and develop or improve their production and export
capabilities. With close ties to local government and some say a
political slant, CCIs can suffer from a lack of professionalization
and hit-or-miss personnel. But this local network with excellent
ties to small business is critical to the success of the French
export machine. According to the ACFCI's annual report, the CCIs
assisted 8,000 companies develop their export potential in 2008.

10. (SBU) The French CCIs overseas (Chambres de Commerce et
d'Industrie Francaises a l'Etranger, or CCIFEs) are the
international analog to the domestic chambers but are essentially
private business clubs. Each club, in return for membership in the
CCIFE network, must commit to certain operating principles,

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including helping any French company that seeks assistance.
Represented in Paris by the Union of CCIFEs (UCCIFE), the CCIFEs
support themselves through their fee-based services and corporate
sponsorship. There are 114 CCIFEs (21 in the U.S. alone) in 78
countries, with a combined membership base of 25,000 companies,
about 50 percent of which are non-French. Most offices provide
initial consultations, market studies, communication campaigns,
organization of meetings, colloquia, and trade shows, as well as
more specialized services. The directors of UCCIFE and ACFCI serve
on each others' boards and coordinate their respective policies.

11. (SBU) In the past, the domestic and overseas chambers passed
businesses off to each other depending on the service required, and
functioned independently of UbiFrance, although with some contact
with the embassies. Now, the 2008 Convention commits the chambers
to coordinating more with UbiFrance, with which they are required to
share their carefully cultivated business contacts and projects.
Many chambers are reluctant to do this; a fear echoed by private
consultants who claim UbiFrance is "dumping" services at
below-market prices and forcing consultants out of business. On the
other hand, UbiFrance complains that the chambers often abuse the
Programme France label (a small Eiffel Tower with a tricolor scarf
and the word "france" beneath it) and provide uneven services at
high prices. Now another potential competitor has entered the
field: the EU is creating its own chambers, as smaller member states
realize they need export assistance but cannot afford their own
bilateral networks. The UCCIFE is pushing the EU to create a
Chamber of Member-State Chambers, open only to other bilateral
chambers, rather than to individual businesses. The UCCIFE claims
it will take at least two more years to sort out the respective
authorities between UbiFrance and the chambers and avoid continuing
clashes over territory and client bases.

Programme France's Financial Partners

12. (SBU) Programme France has drawn in two financial entities --
OSEO and COFACE -- to round out the export promotion portfolio.
Billing itself as "the Company for Entrepreneurs," OSEO provides
direct financing, guarantees bank loans, and co-finances loans to
small innovative business seeking to export. OSEO's 2008 and 2009
budgets were 733 million euros and 544 million euros, respectively,
and the organization received 1.5 billion in the "grand emprunt,"
President Sarkozy's special debt offering for future-oriented
investments. (Ref B) OSEO claims that one secret of its success is
speed; it can react to financing requests in five to ten days. OSEO
employs 1,000 people in its 37 regional offices in France, 600 in
its high-end Paris headquarters, and operates only domestically.
UbiFrance represents OSEO overseas. According to OSEO's
international office, OSEO economic stimulus financing helped 70,000
businesses pull themselves out of the financial crisis.

13. (U) Coface is a French corporation founded in 1946 as a
specialized export credit insurance company, managing its own
products and state guarantees for French exports. Privatized in
1994, Coface has expanded internationally to include 6,816 staff in
67 countries, including the United States. Coface is France's
leading credit information provider, and in 2008, launched a
worldwide rating on the business environment (Coface Rating). In
2009, Coface announced its intention to become a financial rating
agency like the three major Anglo-American agencies, though limiting
itself to corporate ratings. In France, Coface also manages public
export credit guarantees provided by the French state. Examples of
large and small COFACE projects: credit insurance for Brazil's
possible purchase of Dassault's Rafale jets; and insurance for the
costs related to an entrepreneur's business exploration trip.

Helping Hands: INPI, MEDEF, and Trade Counselors
--------------------------------------------- ---

14. (U) Programme France also taps other specialists to assist
budding exporters. The National Intellectual Property Institute
(INPI) is the national government's self-financing IP agency and has
20 domestic offices and branches in the French embassies located in
Beijing, Rabat, and Abu Dhabi, and the French Economic Mission in
Rio de Janeiro. As a Programme France partner, INPI advises
exporters on international patent issues, particularly SMEs. MEDEF
International is the 20-year old spin-off organization of MEDEF, the
French employers union, and helps connect French companies with
visiting international officials, or organizing business delegations
to foreign countries. Finally, the French Foreign Trade Counselors
(Conseillers de Commerce Exterieur de la France (CCEF)) is a
prestigious hundred-year old network of private businesspeople
serving voluntarily as honorary foreign trade advisors. Experts in
their areas, the trade advisors help shape trade policy, advise
SMEs, and sponsor business interns abroad. There are currently

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3,800 CCEF: 2300 French senior executives in 140 countries; and 1700
in France working as managers and executives in exporting or
multinational companies. (CCEF's are nominated by the Prime
Minister, subject to a rigorous background check and pay annual dues
of 800 euros for the privilege to serve.) However, the new
UbiFrance-CCEF partnership is bumpy. A French consultant said he
and his fellow San Francisco consultants who also volunteer as CCEFs
"reacted badly" to being told they should now coordinate everything
with (professional competitor) UbiFrance: "Why should I work for
them for free?"

