November 2021
Summary
Réalités industrielles
French competitiveness within Europe
Complete issue
This issue was coordinated
by Serge CATOIRE
This issue was coordinated
Introduction de Serge CATOIRE et Grégoire POSTEL-VINAY
Diagnosis/Observations
French competitiveness: A historical perspective and strategic issues
By Grégoire POSTEL-VINAY
Ingénieur général des Mines
The state has a part in organizing the system of production in all major countries, this role having evolved considerably since WW II along with the objectives set for competitiveness and the public structures for reaching them. The General Direction of Enterprises (DGE) is now a major figure among these structures. French industrial policy has had to address the accrued opening of the national economy, the restructuring of whole sections of industry in the country and the evolution of its field of activity owing to increased pressure from EU competition and trade policies. The first two sections of this article present the constants (development and regulatory tools, the role of technology), the objectives pursued (with regard to sovereignty, the economy and society) and the principal changes in administrative structures for reaching goals. The third part describes the main current issues (in particular, the three transitions: digital technology; energy and the climate; and health and demography) while the fourth focuses on a few responses to them.
Industrial policy is back at the center of public interventions
By Rémi LALLEMENT, Vincent AUSSILLOUX et Philippe FROCRAIN
France Stratégie
Over the past decade, the resurgence of industrial policy has been driven by the rise of a series of global systemic issues. The Covid-19 crisis has reinforced the need to reorient the industrial base, including its interactions with the service sector. In France, where deindustrialization has been particularly salient, these necessary changes are based on a double logic. On the one hand, they must strengthen the production system by improving environmental sustainability, the competitiveness of companies and the attractiveness of the country as a business location, in particular via cross-cutting policy tools in terms of taxation, training, venture capital and public research. On the other hand, the productive specialization has to evolve through targeted measures. In this respect, focusing on radical innovation and disruptive technologies will probably require more risky bets, when the stakes justify it.
France/Germany: Similarities and differences
By Sylvaine BRUNEAU
Présidente du comité Allemagne des conseillers du commerce extérieur de la France
France and Germany have adopted a ‟2030 industrial strategy” oriented around three axes. This policy calls for both countries to undertake major initiatives in all sectors of the economy in order to see to the international competitiveness of their industries. However the economic structures and sociocultural environment in each of these lands lead to the adoption of different measures based on the country’s advantages and disadvantages. These differences should be seen as typical of the complementarity between these two countries, which form a solid basis for Europe’s development.
Multifaceted policies: The situation and issues
Which skills for which sort of competitiveness?
By Alain CADIX
Membre de l’Académie des technologies
France has to solve two related problems: make its industry competitive and improve the skills and qualifications of its labor force. The three fundamental levers for firms to obtain a competitive advantage (the OHM Act) are: human capital, organization and management. Skills in technology, a major component of human capital, are unstable, since the diffusion of key technologies, not to mention their hybridization, is unpredictable. New skills and qualifications are required. The quality of the organization and management contributes to this. In this context, policies centered on qualifications, at both the company and society levels, are decisive. The other levers are the quality of organization and management. Industry will make a strong comeback only if skills and qualifications are adapted to this new context.
Why is French academic research suffering from a loss of attractiveness?
By Valérie MIGNON
Université Paris Nanterre, EconomiX-CNRS et CEPII
This paper explains why French academic research is losing ground on the international scientific scene. After a general overview of the French research stage, it focuses on the specific case of the French university system. We point out that the financial constraints of universities, the lack of recurrent funding for laboratories, the scarcity of human resources, the cumbersomeness and multiplicity of administrative tasks, the low attractiveness of salaries and careers in academia, but also the obstacles to partnerships between public and private research constitute challenges that must be overcome if France is to regain a leading position in research at the world level.
Competition policy and industrial strategy
By Jean-Paul TRAN THIET
Avocat au Barreau de Paris
Industrial and competition policies are often perceived as an oxymoron, particularly at the level of the European Union. The following article does not reject EU competition policy, which contributed to the integration of the member States’ economies, but is questioning certain rules imposed by Brussels because they are impeding the implementation of a well-informed industrial strategy at a time where globalization is turning into economic fighting with third countries. Merger and State aid controls are particularly questioned, as well as reciprocal access to markets. And the rising of the importance of the digital economy requires an aggiornamento of EU competition rules to allow the recovery of efficiency of public authorities.
