Industrial policies in France Developments and international comparisons

For many years, industrial policy was no longer considered a priority in France, yet the State continued to exert a major influence on industry. Towards the end of the first decade of the twenty-first century,  France found itself subject to a level of taxes - social security charges, corporation tax, production taxes – that were far higher than those of some of its main competitors, especially in Germany. French companies decided to become the champions of relocation. At the same time, France chose demand side policies while Germany and other countries, sharing the single currency, resolved to strengthen their competitiveness through a supply-side policy.

There have been significant policy changes over the last ten years; an awareness of the handicaps affecting French industry has yielded a series of corrective measures. The Crédit d’impôt pour la compétitivité et l’emploi (CICE), the responsibility pact, the transformation of the CICE into a social security contribution relief, the choice to bring the level of corporate tax closer to that of the main comparable countries, and the recent orientations towards a reduction in production taxes all underscore these changes. France has also reviewed its support for innovation and R&D, notably with the reform of the research tax credit (CIR) in 2008. The report published by France Stratégie thus presents an unprecedented overview of support for innovation, and an original quantification of the financial resources of the industrial policy in 2019.

The report focuses on seven industrial sectors - health products, aeronautics, automotive, space, rail, electricity, and telecoms – in which the state plays a particularly important role. In telecoms, public policies have not maintained an equipment industry of sufficient size. As for the drug policy, it has been characterised more by a concern to limit the costs of public expenditure than to strengthen the localisation of production in France. Moreover, the desire to limit nuclear power in electricity production has been at the detriment of industrial excellence in this domain. The automobile industry, despite frequent recourse to purchase subsidies, has suffered a rapid decline in its industrial presence in France. The railway industry, by contrast, retains a strong position and great technological mastery, yet it too faces challenges with the appearance of a Chinese giant. Aeronautics is a sector in which industrial policy has succeeded in recent decades, even if Airbus is hindered by the current crisis. Finally, the space sector in Europe is threatened by the emergence of new state players in Asia and large private manufacturers in the United States, benefiting from significant public support.