Deindustrialisation, fall in exports: the Rexecode Institute is concerned about the deterioration of France’s relative share in Europe.
Could the solid French economic growth recorded last year be built on sand? This is the clear impression one gets from reading the fifteenth report on the competitiveness of the economic institute Rexecode. The indicators highlighted by the study have the effect of a cold shower: widening of the balance of trade in goods and services within the euro zone, deterioration of export market shares, decline in the number of industrial companies in France…
So much data that directly contradicts the flamboyant indicators of attractiveness that the government likes to cite. “The pandemic has reversed the trend instilled at the start of the five-year term, with tax and labor market reforms,” says Michel Didier, president of Rexecode. “The cessation of efforts in favor of cost competitiveness has resulted in a further deterioration in French competitiveness”, judges the economist, who recognizes that “they were resumed in extremis with the reduction in production taxes , the effect of which cannot yet be measured. »
By definition, a country’s competitiveness cannot be measured in absolute terms. It is always relative to that of its partners. And competitiveness gains are a zero-sum game. In other words, good results obtained on national soil are transformed into gains only if other countries do less well. However, during these last two years marked by the pandemic, French competitiveness seems to have collapsed vis-à-vis its peers.
The institute calls primarily for improving France’s cost-competitiveness, through further reductions in production taxes, taxes which include all taxes paid by companies and not based on their profits. These taxes, which have brought in just over 70 billion euros per year until 2020, have already been reduced by 10 billion euros by the current government as part of the recovery plan.
Drastic drop in exports
First indicator: the dramatic widening of the French trade deficit. Between 2019 and 2021, it deteriorated by 26.7 billion euros to reach a record of 84.7 billion last year. And this fall cannot be explained solely by the surge in imports. The share of French exports in world exports, which remained slightly above 3% from 2012 to 2019, has in fact dropped to 2.7% in 2021. The movement is even more obvious within the euro zone. Taking a base of 100 in 2000, France’s market share for goods exports to the eurozone has plummeted to 95 in 2021, the biggest decline within the eurozone. French exports of goods to the euro zone now represent less than 13% of the total.
More boring for Paris, Rexecode twists its neck with the rather easy justification of this withdrawal by the French specialization in aeronautics. “The structural effect seems quite marginal, judge Emmanuel Jessua, director of studies at Rexecode. The fall in exports concerns all categories of goods and services. The share of French exports in those of the euro zone fell overall between 2019 and 2021 by 1.1%. Aeronautics, which fell by 2.6%, posted the worst score. At its side, the share of electrical equipment exports fell by 1.2%. That of machinery and equipment by 1.1%, wood by 1.4%…
The relative deindustrialization of France further illustrates this impoverishment. In Paris, the stabilization of industrial employment after three decades of decline is interpreted as the harbinger of a recovery. Seen from Europe, nothing of the sort. The share of added value of French manufacturing industry in that of the euro zone has in fact continued to decline to the benefit of Germany in particular. It fell from 17.9% in 2000 to 14.7% in 2019 and then 13.9% in 2021.
To reverse the trend, Rexecode recommends continuing efforts in the field of cost-competitiveness, by again lowering production taxes as a priority. Despite an initial drop in 2021 of 10 billion euros, these taxes remain higher by around 30 billion than the euro zone average. The proposal is shared by the main presidential candidates.