Regulating digital platforms: The European moment
By Quentin NAVARO AUBURTIN et Mathieu WEILL
Direction générale des Entreprises – Ministère de l’Économie, des Finances et de la Relance
On 15 December 2020, the European Commission released drafts of the Digital Markets Act (DMA) and Digital Services Act (DSA). The objective is to set up a regulatory framework for the big online platforms for the next ten to twenty years, for both their business practices (now hegemonic) and their processing of contents (an action for which they must, democratically, be held accountable). These texts are a long awaited, major policy initiative whereby Europe asserts its values and determination to lay the grounds for an ambitious model, the precursor of regulation ‒ as happened in the case of the protection of personal data under the General Data Protection Regulation (GDPR) in 2016. For several years now, France has been a driving force in this novel construction of EU law for regulating digital platforms. Its presidency of the EU in 2022 will be the occasion to set these advances in concrete.
Granular policies versus a global vision: Toward strategic actions at last
By Henri LAGARDE
Chef d’entreprise
Among the OECD’s 38 member states, France is the leader in terms not just of public expenditures but also (and by far) of its mandatory levies on firms. A comparison of the official operating statements of three small/medium-sized firms (German, Danish and French) reveals the poorly grounded choices made by France and their impact on the competitiveness of its firms, all this against the backdrop of the country’s granular economic policy which has, since 1974, mainly relied on stimulating growth via consumption (which is undertaxed in France) to the detriment of production (which is overtaxed). Foreign competitors thus enjoy a fantastic free ride! How to break out of this trap? Not with granular measures, but by pursuing a global strategy as in the ‟phoenix lands”, these old industrial basins that have dealt with the same difficulties. Two pillars of this strategy are to lower the mandatory levies on firms and raise the VAT.
2022-2027: Five years for financially shoring up French firms!
By Jean-Paul BETBEZE
Professeur émérite de sciences économiques, Université Paris Panthéon-Assas
Are French firms going to continue experiencing strong growth as they now are? How to help them sustain their growth? This is what is now at stake given that firms entered the pandemic deeply indebted and less profitable (the latter accounting to a large degree for the former) than many of their foreign (in particular German) competitors. They will come out of the pandemic stronger only if they innovate more and invest in information technology and training, while generating more profits and, too, debt.
French innovation policy
By Arnaud DELAUNAY et Paul CATOIRE
Sous-direction de l’Innovation (SDI) de la direction générale des Entreprises (DGE)
Legitimated by contemporary economic theory, innovation is a central axis of current economic policies for raising productivity gains, improving competitiveness (excluding costs), developing new services and sectors, and accelerating economic growth. Innovation policy in France, which relies on well-established fiscal, financial and regulatory tools, is regularly adjusted to bolster its efficiency in a context conditioned by dynamic trends in innovation in other countries. Since 2018, emphasis has been placed on breakthrough innovations, the reassertion and modernization of the support for future markets and technologies, and the importance given to startups and ‟scale-ups”.
Competitiveness, the mobilization and cost of labor: Twenty years of divergence between France and Germany
By Denis FERRAND et Emmanuel JESSUA
Rexecode
The loss of competitiveness is a major economic fact in the history of France since the turn of the century. It is the main factor accounting for the growing difference over the past twenty years between per capita GDP in France and Germany. In France, the cost competitiveness of industrial firms fell at the start of this period while international competition was dictating the prices for selling their products. Several industrial firms were gradually unable to keep up given the margin squeeze in France. Meanwhile, those that managed to pull through were induced to emphasize productivity gains by increasingly replacing labor with capital ‒ to the detriment of less skilled employees. The loss of competitiveness of French firms in exports and the country’s deindustrialization in comparison with neighboring European lands are analyzed along with the persistently high level of unemployment in France and the per capita income spread between France and Germany.
Sectoral policies
Sectoral policies: Energy
By Olivier APPERT
Membre de l’Académie des technologies, président de France Brevets et conseiller du centre Énergie de l’IFRI
et Patrice GEOFFRON
Professeur à l’Université Paris-Dauphine
Although the low-carbon transition shifts the balance within the ‟energy trilemma” towards environmental imperatives, industrial issues are nevertheless an essential component. Without engaging in a wide-ranging sectoral discussion, we propose to review the conditions for the structuring of two energy sectors in the 20th century, oil and nuclear power, and then to set out some of the elements of a set of specifications for the emergence of a hydrogen sector in the 21st century. This ‟exercise” allows us to reveal both permanencies (an effort throughout the chain value, including training) and differences (the rules of competition within Europe and in globalization). Beyond France, if Europeans already have industrial assets, the construction of a hydrogen industry will involve a very long-term effort, with limited effects on the European Union’s environmental objectives in 2030. We are convinced that the construction of a hydrogen industry will serve as a test of the capacity of a Union, in search of sovereignty, to be consistent over the long term.
