France's share of European merchandise exports fell from 15.7% to 13.1% over the past decade while Germany's grew. France is only competitive in 3 industries: aerospace, drinks, and information technology. Until 2000 France compensated for lower quality with lower prices but then became complacent after Germany's economy slowed. French businesses have higher social costs for labor than Germany and fewer French small businesses conduct R&D or collaborate with suppliers compared to German companies. To regain competitiveness, France needs tax reforms, more collaboration, investment in human capital and training, and reduced industrial costs, but copying Germany may have little effect given France's smaller industrial base.

1. French Economy Feb 2011 Germany powered ahead while France’s share of European merchandise exports fell from 15.7% to 13.1% in a decade. France is more competitive (using measure of price, quality and demand) in only 3 industries: Aerospace, drinks and information technology. Until 2000 France made up in price what it lacked in quality. But then Germany was hit by the dotcom bust and this made France complacent. Clung to its 35 hour week and saw minimum wage increase by 17% between 2002 and 2005. Social costs of labour borne by French Employers are amongst the highest in the Eurozone – 50 Euro for every 100 Euro paid to the worker (28 Euro in Germany). France has more industrial companies than Germany but very small. Less than 1/3 have a R&D program, while ½ in Germany do. France doesn’t manage meshing big companies with their suppliers as well as Germany – close collaboration. Its companies make less use of cheap central European labour- region supplies France with only 5.5% of its imports of base and intermediate goods, compared with 18% for Germany.