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                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)

                                    1992      1993      1994 1/

Income, Production and Employment:

Real GDP (1980 prices)               683       632       657
Real GDP growth (pct.)               1.2        -1       1.8
GDP (at current prices)            1,322     1,253     1,325
GDP by Sector:  2/                 1,222     1,159       N/A
  Agriculture                         37        29       N/A
  Processed Food                      37        38       N/A
  Energy/Water                        53        53       N/A
  Manufacturing                      217       194       N/A
  Construction                        69        64       N/A
  Rents                              115       116       N/A
  Financial Services                  57        56       N/A
  Retail Trade/Other
    Non-Financial Services           471       446       N/A
  Government/Non-Profit Services     216       213       N/A
  Statistical Adjustment             -51       -50       N/A
Net Exports of Goods & Services       18        27        39
Real Per Capita GDP (1980 prices) 11,920    10,978    11,344
Labor Force (avg/000s)            25,097    25,159    25,234
Unemployment Rate (avg/pct.)        10.3      11.6      12.3

Money and Prices:  (annual percentage growth) 3/

Money Supply (M3)                    6.0      -0.9      -3.5
Base Bank Lending Rate (yr-end)     10.0       8.1       7.7
Personal Savings Rate (avg)         13.9      14.1      13.0
Retail Inflation (avg)               1.9       2.1       1.7
Intermediate Good Prices (avg)      -1.7      -2.8       0.9
Consumer Price Index (1990=100/avg)105.7     107.9     109.7
Exchange Rate (USD/FF) 4/            5.3       5.7       5.6

Balance of Payments and Trade:

Total Exports (FOB) 5/             236.0     210.0     234.0
  Exports to U.S. 4,6/              15.0      15.0      17.0
Total Imports (CIF) 5/             240.0     203.0     221.0
  Imports from U.S. 4,6/            20.0      18.0      19.0
Trade Balance (CIF/FOB) 5/          -4.0       7.0      13.0
  Balance with U.S. 4,6/            -5.0      -3.0      -2.0
Gold and Foreign Exch. Reserves     56.0      51.0      57.0

N/A--Not available.

1/ OECD forecasts unless otherwise indicated.
2/ Excludes value added and other taxes.
3/ June 1994 data.
4/ 1994 estimate based on first nine months average and
assumption of fourth quarter equal to September average.
5/ Merchandise trade - 1994 data are for first seven months.
6/ Department of Commerce figures.

1.  General Policy Framework

    France is the fourth largest industrial economy in the
world, with an economy about one-fifth the size of that of the
United States'.  The service sector, including government and
financial services, accounted for 54 percent of output in
1993.  Industry and agriculture provided 38 percent and 3
percent, respectively.  

    Economic growth slowed considerably between 1991 and 1993,
after a period of healthy expansion between 1988 and 1990. 
Growth began to pick up significantly beginning in 1994, with
real gross domestic product (GDP) expanding 0.7 percent and 1.0
percent during the first and second quarters, respectively. 
Imports have increased as well, with real imports of goods and
services increasing 3.2 percent and 2.8 percent during the
first and second quarters, respectively.  Nominal merchandise
imports from the United States grew over five percent during
the first quarter of 1994 and remained steady during the second
quarter, after falling by seven percent each year in 1992 and
1993.  Real GDP is likely to grow about two percent in 1994 and
three percent in 1995; the Organization for Economic
Cooperation and Development (OECD) forecast in June 1994 that
real imports of goods and services would increase close to
three percent in 1994 and six percent in 1995.  Unemployment,
on the other hand, is expected to remain high, hovering around
12.5 percent for 1994.

    Inflationary pressures remain well contained.  The annual
inflation rate for consumer prices fell from 3.6 percent in
1989 to 1.6 percent by September 1994, the lowest rate in
France in 37 years.  Continued wage restraint due to high
unemployment is likely to keep inflation from increasing,
despite stronger growth.

    Low inflation has given French producers a price advantage
in overseas and domestic markets.  Due in part to this
phenomenon, France's merchandise trade balance (cif/fob basis)
changed from a deficit of FF 20 billion in 1992 to a record
FF42 billion surplus in 1993, according to French customs
statistics.  Trade in manufactured goods registered the largest
increase, from a surplus of FF7 billion to FF54 billion. 
France's surplus with other European Union (EU) countries
increased from FF17 billion to FF32 billion.  With non-EU OECD
countries, France reduced its deficit from FF60 billion to FF31
billion, primarily due to a decrease in its deficit with the
United States, which fell to FF16 billion from FF26 billion in
1992 because of strong U.S. growth.  Much of the overall trade
surplus can be attributed to weak domestic demand, and in
particular, to persistently weak corporate investment in
imported capital goods.  France is likely to run another large
merchandise trade surplus in 1994, although slightly lower than
the 1993 figure.

