French industry must be the best, says President

Economic diplomacy – “Convergence for the Industry of the Future” show – Speech by M. François Hollande, President of the Republic (excerpts)

Villepinte, 6 December 2016


When I took responsibility for the country in 2012, our industry accounted for barely 12% of national wealth, whereas we know it’s more than double that in Germany, and other countries have long had strategies based on industry and the services linked to it.

The figures may also be deceptive, because there’s also a lot of business in industry-related services. Even so, industry’s share in our country steadily declined in the 2000s. There was also a loss of competitiveness, particularly resulting from costs that may have been higher than our neighbours’. The trade balance also deteriorated, and market share declined. So we wanted to make a clear-sighted assessment of our strengths and weaknesses. Hence the Gallois report – and once again I want to pay tribute to the work he did, fully independently, to tell us where we were and where we had to go.

Following this report, which was presented in November 2012, I made a number of decisions, particularly to restore businesses’ margins by means of the Competitiveness and Employment Tax Credit. I then confirmed these [decisions] through the Responsibility Pact. This unprecedented effort today accounts for €30 billion. It’s largely behind the recovery of businesses’ margins – which have returned to pre-crisis levels –, and there hasn’t been the slightest loss of purchasing power, because it’s not salaries that are being roped into the effort but the government, through tax reductions.

But competitiveness isn’t just about labour costs, even though today we’re at levels comparable to our German neighbours: it’s also about energy costs. They’ve clearly fallen, given what’s happened with oil and gas prices. But in France we have a competitive advantage, namely that the electricity price is markedly lower than it is for our European neighbours.

On the other hand, we had a problem with offsetting carbon prices in what are called the electro-intensive industries, i.e. those using a lot of energy, which can be traditional industries or industries of the future.

We’ve made sure to offset these additional costs in such a way that our businesses can also be the best placed in this competition.

We’ve also – and I was especially keen to do this – ringfenced the R&D tax credit, which doesn’t exist anywhere else and which, for businesses of all sizes – small, medium and large – provides lasting support for innovation and research: not only research jobs but also investment in machines and the invention of tomorrow’s products.

This accounts for €6 billion, and so in comparative tax terms it’s an advantage for France.

I’ve also, particularly in recent months, wanted there to be a strong incentive for investment. I’ve introduced the increased depreciation mechanism – which enables businesses that are going to invest or have already invested to reduce their corporation tax – and made it a permanent fixture. All businesses that make orders in the coming months will still have this advantage.

Here too – this is an essential condition if we want to make progress in every field, in particular industry – we must invest. It’s especially necessary today, when the public accounts have to some extent been restored and company accounts put back on a sound footing. There’s room not only for public investment but also private investment. What will make the difference amid globalization as we know it – with competition that will be increasingly fierce and with China, the emerging countries and the United States as well, especially if there’s a protectionist tendency – is the ability to be the best when it comes to technology, expertise and therefore specialization.

French industry has long been accused of focusing on middle-of-the-range products and therefore suffering in comparative cost terms. Today we must be the best, not only in terms of cost – we’ve made the necessary efforts – but also in terms of specialization.

What results can we already see? That investment is picking up again, but there’s also been an industrial strategy, which began in 2013 with The New Face of Industry in France, where we identified several major areas that were going to turn industry upside down: mobility, the Internet of Things, sustainable cities, the bioeconomy and Big Data. We concentrated our capabilities, our resources, on these major priorities, in such a way that France could get a head start and make full use of new technologies. They’re visible here: 3D printing, augmented reality, the possible medicine of tomorrow, predictive maintenance, virtual models, and robotics – because in France we have fewer robots than many of our neighbours. (…)./.

Published on 09/12/2016

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