Issues of competitiveness in the chemical industry
By Luc BENOIT-CATTIN
Président de France Chimie
The chemical industry ‒ the second branch of the French economy in terms of exports: €62 billion in 2019 ‒ has a high added value and irrigates the whole productive sector in the economy. Owing to its capacity for innovation and a policy for differentiating business activities upstream in the production process, this industry has managed to adapt to a planetary situation that has deeply changed over the past fifteen years, given the rise of Asia and the shale gas revolution in the United States. Nonetheless, it has lost ground in relation to its European competitors. A new phase is opening with the twofold challenge of the environment and digital technology. This challenge must be seen as an opportunity. Society is undergoing a radical paradigm shift that highlights the key place of chemistry in the large-scale technological and industrial trends that will play out during the coming decade. The awareness of this situation has been made clear by the COVID-19 pandemic; and the stimulus plan represents the first step toward supporting this sector ‒ an effort that should be sustained by giving priority to investments in the breakthrough technologies that will reinforce the European chemical industry while creating the conditions for a sustainable competitiveness of installations in France so that the country can take part in competition within Europe.
Competitiveness and health
By Olivier BOGILLOT
Président de Sanofi France
COVID-19 has made the healthcare sector a strategic priority for France and the European Union. A major issue is to overhaul the budgetary policies based on cutting prices that have, for more than a decade, hampered the necessary growth in private investments and thus jeopardized this industrial tool, as plants and the jobs there have been moved out of the country. During the crisis, companies producing health products took part in exceptional initiatives: cooperative efforts to produce as many doses of vaccine as possible, the pooling of data on the genome of the SARS-CoV-2 virus, and the investments made to reconvert plants and production facilities. France has the potential of becoming the leading health product supplier in Europe on condition that the necessary factors are brought together for supporting its independence in bioproduction, chemistry and digital technology. Considerable financial means have been mustered in budgets (France’s and Europe’s), through projects (PIIEC) and via the creation of an agency of prospective studies (HERA). Efforts are already being made to realize these ambitions, such as the creation of a European leader (EuroApi) in the production of active principles, the development of Alliance France Bioproduction, and the Biotech Digital Campus, which has the objective of fostering the skills needed in this field of activity. Once France and Europe consider health to be a strategic sector, they will have to draft long-term strategies and policies for accompanying the healthcare sector; and investments for future innovations will have to be made by taking account of all the dimensions indispensable for success in this sector, such as data management and platforms for data analytics.
What are the sovereign issues and stakes in the digital world, in particular with regard to cybersecurity?
By Patrice CAINE
Président-directeur général de Thales
Cybersecurity is not just a tedious formality we have to accept to protect our information systems. It is, according to Patrice Caine, ‟ The key to success of our digital economy” . Thales’s Chairman and CEO looks at the diversity of threats and the plethora of contexts that the term ‟cybersecurity” covers, and asks: can France and Europe maintain their digital sovereignty when ‟hardware and software from the United States and China are permeating every information system?” Patrice Caine believes they can, provided that they shape a French and European sector into which the necessary financial and human resources are injected. The skills exist, in particular in industrial groups such as Thales. It is therefore up to the authorities – in France and across Europe – to call for the widespread mobilisation that will enable us to ‟assert ourselves as leaders in areas as vital as the cloud, the Internet of Things and post-quantum cryptography ”.
Competitiveness and computational intensity
By Jean-Claude ANDRÉ
Ancien directeur du Cerfacs, correspondant de l’Académie des sciences et membre de l’Académie des technologies
et Gérard ROUCAIROL
Ancien directeur scientifique du Groupe Bull et président honoraire de l’Académie des technologies
The ability to perform calculations on the edge of what is possible has major advantages for increasing knowledge, designing new competitive products and services, and developing effective weapon systems. Advances in the physics of semiconductors and the enhanced capacity for collecting and using big data are setting off a literal revolution in the architecture of supercomputers and model-building methods. Following a description of examples of advanced uses of intense computing power in research, industry and defense, the breakthroughs are presented that are being made in physical systems and methods. The opportunities thus arising for shaping a market for high performance IT are pointed out. They place France among the four countries in the world (and the only country in Europe) that can take part in this race toward computational intensity and thus enable Europe to lay the grounds for a policy of digital sovereignty.