    Due primarily to the merchandise trade surplus, France ran
a current account surplus of FF59 billion in 1993.  The surplus
in tourism receipts was a record FF60 billion.  In contrast,
the deficit on net investment income increased to FF45 billion
in 1993 from FF41 billion in 1992, due to the continued inflow
of foreign portfolio investment and higher interest rates
relative to rates in other industrialized countries.  Due to a
lower merchandise trade balance and lower interest payments to
foreigners (resulting from a large outflow of foreign portfolio
investment at the beginning of 1994), the current account
surplus is likely to fall in 1994.  

    Since France is a member of the EU, its imports are subject
to a common external tariff and to the restrictions of the
Common Agricultural Policy.  As the EU continues to implement
its "single market" program to remove all barriers to the free
internal circulation of goods, services, capital and labor,
jurisdiction over a growing number of economic areas, including
certain aspects of tax and investment policy, will be
transferred to Brussels from Paris.

    Since 1991, the sharp drop in economic activity has led to
a dramatic decline in government revenues.  This, coupled with
increased spending on unemployment, retirement, health care,
and interest payments, has resulted in soaring budget
deficits.  The central government budget deficit as a
percentage of GDP rose from 1.9 percent in 1991 to 4.5 percent
in 1993, and is expected to be close to four percent in 1994. 
The general government budget deficit, which includes federal,
local, and social security budgets, rose from 2.2 percent of
GDP in 1991 to 5.8 percent in 1993, and is expected to be 5.6
percent in 1994.

    Like its G-7 counterparts, the Bank of France conducts its
monetary policy primarily by adjusting official rates and
through open market operations.  During most of 1993, French
money supply (M3) grew far less than the Bank of France's
target growth rate of 4-6.5 percent, and fell almost one
percent between the fourth quarters of 1992 and 1993.   The
Bank of France estimated that had it not been for the large
transfer of assets from money market funds (which are included
in M3) to stocks and long-term bonds, in response to tax
incentives and declining interest rates, M3 would have
increased 1.5-2 percent during this time, still far below its

2.  Exchange Rate Policies

    Within the established limits of the European Exchange Rate
Mechanism (ERM), whose bands were significantly widened in
August 1993, the value of the French franc is set by market
forces.  It is also influenced by macroeconomic policy actions
or central bank interventions.  These actions are usually
coordinated with those of other governments, both within the
ERM and as part of broader international economic policy  a
series of exchange rate crises to maintain high short term
interest rates to keep the franc within its ERM bands.  Even
after the bands were widened in August 1993, the Bank
maintained high rates while it replenished the foreign exchange
reserves it spent in July to defend the franc.  Beginning
February 1994, the Bank followed the German Bundesbank in
gradually lowering official rates.  It is expected to continue
coordination efforts among industrialized countries, including
the United States.  

    Throughout much of 1992 and the first half of 1993, the
Bank of France was forced by high German interest rates andto
maintain a 20-40 basis point spread between French and German
official rates to prevent further serious pressures on the
franc.  The interest rate on three-month interbank loans has
fallen from 12.1 percent to 5.6 percent between February 1993
and August 1994.  However, the average interest rate on
long-term government bonds, after declining from 10.6 percent
in September 1990 to less than 5.8 percent in October 1993, is
expected to rise to 8.3 percent by October 1994, due in part to
rising U.S. interest rates. 

    The Balladur government has continued the "franc fort"
(strong franc) policy of its predecessors.  The government's
objective is to lower the cost of imports and keep inflation
and wage increases low, thereby improving French
competitiveness.  It is also seen as a way to build France's
reputation for sound economic policies, and to ensure further
progress toward European Monetary Union (EMU).  The Franc
appreciated 3.0 percent in nominal terms against other OECD
currencies between September 1993 and September 1994.  However,
factoring in France's low inflation rate, the Franc only
appreciated 1.7 percent in real terms.  Compared to the U.S.
dollar, the franc appreciated by 5.2 percent in real terms
during this period.

