8 March 2013
France: Market Profile
Major Economic Indicators
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 scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2009, and has been extended to remain in force until 31 December 2013 (or until such time as the next Regulation becomes applicable, whichever comes first). While the Chinese mainland remains a beneficiary, it is among the group of to-be-excluded countries, which also includes India, Brazil, South Africa, Indonesia, Malaysia and Russia, while Chinese mainland exports of, among other product categories, toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been excluded from the preferential treatment.
A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, candles, fasteners, ironing boards and saddles, which are of interest to Hong Kong exporters.
Hong Kong’s total exports to France slid by 9% to US$418 million in the first month of 2013, while its imports from France grew by 7% to US$425 million.
The total stock of French direct investment in Hong Kong amounted to US$6.7 billion (or HK$52.3 billion) as at the end of 2011.
Given the country’s high exposure to euro zone debts, France’s economic growth is expected to remain sluggish over the medium term. Chronically high unemployment, coupled with sharp belt-tightening measures to bring down the fiscal deficit, will continue to rein in consumption, while weak business confidence and external demand will weigh on investment and exports. Against this backdrop, France is forecast to see mere 0.1% growth in 2013.
Current Economic Situation
The long-running European sovereign debt crisis, ailing export competitiveness (except for the buoyant aeronautic industry) and the slew of sharp belt-tightening fiscal measures to bring down government deficit from 5.2% in 2011 to about 4.6% of GDP cooled the French economy down to growth stagnation in 2012. Continuing with the struggles to improve industrial competitiveness and fiscal sustainability (to run below the 3% ceiling contained within the Maastricht Treaty), unemployment edged up from 9.8% in 2011 to 10.5% in 2012, which in turn curbed the contribution of private consumption to the economy, while the deterioration in profit margins, on the other hand, made a dent on business confidence and investor appetite.
Over the medium term, the high exposure to debt in weak euro zone economies and chronically high joblessness due to the persisting competitiveness losses remain drags to the French economy, not to mention the alarming external debt ratio, which has already reached 90% of GDP by the end of last year but is still trending up in light of the still-high general government deficit and subdued GDP growth. Despite the harshest budget for 30 years put forth by the new government under President Hollande, no “shock treatment” is available for France’s uncompetitive economy. Until the business confidence and labour market regain momentum and the lingering economic dark cloud over the country’s main trading partners subsides, the French economy will remain largely flat. In all, the French economy is forecast to see mere 0.1% growth in 2013, before returning to a faster pace of growth of 1.2% in 2014.
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.
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 scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2009, and has been extended to remain in force until 31 December 2013 (or until such time as the next Regulation becomes applicable, whichever comes first). While the Chinese mainland remains a beneficiary, it is among the group of to-be-excluded countries, which also includes India, Brazil, South Africa, Indonesia, Malaysia and Russia, while Chinese mainland exports of, among other product categories, toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been excluded 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 2011, 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 will come 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 Directive and the soon-to-be adopted recast WEEE Directive, 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 slid by 9% to US$418 million in the first month of 2013, after decreasing by 6% to US$4.8 billion in 2012. Major export items in January 2013 included telecommunications equipment and parts (shared 14% of the total), jewellery (9%), articles of apparel, of textile fabrics (8%), semi-conductors, electronic valves/tubes (8%), travel goods and handbags (6%), computers (4%), watches and clocks (4%) and women’s or girls’ wear of textile fabrics, not knitted (4%).
Meanwhile, Hong Kong’s total imports from France increased by 7% to US$425 million in the first month of 2013, after rising by 12% to US$6.0 billion in 2012. Major import items in January 2013 included travel goods and handbags (shared 20% of the total), alcoholic beverages (11%), telecommunications equipment & parts (10%), perfumery and cosmetics/toilet preparations (7%), jewellery (6%), footwear (4%) and pearls, precious & semi-precious stones (4%).
French Involvement in the Hong Kong Economy
France has a substantial investment in Hong Kong. The total stock of direct investment amounted to US$6.7 billion (or HK$52.3 billion) as at the end of 2011.
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), Air France (transport), Agence France-Presse and Maya Press (media), BSO Network Solutions and TheTMSway (information and communications technology), Maltem (IT consultancy), Gameloft (video game publisher), and L'Occitane and DESSANGE Paris (beauty care).
As at 1 June 2012, there were 62 French companies with regional headquarters in Hong Kong, while another 114 had regional offices here. Reflecting France’s diverse activities, there were 3,660 French nationals resided in Hong Kong as at the end of June 2012.