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Wednesday, May 14, 2008

Perception vs. reality

One wonders how much people really know about the economic inter-relationships between France and the United States. My guess is that it is fairly little given the vitriol that was aimed at France back in 2003 - leading to Freedom Fries and symbolic pouring of French wine down the drain.

This CRS Study has the following tidbits:

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 2006, 62% or $38 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.

International trade is, however, dwarfed by the foreign direct investment the two countries have with each other. I wonder how many Freedom Fries were sold to one of the 473,000 U.S. employees of French-owned companies:
In 2006, France was the eleventh largest host country for U.S. foreign direct investment abroad and the United States with investments valued at $65.9 billion was the number one foreign investor in France. During that same year, French companies had direct investments in the United States totaling $159 billion (historical cost basis), making France the fifth largest investor in the United States. French-owned companies employed some 473,000 workers in the United States in 2005 compared to 619,000 employees of U.S. companies invested in France.

Boycotts tend not to work because it is nearly impossible to hold solidarity unless there are homogeneous preferences and incomes. It turns out that boycotts in 2003 didn't work:

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 at the time suggested support for economic boycotts as a way of expressing opposition to France’s position on Iraq, an economic backlash appears not to have materialized.

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