Decreasing competitiveness and vulnerability: A need for decisive interventions in the food supply
By Marion GUILLOU
Administratrice indépendante et membre du Haut Conseil pour le climat
Hugues de FRANCLIEU
Directeur de projets, en charge de l’industrie agroalimentaire, à la direction générale des Entreprises (DGE) ‒ Ministère de l’Économie, des Finances et de la Relance
et Claire SAINT-FÉLIX
Statisticienne et économiste
What has happened to the competitiveness of the French food industry since May 2020? The fundamentals in farming and the economy have hardly changed. The country’s balance of trade in the primary sector is still running a surplus, but is slowly decreasing: market shares in comparison with major European rivals are definitely tapering off. This trend is set down to a lack of ‟competitiveness”, whether due to labor costs in the sector, the slight gains made in productivity, non-price competitiveness or structural causes. Not all stakeholders deem it urgent to undertake action; nor do they agree on the remedies to be applied. What is new since 2020 is that ‟sovereignty over the food supply” has become a publicly debated issue. ‟Delegating our food supply is insane”, in the words of the president of France at the start of the COVID-19 pandemic, when supermarkets were having problems restocking shelves with flour, milk or eggs while the French were rediscovering at home the pleasure of baking. This sector’s resilience has become a preoccupation motivating interventions; and some inputs now used in this sector have been listed as ‟sensitive” products.
The predicament in the building trades
By Pierre-André de CHALENDAR
Président du conseil d’administration de la Compagnie de Saint-Gobain
The construction industry must address three major issues. The first is related to the raising of the goals for reducing by 55% greenhouse gas emissions by 2030 and attaining ‟carbon neutrality” by 2050. Several countries ‒ representing 70% of the planet’s GDP ‒ have pledged to reach this twofold objective. The second issue has to do with the use of primary resources, which has tripled over the last fifty years. The construction industry is a big consumer of raw materials; and the pace of extraction and production is hurling us toward a depletion of these resources. The third issue is demographic. The urban population will, it is predicted, increase by two billion over the next thirty years. The construction industry is faced with a predicament: how to reach carbon neutrality by 2050 and reduce its consumption of primary resources while responding to the growing demand for housing that results from the increase in the world’s population?
What are the issues for French tourism following the COVID-19 pandemic?
By Caroline LEBOUCHER
Ingénieure générale des Mines, directrice générale d’Atout France, l’agence française de développement touristique
In March 2020, France, the first tourist destination on the planet, went into ‟confinement”. Museums, monuments, amusement parks, theaters, restaurants and bars were shut down; airports and railway stations, deserted; trade fairs, shows and meetings, canceled; traveling was restricted. The pandemic caused business in tourism worldwide to drop as never before. This sector should recover slowly, gradually, depending on the health situation worldwide. This crisis has highlighted how important tourism is economically and socially (whether as a leisure or business activity). It amounted to 7.4% of the GDP in 2019, and weighed heavily on France’s balance of payments with a surplus of €11 billion in 2019. Eighteen months later and mainly thanks to massive support from public authorities (more than €30 billion between March 2020 and June 2021), French tourism is rebounding, proving its resilience. The question will eventually arise, however, of whether firms will be able to reimburse the loans guaranteed by the state. The health crisis has accelerated innovation and the digital transformation of the tourist industry. It has also been the occasion for realizing how fragile this sector is given its dependence on international travel and airline connections, and how necessary it is to improve on its environmental and societal impact. What if the worse crisis in tourism were to be an opportunity for it? The opportunity to adapt, to change, to innovate… opportunities for making new investments, creating new business activities and making jobs more attractive? The analysis of the impact of this crisis and the observation of new trends have provided information for drafting an ambitious national policy on tourism that will make this sector more competitive, attractive, innovative, resilient and sustainable. This is the purpose of the plan to be presented by the president of France in November 2021. Atout France has played an active part in drafting this plan and will have a full part in implementing it.
Miscellany
Responsible innovation in neurotechnology, practical examples from translational projects
By Tracy LAABS
PhD, Chief Development Officer, Wyss Center for Bio and Neuroengineering
New technologies raise ethical questions and responsible innovation is needed at every step of the development process. Here we describe two research projects breaking new ground in neurotechnology and neurobiology respectively. The first, a brain-computer interface, enables people who are completely locked-in to communicate in real time using their brain signals to control a communication device. The second assesses the feasibility of using photobiomodulation (PBM) as a therapy in the fight against neurodegenerative disorders like Parkinson’s and Alzheimer’s disease. We briefly consider the ethical aspects of both projects and conclude that organizations developing new neurotechnologies should consult with experts in neuroethics and put quality systems which require development in line with accepted international standards in place early in the development process. They should additionally engage in an open dialogue with society around the impact of their technology. Finally, they should anticipate potential unintended use of new technologies and engage with professional organizations to facilitate the translation of applied research ethics into government policy.