60 years of Elysée Treaty: economic relationship remains close

uNotwithstanding recurring political upsets: 60 years after the signing of the Élysée Treaty, Franco-German economic relations are close. In many industries today there are interdependencies as they were in the times of Konrad Adenauer and Charles de Gaulle were still unthinkable due to language barriers or inherited hostilities.

That means far more than just joint aircraft construction airbusAccording to the company database Orbis, around 5,700 French companies were last active in Germany and employ more than 400,000 people there. Conversely, there are about 4,500 companies and 325,000 employees.

Industrial alliances and mergers of German and French companies are no longer uncommon. Recent examples include the joint production of battery cells by the car manufacturers Stellantis and Mercedes with the energy group Totalenergies or the takeover of the German automotive supplier Hella by Faurecia from France.

“Stable and dynamic”

Cross-border production networks have also long been a reality in the European internal market, even if medium-sized companies in particular still have to contend with a lot of bureaucracy, for example in the posting of employees. In terms of trade in goods, which includes primary products, Germany is by far France’s most important partner. Neither China, Italy, Belgium, Spain nor the USA are even remotely equal in numbers.

For the German economy, China, the Netherlands and the USA recently ranked first when it came to the exchange of goods, followed by France in fourth place. The sum of imports and exports in 2021 was around 165 billion euros. For comparison: That is twice as much as is traded between Germany and Spain.

For the past year 2022, the German-French Chamber of Industry and Commerce (AHK) expects strong growth in trade between the two largest economies in continental Europe, which together represent more than 40 percent of the gross domestic product in the EU.

The economic relations are “stable and dynamic”, said the chamber manager Patrick Brandmaier this week in the run-up to the Élysée anniversary. Among other things, he draws his confidence from a survey that the AHK conducted together with the consulting firm EY last summer.

What speaks for France

Accordingly, the satisfaction of German companies with France has increased and nine out of ten assessed the overall situation positively. In the last survey it was only eight out of ten. The Germans have recently been particularly satisfied with France’s infrastructure, which includes the connections with the TGV express train.

From the point of view of many German companies, the geographic proximity and political stability alone speak in favor of the French market in times of growing geopolitical tensions, says AHK representative Brandmaier. Also, President’s labor market reforms Emmanuel Macron would be well received.

The state-owned investment agency Business France enjoys a good reputation among investors. Companies such as agricultural machinery manufacturer Claas praise the fast connection to the agency.

Striking differences remain

The fact that France has gained a lot of ground in the annual EY census of foreign direct investments is also attributed to the work of Business France. In 2019, France overtook Great Britain for the first time and in 2021 even landed in first place by a clear margin, while Germany has been lagging behind in third place for years.

Striking differences between the Federal Republic and France remain, strong interdependence or not. The French economy is less export-oriented than the German economy, apart from exceptions such as the aerospace sector and the perfume and cosmetics industry. There are also significantly more large corporations and comparatively few medium-sized companies.

The industry share in France is also just over 10 percent, only half as high as in Germany. Macron has made the country’s reindustrialization a priority during his term, but soaring energy costs threaten to thwart efforts.

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