The Inward Investment Machine:
Well-Built But Underpowered

15. (SBU) In 1969, France opened the first French Delegation for
Development and Regional Action (DIACT) in New York to encourage
international investment in France. Throughout the 1970s, further
offices were opened in Chicago, Los Angeles, Japan, Germany, the UK,
Sweden, Switzerland, and Spain. The offices adopted the "Invest in
France" title and became, within French Embassies, the departments
responsible for inward investment in France. In 2001, the New
Economic Measures Law established the Invest in France Agency (IFA),
a public "industrial and commercial body" placed under the authority
of both the Ministry of Economy and the Ministry of Regional
Development. The 2007 IFA budget was 22.2 million euros, coming
entirely from government funding.

16. (U) The Invest in France Agency is now the main government
agency charged with attracting inward investment to France. It
covers every stage of the investment decision-making process, from
researching the market to actually setting up a business in France.
Activities include promoting the French territory to international
investors and opinion leaders; prospecting for investors and
internationally mobile investment projects; acting as a link between
investors and local authorities to facilitate investment and site
selection bids; and monitoring and studying international investment
flows, and providing individualized after-care services. IFA works
in close coordination with French regional economic development
entities as well as with private partners (logistics, real estate,
energy, banks, lawyers, accountants and other business-to-business
(B2B) service providers) to come up with the appropriate and most
effective/competitive offer to the potential investor. IFA will
also do a pre-selection of appropriate locations in France, based on
the specificity of the project, thus helping potential investors
avoid being approached by too many regional economic development
agencies and local entities.

17. (U) In contrast to UbiFrance and the chambers of commerce, IFA's
services are free, but the agency works closely with a network of
corporate partners -- the IFA Club -- which provide a range of
fee-based services to potential investors. IFA's staff are
typically sectoral experts on three to five-year contracts, with
steep quotas they must fill each year, e.g., visiting 200 new
companies a year to sell France as an investment destination. IFA
maintains 21 overseas offices -- 11 in Europe, four in North America
(New York, Chicago, San Francisco, Toronto), and seven in Asia --
which employ 79 people (22 in North America) in addition to the
60-person IFA headquarters in Paris. These offices are considered
part of the French public service. Through the French embassies,
the DGTPE represents IFA in another 30 countries.

18. (U) The IFA covers every stage of the investment decision-making
process, from researching the market to actually setting up a
business in France. IFA has limited partnerships with DGTPE,
UbiFrance, FirmaFrance (the official French exporter directory), and
Maison de la France (the French Government Tourist Office website),
as well as with French regional entities. Through these
partnerships, IFA is represented at international and domestic trade
shows, has access to French business listings, and obtains
testimonials from the heads of international businesses already
operating in France. In the near term, Invest in France will focus
on 15 emerging high-tech, high-value-added sectors: renewable,
efficient, and nuclear energy; electronics/telecom; medical and
pharmaceutical; bio-, nano,- and animation technology; non-food
agricultural products; and waste management.

19. (SBU) While the IFA structure seems impressive, business
contacts say their impact is often limited. Our French investment
consultant contact told EconMinCounselor that the San Francisco
office is too small to be effective and only helps large companies.
However, IFA is the biggest sponsor of the annual World Investment
Conference, organized to attract investment to Europe, and it
recently received a 13 million euro injection.

Revving the Engine and Hitting the Gas

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20. (SBU) Comment: France is already a top exporter, and if
Programme France can quell the current rivalries and increase
efficiency, exports could boom, especially for SMEs. The 1.5
billion euros available through the "grand emprunt" to finance
innovative SMEs will provide another significant boost. While some
lack of innovation or quality in French products is partially to
blame for declining exports over the past decade, a well-designed
French widget now stands a better chance of reaching a fertile
export market. The French inward investment machine needs a similar
revamp: while the basic structure exists, performance lags behind
potential. While much depends on the economic policies that
President Sarkozy's government adopts, or fails to, France's
aggressive approach to export promotion and inward investment bode
well for its future competitive stance and position as a global
economic leader. End comment.


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