3.  Structural Policies 

    Since it submitted its first budget in mid-1993, the
Balladur government's fiscal strategy has been to reduce the
budget deficit in the long term (primarily by raising taxes and
controlling spending), but offset the immediate restrictive
effects through temporary stimulus measures.  In addition, many
of the French government's fiscal policy proposals in 1993 and
1994 were designed to offset, through state aid, effects of
high real interest rates in sectors such as real estate and
automobiles where consumption is dampened strongly by high

    During 1993, the Balladur government's assortment of
supplemental budgets cut corporate taxes by approximately FF50
billion for 1993-94, while increasing taxes on households for
these two years by FF100 billion.  The government's priority
was to limit spiraling unemployment by stopping the hemorrhage
of bankruptcies, particularly among labor-intensive small
businesses.  The government decided to change course in 1994,
and to try to boost short-term economic growth by stimulating
household consumption.  In its 1994 budget, the government
reduced personal income taxes by FF19 billion a year.  The
government also offered several incentives to induce households
to withdraw funds from savings accounts, in the hopes of
reducing savings and boosting consumption.  However, the
decrease in income taxes only partially offset the 1993
increases in excise taxes and in the general social
contribution (CSG), a supplemental tax on all earned and
unearned income.  As a result, the government expects total
taxes as a percentage of GDP will increase from 43.6 percent in
1993 to 44.5 percent in 1994, before falling to 44.2 percent in
1995.  This remains one of the highest ratios among
industrialized countries.

    In March 1993, the French government began a massive
privatization program, and has already sold some of the largest
and best known government-owned corporations.  A seven-member
commission decides the minimum price for the shares to be sold
and chooses the core of stable investors for each
privatization; and the Economics Ministry decides the
percentage of shares to be sold, the proportion to be sold in
foreign financial markets, and the size of "core" shareholdings.

    To meet deficit reduction targets in its 1994 and 1995
central government budgets, the government has essentially
frozen non-interest spending, and is counting on receipts of
over FF100 billion in privatization revenues.  Fiscal policy,
or at least central government spending, is likely to remain
tight for many years to come, as the government seeks to meet
common macroeconomic criteria agreed among EU members in the
Maastricht Treaty:  general government budget deficits of no
greater than three percent of GDP, and a debt to GDP ratio of
no more than sixty percent.  In 1993, the government submitted,
for the first time, a multi-year deficit reduction plan.  In
the revised 5-year plan in its 1995 budget, the government
maintains the real freeze on government spending, and extends
it to 1998.  Real non-interest spending would be cut by 0.6
percent in 1996 and 1997, and by 0.4 percent in 1998, the
longest and largest sustained reduction in non-interest French
government spending since the end of World War II. 

4.  Debt Management Policies

    The budget deficit is financed through the sale of
government bonds at weekly and monthly auctions.  As a member
of the G-10 group of leading financial nations, France
participates actively in the International Monetary Fund, the
World Bank and the Paris Club.  France is a leading donor
nation and is actively involved in development issues,
particularly with its former colonies in North and West Africa.

5.  Significant Barriers to U.S. Exports

    U.S. companies sometimes complain of complex technical
standards and of unduly long testing procedures.  Requirements
for testing (which must usually be done in France) and
standards sometimes appear to exceed levels reasonable to
assure proper performance and safety.  Most of the complaints
have involved electronics, telecommunications equipment,
medical/veterinary equipment/products and agricultural
phytosanitary standards.

    An area where French trade policy is clearly discriminatory
is in audiovisual trade.  The 1989 EU Broadcast Directive
requiring a "majority proportion" of programming to be of
European (i.e. EU or Central European) origin was incorporated
into French legislation on January 21, 1992.  France, however,
goes beyond this rule, specifying a percentage of European
programming (60 percent) and French programming (40 percent). 
These broadcast quotas were approved by the EU Commission and
became effective on July 1, 1992.  They are less stringent than
France's previous quota provisions, which required that 60
percent of all broadcasts be of European origin and that 50
percent be originally produced in French.  The new 60 percent
European/40 percent French quotas are applicable both during a
24-hour day, and during prime time slots.  The prime time rules
go beyond the requirements of the EU Broadcast Directive and
limit the access of U.S. programs to the French market.

    The French government has recently revised its legal
services system.  Non-EU lawyers may no longer practice as
legal consultants and are required to qualify as "avocats," on
the basis of full-fledged membership in the French bar.  Under
implementing legislation which went into effect on January 29,
1993, this means that non-EU lawyers will have to pass either a
"short-form" exam or the full French bar exam.  Non-EU lawyers
qualify for a "short-form" exam provided they are able to prove
that the foreign state or territory in which they practice
allows French lawyers to practice law "under the same
conditions."  Failing that, they must take the full French bar
exam.  Due to EU regulations, France is required to recognize
law degrees for EU nationals but not third country nationals. 
Nevertheless, non-French EU lawyers, who are also required to
qualify as "avocats," may do so via exams less stringent than
those for non-EU lawyers.  Meaningful access will hinge on how
implementing regulations are administered, including the
interpretation of what is meant by granting access on a
"reciprocal basis" and the nature of the exam imposed on non-EU

    Since September 1988, foreign investors establishing new
businesses in France are no longer subject to advance notice
and approval requirements.  However, there are still several
administrative procedures related to acquisition of French
firms that burden foreign investors.  Unless firms are
controlled by French nationals or "established" EU investors,
they must receive prior approval from the Ministry of Economics
in order to purchase existing French businesses valued at more
than FF50 million or having more than FF500 million in sales. 
To qualify as an "established" EU-controlled firm, a business
must have annual sales of more than FF1 billion and have been
in business for at least 3 years.  EU-controlled firms not
qualifying as "established" and non-EU controlled firms
purchasing smaller French entities are required to notify the
Ministry in advance.  The Ministry can block large acquisitions
deemed not to be in the national interest, as well as any
acquisition, irrespective of size or nationality of the
investors, which the Minister sees as a threat to public
health, public order or national security.  

