17 Oct 2014
France: Market Profile
- As France is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.
- Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China had been established to monitor EU imports of Chinese textiles and apparel, which was scheduled to operate for one year, covering 8 out of the 10 previously restricted categories. Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.
- The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of the countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment.
- A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, candles, ceramic tiles, ceramic tableware and kitchenware, fasteners and ironing boards, which are of interest to Hong Kong exporters.
- Hong Kong’s total exports to France decreased by 3% to US$3.3 billion in the first eight months of 2014, while its imports from France slid by 20% to US$3.5 billion.
- The total stock of French direct investment in Hong Kong amounted to US$7.5 billion (or HK$58.5 billion) as at the end of 2012.
- The French economy remains weak after seeing zero growth in the first and second quarters of 2014, accompanied by a high level of unemployment. In response, the French government has put forward a package of tax breaks financed by cuts in public spending. Against this backdrop, the French economy, helped further by continued monetary easing and a stronger demand from other EU countries, is forecast to see a 0.4% growth in 2014, but move on a faster track to expand at 1% in 2015.
Current Economic Situation
The French economy levelled off in the first half of 2014. Weak private demand, plus high degree of fiscal uncertainty among French businesses and households, has contributed to the upward trend of unemployment. In response, the French government, by cutting public spending, has introduced a package of tax breaks, both on the corporate and personal front, in order to stimulate investment and consumption. In addition, more structural reforms such as further relaxation of labour laws and pro-competition industrial policies are also expected, yet they can only yield benefits over a longer term.
On the external front, exports, though remaining anaemic for now, will likely strengthen gradually as the favourable impacts of the incipient recovery of many of France’s European peers in wake of further monetary easing and a weaker euro start to set in. In all, the French economy, after a mere 0.4% growth in 2014, is expected to expand by 1% in 2015 in line with the modest EU recovery.
France is a member of the EU, and it follows EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002. As it now stands, a total of 18 EU members, namely Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, has adopted the euro as their legal tender.
Textiles and Clothing
Hong Kong’s textiles and clothing exports to the EU were previously subject to the World Trade Organisation (WTO) Agreement on Textiles and Clothing (ATC), under which quantitative restrictions on textiles and clothing were eliminated completely on 1 January 2005.
Likewise, the previous quotas imposed by the EU on textiles and clothing products originating from the Chinese mainland were removed on 1 January 2005. However, as a result of the EU-China agreement reached in June 2005, the EU imposed safeguard quotas on 10 categories of Chinese textile products for the period of 2005-2007. Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China was established to monitor EU imports of Chinese textiles and apparel for one year, covering 8 out of the 10 previously restricted categories.
Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.
Non-textile Manufacturing Products
Previously, the EU also imposed Union-wide quotas on three categories of non-textile products originating from the Chinese mainland, including certain footwear, porcelain and ceramic tableware/kitchenware. But these quotas were liberalised on 1 January 2005.
Scheme of Generalised Tariff Preferences
The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of the countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.
The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of mainland-origin items subject to EU’s anti-dumping measures, including bicycles (at a duty rate of 48.5%), fasteners (27.4%-85.0%), ironing boards (42.3%) and saddles (29.6%), which are among the affected products of interest to Hong Kong. As at the end of September 2014, the EU did not apply any AD measures on imports from Hong Kong.
To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.
For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.
On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive.
The recast RoHS Directive was published on 1 July 2011 and entered into force on 2 January 2013. The new Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, the new Directive will widen, as from 22 July 2019, the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.
Another important law for Hong Kong companies to grapple with concerns waste EEE, i.e., the WEEE Directive. With the formal approval on 7 June 2012, the recast WEEE Directive entered into force on 13 August 2012, while Member States have until 14 February 2014 to transpose the new directive into national law. In brief, the recast WEEE Directive will see Member States subject to higher collection/recycling targets (i.e. 45% collection rate as of 2016 and 65% as of 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs.
On the heels of the recast RoHS and WEEE Directives, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP, Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.
Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.
Following the entry into force of the new Toy Safety Directive (Directive 2009/48/EC) on 20 July 2011, the Official Journal of the EU published on 11 August 2011 references to two important safety standards concerning electric toys (EN 62115:2005 and its amendment EN 62115:2005/A2:2011) and two previous standards on the mechanical and physical properties of toys and a standard on the flammability of toys.
Hong Kong's Trade with France 
Hong Kong’s total exports to France decreased by 3% to US$3.3 billion in the first eight months of 2014, after growing by 10% to US$5.3 billion in 2013. Major export items in January-August 2014 included telecommunications equipment and parts (shared 19% of the total), articles of apparel, of textile fabrics (8%), semi-conductors, electronic valves/tubes (7%), jewellery (6%), pearls, precious & semi-precious stones (5%), travel goods and handbags (4%), electrical machinery & apparatus (4%), toys, games & sporting goods (3%), watches and clocks (3%) and electrical apparatus for electrical circuits (3%).
Meanwhile, Hong Kong’s total imports from France slid by 20% to US$3.5 billion in the first eight months of 2014, after rising by 6% to US$6.3 billion in 2013. Major import items in January-August 2014 included travel goods and handbags (shared 17% of the total), aircraft & associated equipment; spacecraft; & parts (12%), alcoholic beverages (8%), perfumery and cosmetics/toilet preparations (8%), jewellery (7%), footwear (4%) and pearls, precious & semi-precious stones (3%).
French Involvement in the Hong Kong Economy
France has a substantial investment in Hong Kong. The total stock of direct investment amounted to US$7.5 billion (or HK$58.5 billion) as at the end of 2012.
Over 600 French companies are operating in Hong Kong, including BNP Paribas, Credit Lyonnais, Credit Agricole and AXA (banking and finance), LVMH Asia Pacific Ltd and Parfums Christian Dior Far East (trading/distribution), Renault (automobile), Air France (transport), Agence France-Presse, Maya Press, COTE Magazine (media), BSO Network Solutions and TheTMSway (information and communications technology), Maltem, Freelog, Digitalin and BuyMeDesign (business planning and consultancy), Gameloft (video game publisher), Caudalie, L'Occitane and DESSANGE Paris (beauty care), Paul Lafayet (French pastry and desserts), Christofle (silverware), Qeelin (jewellery), The Chinese Timekeeper (timepieces), Bacchus & Century, Baron Edmond de Rothschild Group and Pont des Arts (wine).
As of June 2013, there were 66 French companies with regional headquarters in Hong Kong, while another 114 had regional offices here. Reflecting France’s diverse activities, there were 2,960 French nationals resided in Hong Kong as at the end of 2013.
 Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.