France: high-technology sectors continue to provide best U.S. export opportunities - Business Outlook Abroad

Business America, Feb 3, 1986

France High-Technology Sectors Continue to Provide Best U.S. Export Opportunities The United States and France have an active and long-standing trading relationship. France is the eighth largest supplier for the United States, while the United States is the fifth larges for France after West Germany, Italy, Belgium, and Luxembourg. The positive effects of the upswing in the U.S. economy, combined with the sharp rise in the value of the dollar, have definitely been felt in the French economy. By the end of December 1985, however, the strength of the dollar had decreased by about 20 percent from its February 1985 peak, thereby increasing the price competitiveness of U.S. exports to France. The franc now stands at about 8 francs to the dollar.

French exports to the United States increased over 30 percent in 1983, and 50 percent in 1984. This has shifted the trade balance rather dramatically. The United States, which historically has had an annual trade surplus with France, now finds itself in the position of having a trade deficit of approximately $3.5 billion, based on U.S. government statistics.

Between 1982 and 1984, French imports of U.S. nonagricultural products increased when measured in dollars. During the first half of 1985, this trend continued.

The drop in U.S. exports is leading U.S. companies increasingly to look for other forms of exchange such as joint venture and licensing agreements, and new investments. One example of this is in the computer industry where the United States is contributing in a major way to its development in France both through direct sales and investments, and through licensing and joint-venture agreements between French and U.S. companies. Several U.S. companies already present in France have announced plans to expand existing manufacturing facilities and in some cases to construct new plants.

The high value of the dollar means that normal commercial considerations in the French market are more important than ever before and will require increasing attention from U.S. manufacturers and exporters. These include such items as credit terms, quality, delivery time, after-sales service, innovative solutions to customers' problems, style and design, and French-language consumer literature (now mandatory), correspondence and instruction manuals.

Many U.S. manufactured goods continue to be competitive in the French market, because of their quality and technical sophistication, and because of the important role they play as components of French production for both the domestic and the increasingly critical French export markets. French industrial equipment and installations which are exported frequently use U.S. components because of their technology or the technology used in their production, and also the quality, availability and world-wide after-sales service.

Many of these goods are in the high-technology and specialized equipment areas such as industrial controls, robotics, and electronic production and test equipment.

As noted earlier, the dollar, though still strong by historic standards, has fallen more than 20 percent from its February 1985 peak. Consequently, U.S. exports can be expected to improve. Of negative influence are: the continuing weakness of French investment in capital goods equipment, the general tendency of the French government to encourage nationalized French industry to "Buy French," and the encouragement of nationalized banks to give priority to loans for investments that use French-made equipment.

The following areas offer the best export opportunities for U.S. suppliers.

Computers and Peripherals--The French computer market is the fourth largest in the world. The United States, as the leading supplier, accounts for 52 percent of imports into France. The French market for micro-computers, mini-computers and small computers and peripherals is growing rapidly, while the market for medium-to-large mainframe computers is expected to decline over the next few years. In particular, the micro-computer growth rate should explode, and it is expected that the U.S. share of this market will increase rapidly as American mini-computers recently introduced in France gain wide acceptance.

Electronic Industry Production and Test Equipment--A priority of France's industrial policy is the development of its electronics industries. Imports account for 90 percent of domestic consumption, of which over one-third comes from U.S. manufacturers. The largest category of U.S. exports to France is production and assembly machines, followed by instruments for testing electrical radio and communication circuits.

Electronic Components--The market for electronic components in France is expected to grow from $2.2 billion in 1985 to $3.7 billion in 1988, representing a real annual growth rate of 9.4 percent. The French government considers electronic components a strategic item, and while wishing to ensure French industry's independence from foreign sources, is nonetheless encouraging international technological cooperation. The United States currently holds 24 percent of the market.