Patrick Sabatier | The Statesman
http://www.thestatesman.net/page.news.php?clid==4&theme==&usrsess==1&id=6924
Call it the French paradox. French multinationals go on acquiring
foreign assets, but the French government is busy erecting walls
around French companies against foreign takeover, while at the same
time encouraging foreign investment in the country.
France appears as the most protectionist member of an increasingly
protectionist Europe, following a succession of government
interventions against attempted takeovers of French companies by
foreign interests: Paris foiled the acquisition of the Danone Group,
maker of yogurt and mineral water, by the American giant Pepsico;
publicly opposed the buying of steelmaker Arcelor by Anglo-Indian
Mittal Steel; and pushed for the recent merger between water utility
company Suez and the national gas company GdF to prevent Suez
becoming prey to the Italian energy concern Enel.
Prime Minister Dominique de Villepin has repeatedly intervened to
stop cross-border mergers as official policy, under the label
of "economic patriotism". His government recently introduced
legislation designed to complicate, or just block, hostile takeovers
of French companies in eleven sectors deemed as strategic to the
economy. The government has drafted a list of 10 major companies
from the CAC 40 index of the Paris Bourse as untouchable by
foreigners. Not yet published, the draft is said to include
distribution giant Carrefour, the Société Générale bank, Danone and
glassmaker Saint-Gobain.
Meanwhile, in April the French electronics company Alcatel absorbed
American telecom equipment maker Lucent, the latest in a long list
of mergers and acquisitions by French groups ~ 190 last year, a 157
per cent increase over the previous year, for a record £60.6
billion. Such activity suggests France is practicing globalisation à
la carte ~ profiting from globalisation while resisting others'
efforts to do the same with French companies, along the
principle, "What's mine is mine, and what's yours is open to
negotiations."
While France may be more open in applying this double standard in
the globalisation game, it is far from alone. Since the beginning of
the year, Spain has blocked a German company taking over one of its
own energy producers; Poland has thwarted the purchase of several of
its banks by Italians, while Italy has done the same for some time,
as evidenced by the long-running battle in 2005 to fight off the
takeover of Antonveneta bank by the Dutch bank giant ABN Amro; and
Germany staunchly defends its "Volkswagen law", protecting its auto
industry from foreign predators.
Outside the EU, one need only look at the spat over the acquisition
of six US port operations of P&O by Dubai Ports World or remember
the furor over the Chinese oil firm CNOOC attempting to buy Unocal.
This list, not exhaustive by any means, shows that what the French
call "economic patriotism" is a truly a globalised attitude,
especially in the developed world. Ironically, the developed nations
push for more liberalisation and opening of investments against
developing powerhouses like China, India or Brazil ~ which resist
the opening of their still highly state-controlled and "national"
economies ~ in the Doha Round of international trade negotiations.
Economic patriotism may strike some as odd and incoherent when
considering that its leading proponent, France, is by far the EU
nation most "open" to foreign investments, at least according to IMF
figures. Direct foreign investment represents 13 per cent of GDP in
Italy, 25 per cent in Germany, 36 per cent in the UK ~ but 42 per
cent in France. Over 40 per cent of the shares of the most important
French groups quoted on the Paris Bourse are in foreign hands, and
one in seven French workers is employed by a foreign company ~
compared with one in 10 in the UK and one in 20 in the USA. But in
France, economic patriotism has deep historical roots, right to the
birth of the modern French state in the 17th century, under Louis
XIV and his Prime Minister Jean Baptiste Colbert.
The state's political legitimacy was predicated upon its capacity to
macro-manage the economy, lead a successful development strategy,
launch big industrial and technological projects, and nurture world-
class "industrial champions". This endured into the 20th century,
successively upheld by the Left ~ the Popular Front government
nationalising in 1936 defence industries, railways, the Banque de
France and more ~ as well as the Right, with Charles de Gaulle doing
much the same after 1945 for the nuclear, aeronautics, railways and
space industries. To this day, French minds link the "Thirty
Glorious Years" of the post-war French economic miracle with this
policy. Economic patriotism is thus as much a political as an
economic concept.
At a time when the public views the national state and its
politicians as weakened and made powerless by globalisation ~ a
phenomenon so far exclusively driven by economic and, more and more,
financial forces ~ economic patriotism has been rediscovered as an
antidote to scepticism and distrust of political leaders. Public
opinion polls show that 69 per cent of the French favour this
policy.
Then again, economic patriotism is not a peculiarly French reaction
to globalisation; other forces must be at work. One is the current
crisis of the EU. Since last year's French and Dutch rejection of
the proposed European Constitution, previous attempts, many
halfhearted, at European industrial policies and cooperation, and
dreams of "Europe as Power" are at a standstill. At the same time,
the deregulation of key European markets has generated a frenzy of
mergers and acquisitions unseen since 2000. Governments have
consequently acted along their own perceived "national interests",
pressured by their citizens anxious about the social costs of
deregulation and the loss of decision-making in foreign buyouts.
Many people ~ again not only in France ~ are unconvinced that, in
line with liberal ideology, only the benevolent and
cosmopolitan "hidden hand" of free markets is at work in
international economic dealings. One of the ironies of economic
patriotism is that the French advocates have theorised that it's
taking a leaf from Washington's book. They point to American
supporting and protecting key industries and technologies through
devices such as the Advocacy Center, set up by the commerce
department in Washington, DC, to "support and expand" US exports;
the Committee on Foreign Investment in the USA; the Exxon-Florio
legislation; or federal control over some investment funds, like the
CIA-created In-Q-Tel.
Alain Juillet ~ former deputy head of the French secret service
Direction Générale de la Sécurité Extérieure, whom Prime Minister
Villepin has placed in charge of "economic intelligence" ~ argues
that "we in Europe are in fact much more liberal than the USA" in
matters of political control over strategic companies. Proponents of
economic patriotism argue that, in the post-Cold War world,
technological and economic competition has become paramount, not
only for security, but also for diplomacy, politics and social
benefits. "Economic patriotism is a thoroughly modern concept,"
according to Thierry Breton, former head of France Telecom and
French minister for the economy, finance and industry.
All things considered, the paradox one finds in French policies on
foreign investment is a generalised one. For all their talk of
letting the market decide, the developed countries are just as quick
as developing ones to raise walls when they think their national
interest may be affected or for reasons of domestic political
expediency. "Economic patriotism" is the flip side of free-market
liberalism and part of the current fashion for globalisation à la
carte.
Patrick Sabatier is Deputy Editor of the Paris daily Liberation.
Reprinted with permission from YaleGlobal Online,
(http://yaleglobal.yale.edu) a publication of the Yale Center for
the Study of Globalization. Copyright © 2006 Yale Center for the
Study of Globalization.
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