Globalisation for the good

Research shows that the effects of globalisation have benefited France, says Mark Spelman

Globalisation is changing all of our lives as the pace of economic interdependence grows between developed and emerging countries. Debate thrives about whether globalisation has been good or bad for European consumers, workers, companies and governments and what are the prospects in the future. The effects of globalisation have been both positive and negative across Europe. In advance of the French presidency of the EU, the executive council of the American chamber of commerce to the EU (AmCham EU) commissioned a study to take a closer look at France.

Daniel S. Hamilton and Joseph P. Quinlan from the Center for Transatlantic Relations at Johns Hopkins university in Washington DC were asked to take a series of metrics and measure the impact of globalisation on France. The analysis reveals that France has been a net beneficiary of globalisation, but there have been some pains which some sectors of the economy have had to deal with.

When considering the position of France on the world’s stage much has been said about the loss of France’s influence and power in political terms, yet when looking solely at economic metrics we see a complete opposite to this trend. Since 1998 France’s economic impact on the world has significantly increased. France remains one of the largest and most competitive entities in the world.

Globalisation has produced strong gains in both manufacturing and services trade. France ranked fifth with 0bn in exports in 2006, just behind Germany, China, Japan and the United States, and sixth in imports with 5bn.  France’s exports to developing nations across the globe have dramatically increased – exports to Asia increased by 142 per cent from 2000 to 2006. Lower-cost imports from developing countries into France have benefited France by putting downward pressure on interest rates, boosting real wage gains for workers and giving consumers more choices and lower prices.

France remains one of the most attractive destinations in the world for multinationals. FDI outflows have helped boost the competitiveness and earnings of French multinationals and FDI inflows have helped create jobs and boost incomes of French workers. The US is the leading foreign investor in France, with nearly 3000 companies supporting 594,100 jobs, accounting for 16 per cent of all jobs created in France in 2007. US affiliates in France employ nearly 20 per cent more people than US affiliates in China.

Globalisation has also increased labour mobility across Europe. Europe as a whole is shrinking and ageing, with an expected loss of 60 million workers over the next decade. This will have a profound impact on consumer trends, housing and care needs, social attitudes, defence capabilities and political priorities across the continent. France’s fertility rate of 1.94 children per female puts the country in a better position than most of its EU partners, and together with migration inflows France will be able to register modest population gains.

Global competitiveness has drastically increased as a result of globalisation and here too we see that Europe and France stand to gain even more through increased investment in R&D and innovation. Technology is a key economic differentiator –a variable that separates superior economies from the rest of the world. Technological innovation lies at the core of any economy’s long-term growth potential. Currently, we see that France is lagging behind some of its European neighbours and other major world economies. In order to reverse this trend an increase in investment is certainly a start but also an opening of the education system, with strategic partnerships between universities and business, can be a stimulus for innovation and creativity.

France is potentially well-positioned to take advantage of globalisation in many sectors. Economic prospects are sound and in recent years output has grown and public finances have improved. Recent reforms introduced by the French government have intended to specifically address some of the barriers to economic growth and to make certain rigidities more in tune with market needs. President Sarkozy said that France needs to play the globalisation game, an illustration of his government’s will  to work towards further opening of markets and more investment in key sectors to ensure a maximisation of capabilities.

The debate on whether globalisation has been good or bad will certainly linger, as for the most part it is not a debate solely on globalisation but rather a debate on the self-image as the French judge whether globalisation is an affront to their way of life. Globalisation has certainly brought challenges and has affected some sectors of the economy but it has brought unique opportunities which France must capitalise on.