    There are several restrictions on foreign holdings in
French firms that are privatized.  A December 1993
privatization law prevents the government from selling more
than twenty percent of a firm's capital to non-EU investors at
the time shares are first sold.  The law does not prohibit
private EU-investors from selling their shares to non-EU
investors thereafter, and shares held by non-EU investors
before the law went into effect are not affected by the 20
percent limit.  The Balladur government also gave the
privatization commission the option of waiving the 20-percent
limit if the purchase is part of an industrial, commercial, or
financial cooperation agreement.  This option has not yet been
exercised in privatizations to date.

    Through "golden shares" in key companies being privatized,
the government retains the following rights:  to block the sale
of any assets "essential to the national interest;" to prevent
certain investors from purchasing additional shares; and to
exert significant control over company management, even after
privatization is completed.  Finally, any investor seeking to
own more than five percent of outstanding shares of a
privatized company in the health, security or defense sectors
will be required to seek the approval of the Economics

    The French government has notified the OECD that it treats
foreign investors differently than domestic investors and may
not provide national treatment in the following sectors: 
agriculture, aircraft production, air transport, atomic energy,
audiovisual, accounting and financial services, defense,
insurance, maritime transport, road transport, publishing,
telecommunications, and tourism.

    France is a party to all the relevant GATT codes, including
those on government procurement and standards.

6.  Export Subsidy Policies

    France is a party to the OECD guidelines on the arrangement
for export credits, which includes provisions regarding the
concessionality of foreign aid.  The government has begun
examining ways to concentrate the benefits of its export
promotion efforts more on small and medium-sized businesses.

    There are virtually no direct French government subsidies
to agricultural production.  Direct subsidies come primarily
from the budget of the European Union.  The French government
does offer indirect assistance to French farmers in many forms,
such as easy terms for loans, start-up funds, and retirement

7.  Protection of U.S. Intellectual Property

    France is a strong defender of intellectual property rights
worldwide.  Under the French intellectual property rights
regime, industrial property is protected by patents and
trademarks, while literary/artistic property is protected by
copyrights.  France is a party to the Bern Convention on
Copyright, the Paris Convention on Patents, the Universal
Copyright Convention, the Patent Cooperation Treaty, and the
Madrid Convention on Trademarks.  By virtue of the Paris
Convention and the Washington Treaty Regarding Industrial
Property, U.S. nationals have a "priority period" after filing
an application for a U.S. patent or trademark, in which to file
a corresponding application in France.

8.  Worker Rights

    The French constitution guarantees the right of workers to
form unions.  Although union membership has declined to ten
percent of the workforce, the institutional role of organized
labor is far greater than its numerical strength might
indicate.  The French government regularly consults labor
leaders on economic and social issues, and joint works councils
play an important role even in industries that are only
marginally unionized.  The principle of free collective
bargaining was reestablished after World War II, and subsequent
amendments in labor laws encourage collective bargaining at the
national, regional, local, and plant levels.  French law
prohibits anti-union discrimination and forced or compulsory

    With a few minor exceptions for those enrolled in
recognized apprenticeship programs, children under the age of
16 may not be employed.  France has a minimum wage of
approximately $6.50 per hour.  The legal work week is 39 hours
long, and overtime is restricted to 9 hours per week.  In
general terms, French labor legislation and practice, including
that pertaining to occupational safety and health, are fully
comparable to those in other industrialized market economies. 
France has three small export processing zones, where regular
French labor legislation and wage scales apply.  Labor law and
practice are uniform throughout all industries of the private

  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
              Category                          Amount          

Petroleum                                                973
Total Manufacturing                                   13,257
  Food & Kindred Products                   1,267
  Chemicals and Allied Products             4,536
  Metals, Primary & Fabricated                488
  Machinery, except Electrical              2,237
  Electric & Electronic Equipment             359
  Transportation Equipment                    700
  Other Manufacturing                       3,672
Wholesale Trade                                        4,733
Banking                                                  364
Finance/Insurance/Real Estate                          2,374
Services                                                 996
Other Industries                                         868
TOTAL ALL INDUSTRIES                                  23,565   

Source: U.S. Department of Commerce, Bureau of Economic Analysis


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