U.S.-French Commercial Ties

Publication Date: May 2009

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Economics; Trade

Type:

Coverage: France

Abstract:

U.S. commercial ties with France are extensive, mutually profitable, and growing. With approximately $1 billion in commercial transactions taking place between the two countries every day of the year, each country has an increasingly large stake in the health and openness of the other's economy.

France is the 9th largest merchandise trading partner for the United States and the United States is France's largest trading partner outside the European Union. In 2003, 64% or $29.7 billion of bilateral trade occurred in major industries such as aerospace, pharmaceuticals, medical and scientific equipment, electrical machinery, and plastics where both countries export and import similar products.

The United States and France also have a large and growing trade in services such as tourism, education, finance, insurance and other professional services. In 2003, France was the sixth largest market for U.S. exports of services.

While trade in goods and services receives most of the attention in terms of the commercial relationship, foreign direct investment and the activities of foreign affiliates can be viewed as the backbone of the commercial relationship. The scale of sales of U.S.-owned companies operating in France and French-owned companies operating in the United States outweighs trade transactions by a factor of five.

In 2003 France was the ninth largest host country for U.S. foreign direct investment abroad and the United States with investments valued at $47.9 billion was the number one foreign investor in France. During that same year, French companies had direct investments in the United States totaling $143.3 billion (historical cost basis), making France the fifth largest investor in the United States. French-owned companies employed some 466,000 workers in the United States in 2001 compared to 583,000 employees of U.S. companies invested in France.

Most U.S. trade and investment transactions with France, dominated by multinational companies, are non-controversial. Nevertheless, three prominent issues -- agriculture, government intervention in corporate activity, and the war in Iraq -- have contributed to increased bilateral tensions in recent years. The most pointed perhaps arose in early 2003 with reports of U.S. consumer boycotts of French goods and calls from some Members of Congress for trade retaliation against France (and Germany) due to foreign policy differences over the Iraq War.

The foreign policy dispute, however, appears not to have had much impact on sales of products such as French wines, perfumes and toiletries, travel goods and handbags, and cheeses that are most prone to being boycotted. While some public opinion polls suggest support for economic boycotts as a way of expressing opposition to France's position on Iraq, a substantial economic backlash appears unlikely due to the high degree of economic integration. Effective boycotts would jeopardize thousands of jobs on both sides of the Atlantic. This report will be updated as needed. See also its companion report, France: Factors Shaping French Policy, and Issues in U.S.-French Relations (CRS Report RL32459), by Paul Gallis.