The keys to exporting

Last February, although the Minister Delegate for Foreign Trade, Christine Lagarde, did not seem to be worried, France announced a trade deficit of 26.4 billion euros for 2005. A few months before, she had explained: "We have to manage a paradoxical situation. Exports have reached their highest level ever (Editor’s note: 355 billion euros), and at the same time we are recording a high deficit. This paradox is partly due to the increase in our imports (Editor’s note: 382 billion euros) due to rising oil prices and partly due to a certain lack of enthusiasm on the part of our neighbours, which does nothing to help trade.” Nonetheless, the Minister pointed out: “There are positive signals. The number of companies that export is rising again. This is very encouraging for employment, as our SMEs are recruiting. Our trade is beginning to be redirected to high growth zones such as China and India. Finally, foreign orders placed with our industries, i.e. tomorrow’s exports, have never been higher; they are nearly double the figure for 2004. »

The numerous initiatives taken by the government since 2002 are beginning to show results at last. First, Ubifrance was designated as the overall French export development agency. The institution dealing with France’s foreign trade advisors was then modernised and their commitments to help SMEs have now been significantly reinforced. Certain trade shows were awarded a quality label in a view to increasing France’s presence at the major trade events abroad. The Sidex, a financial support system for SMEs wishing to export, was reorganised. Sector-based action plans and commercial action plans have been set up to redirect foreign trade to certain target countries.

Easier access to financial aids

During the summer of 2005, when Christine Lagarde came into office, an initial assessment already established a trade balance with a deficit of 11 billion euros. The French government was anxious to make the support measures more simple and effective, by targeting three objectives: promoting jobs for export, in particular for young people; going abroad to win markets; and having a collective approach to exports. In October of the same year, the Minister Delegate for Foreign Trade presented, with Thierry Breton, Minister of the Economy, Finances and Industry, a scheme called Cap Export. Cap Export consists in mobilising resources around a few incentive tools to be used by SMEs, the main targets of these measures. For employment, the scheme was first extended to export tax credits, which enable SMEs to reduce the cost of employees charged with developing exports. Under the Cap Export scheme, this measure was extended to trade exploration campaigns inside the European Economic Area. The scope of eligible expenses was also extended to remunerations for young people on VIE contracts (international voluntary service).

Under the VIE system, French companies can send young people on work assignments abroad for a period of 6 to 24 months for less than it would cost to send an expatriate executive. In order to gain markets abroad, employees who work in export-related activities for more than 120 days outside France can deduct from their taxable income the fraction of their income corresponding to the time spent abroad. This income tax allowance was previously only granted for periods exceeding 183 days. The share of expenditures covered by the market exploration insurance policies managed by the Coface on behalf of the State was increased from 65 to 80% for campaigns taking place in China, Japan, India, Russia or the United States. This advantage is another way of reducing companies’ market exploration costs and of helping them to raise additional financing. Two new measures were also introduced to encourage banks to take greater risks in financing exports. First, new pre-financing guarantees proposed by the Coface are designed to facilitate export contracts. 70% of the expenditure can be covered. Secondly, the share guaranteed by an existing product, OSEO-Sofaris, which also covers export pre-financing (purchases of raw materials, equipment, expenses relating to customer service and the production of products ordered, etc.) was increased from 50 to 70%.

Grouping exporters

To make up for difficulties arising from the lack of export skills in certain companies, the Minister Delegate for Foreign Trade also chose to encourage collective promotion campaigns. The quality label procedure, managed by Ubifrance, was introduced as part of this initiative. From now on, when major groups organise collective sponsoring schemes, these will be subsidised under the quality label system. This involves, for example, campaigns to promote French products in foreign markets. Any campaign involving at least five companies is considered to be a collective operation and is therefore eligible. The groups which take part in these sponsorship programmes can also offer support to SMEs working in competitive clusters. During a conference on SME export groups, organised by the French confederation for inter-company trade (CGI) and Ubifrance on 14 March 2006, the government called for a national project designed to encourage the setting up of 1,000 new SME groups in the coming years, in the form of associations or Economic Interest Groups (EIG).

One large company is allowed to be a member of each quality label group, in order to give the other members the benefit of its experience and its infrastructures. The deadline was set at 20 May 2006 for the first applications. They will then be submitted to a selection committee, chaired by the Minister for SMEs, backed by the Minister for Foreign Trade and other partners. The Ministry for SMEs will attribute additional financial aid to quality label groups under the Cap Export scheme. The second call for candidates should be launched in July 2006. When the scheme is fully operational, two or three such calls will be made each year, each for a period of four to six months. As these measures and action plans are already starting to produce concrete results, Christine Lagarde is able to say that: “2006 should be a good year for French external trade.”