In November the French trade deficit reached 9.7 billion euro. During the last three months, it amounts at 24.5 billion. Such levels were never reached in the past. On an annual basis, the deficit had fluctuated from 2012 to 2020 between 43.5 and 69 billion. In 2021, it would go beyond 80 billion. These figures are all the more worrying that the recovering of balanced trade exchanges trade balance and the rebound of enterprises competitiveness were, for ten years, among the main priorities of the successive governments. So adopted policies have failed and no lesson seems to have been learnt from this failure. It is even proposed to go farer into the logic of the past policies instead of questioning the real reasons of this failure.

That situation is not a new one. In 1983, the Mauroy government had considered that the trade deficit increase which was threatening the stability of the European Monetary System has as its origin the rebound policy started in 1981. The State had to devaluate the Franc three times. It was followed by the “Rigor Plan”, qualified sometimes as the “Rigor Turnaround”. Yet, that analysis was wrong. The trade deficit increase had, as its unique cause, the oil bill growing heavy, itself a consequence of the 56% dollar rise between 1980 and 1982, in which was paid the imports.

After the launch of the euro, in 2002, it was observed a degradation of manufactured goods foreign exchanges which were until then with a large surplus. Many were these who affirmed that it was due to the euro whose rate was too high for the French industry and not high enough for the German industry which so would benefit from an unjustified advantage. That point was taken by the anti-European political leaders who made during a long time the trial of the unique currency. But this point did not make any sense because it was enough to look at the achievements of the Italian economy which had and still has a large trade surplus to understand the euro wasn’t in any way responsible of the weak achievements of the French enterprises.

In 2012, after the euro crisis the European Central Bank had successfully overcome, is appearing a new explanation: the excessive labor costs would be at the origin of the deficit which reached that year 65 billion. Then the State will proceed to massive social charges reductions, financed partly by taxes increases on household weighting on the growth of the following years which will be near zero and by the budget deficit. After a short reduction in 2015 and 2016, the trade deficit recovered in 2018 the level of 65 billion.

Instead of recognizing that this policy didn’t deliver any result, it was proposed new transfers in favor of the enterprises with the reduction of the “production taxes”. That policy has no more chances to reach the expected results than the previous ones. The industry value-added share in the GDP, on which foreign competition is weighting, is, following the chosen definitions, between 15 and 20%. So, at least 80% of the cost of these tax reductions will go to sectors which are not directly facing international competition and have no reason to benefit from them. These mistakes are frequent in economy. It was thought until the Eighties, that it was the prices control which would allow to curbing inflation. France, thanks to the reforms decided during that period through a prices progressive liberalization and relying on competition, has definitely defeated that harm which was weakening the French economy.

The aggravation of the France trade deficit results from the strategy of many big French groups which indulged, from the beginning of the Twenties, in a race of foreign acquisitions and of de-localizations believing that they would take profit of them. Renault gives a good example. The car industry is the sector whose employment and production in France has the most fallen. In 2004, France produced 3.6 million cars. In 2019, that number has fallen to 1.7 million. Have all the car producers been affected, which would validate the hypothesis regarding labor costs? No. Toyota invested in France at the end of the Nineties. The Japanese group, which was supporting the same tax system and the same level of social charges than Renault did not stopped during that period to hire and to increase its production.

Renault had proceeded to the acquisition of Dacia which produces down market range vehicles in Rumania. These models went to compete with these Renault was producing in France. Then the group decided to de-localize its production in Turkey and in Slovenia or in Slovakia. Renault executives are very proud to have saved Nissan through taking a 40% share of the capital. So they excluded themselves of the three major car markets in the world, the U.S., China and Japan to focus on Russia and on Brazil. That strategy was presented as creating value for the enterprise.The result is afflicting. Market capitalization of Renault is 9.5 billion euro, Nissan one is 22 billion. So if you take away the value of Nissan shares, we see that the real value of Renault is near zero. To the opposite, as executives remunerations are, at least partly, based on the size of the group, these ones are the main, if not the only beneficiaries of this strategy and Renault case is not an isolated one.

But despite its very negative contribution to employment and to foreign trade, Renault has survived. It is not the case of many large groups after hazardous foreign investments which have sometimes caused their insolvency or their taking over by foreign competitors. That did not deprived these ones to repatriate production centers toward their country of origin which, along with consequences on employment and on sub-contractors, has increased the trade deficit. Alcatel, after its costly and missed merger with Lucent, has disappeared under the control of Nokia like Pechiney with its attempts of merging with Alcoa or Alcan. The inappropriate acquisition of the Swiss company ABB was near to put Alstom into bankruptcy. Lafarge, after its disastrous acquisitions in the Middle East passed under the control of its Swiss rival Holcim. The steel industry, which was saved thanks to the billions the State invested in it, fell under the control of the Indian group Mital and its headquarter is now located in Luxembourg.

The State which refused to intervene in all these operations has even sometimes contributed to the de-industrialization and so to the trade deficit increase. France, in less than 10 years has closed one third of its refining capacities after the choice made during the “Grenelle de l’Environnement” in favor of diesel. As it is not possible to transform a refinery, a large share of these which produced gasoline had to close. It is not profitable to import oil, to refine it and to re-export the gasoline. Today the State, still in the name of the protection of the environment, and this time rightly, is making a turnaround. Diesel cars registrations are in a deep fall. The refineries which produce it will be closed at their turn. One more industrial sector will have disappeared.

The State must, at last, take conscience of the true causes of the trade deficit, which goes along with the country de-industrialization and put at its disposal the appropriate intervention tools.