Made in France Trumps Consumer Choice in Hollande Jobs Quest

On the cover of Le Parisien’s magazine today, Industry Minister Arnaud Montebourg poses before the French flag in a sailor’s jersey, wearing a Michel Herbelin watch and holding a Moulinex blender -- all made in France.

Seeking to preserve and create work in France in the face of a 13-year high unemployment rate of 10 percent, Montebourg suggests French consumers forget cheaper imports and a greater product choice if it means more of their countrymen keep jobs.

“My priority is ‘Made in France,’” he said this month. “There’s a choice that’s more important than any other and that is to preserve France’s industrial base.”

The minister is among members of President Francois Hollande’s government struggling to prevent the exit of more people from the workforce as Europe’s second-largest economy slumps, shrinking demand and forcing consumers to tighten their purse strings. Montebourg’s pronouncements mark a long tradition of treating the French as citizens first and consumers later.

“There is a patriot in all of us,” Montebourg said in Le Parisien today. “When you’re a consumer, you’re also an employee, a parent, a neighbour, a friend directly or indirectly touched by unemployment and company closures.”

The heightened mercantilist leanings of the government are drawing the ire of consumer groups.

“We have a government today that wants immediate results on employment and so is quick to sacrifice the rights of consumers,” said Edouard Barreiro, a representative for consumer group UFC-Que Choisir in Paris.

Car Repairs

Take the case of auto repairs in France, for example. The French competition regulator reported Oct. 8 that the cost of fixing and maintaining cars rose 28 percent, after inflation, from 2000 to 2011 in France. In neighboring Germany, consumers paid just 10 percent more than in 1998, it noted.

The regulator recommended lawmakers take steps to open the market, saying carmakers have too strong a grip on it. French carmakers PSA Peugeot Citroen SA (UG) and Renault SA (RNO) get higher profit margins from repairs and maintenance than from selling cars, the regulator said.

Montebourg, visiting auto factories in northern France that day, shrugged off questions about the higher prices for repairs for French vehicle owners, saying giving carmakers the ability to preserve the industrial base was more important. Peugeot is cutting 8,000 jobs and closing a factory near Paris.

“Pitting companies against consumers has taken on a new dimension with this government,” said UFC-Que Choisir’s Barreiro. “It means negotiating with companies, saying to them: you cut fewer jobs and I’ll give you something in exchange.”

Mobile Phones

A spokeswoman in Montebourg’s office called UFC-Que Choisir’s comments “archaic,” saying the idea isn’t to force the French to buy domestic-made products. Rather, it is to promote such products and hence create jobs, she said.

Deals with companies often come at a cost to consumers, Barreiro said, adding that the government is perpetuating an “erroneous” idea that the “interests of consumers don’t go hand-in-hand with competition.”

Nowhere is this more evident than in the mobile-phone market, where the entry of a fourth operator, Iliad SA (ILD)’s Free, in January has pulled down prices, once among Europe’s highest.

Iliad founder Xavier Niel said during a press conference on Aug 31st that a study by a consumer-rights magazine showed the average French household had gained 7 euros per month in purchasing power since Free began operations.

The intensified competition from Free’s entry hurt margins and profits at the three existing operators, France Telecom SA’s Orange, Vivendi SA (VIV)’s SFR and Bouygues Telecom.

Twitter Message

The telecommunications regulator Arcep in March said the companies may eliminate as many as 10,000 jobs to adapt to competition from Free.

Montebourg last week rushed to stem job cuts in the industry by allowing the carriers to accelerate the deployment of faster networks -- investment costs of which will likely be passed on to consumers.

That marks an about-face for the minister, who not very long ago -- before he was in government -- had cheered the decline in consumer prices from the entry of Free.

On Jan. 10, when Free began operations, Montebourg posted a message on Twitter, jeering at former President Nicolas Sarkozy, saying, “Xavier Niel has done more with his unlimited mobile- calls package for French people’s purchasing power than Nicolas Sarkozy in five years.”

‘Low-Cost Obsession’

In Le Parisien’s interview today, Montebourg sings a different tune.

“The obsession with low cost means outsourcing and job cuts,” he said. “Discount airfares ultimately end in 5,000 people at Air France (AF) losing their jobs.”

Consumer spending accounts for 56 percent of the $2.77 trillion French economy. While 68 percent of the French in a survey by the Cedre, an association to promote local entrepreneurs, said products made in France tend to be better than comparable imports, 82 percent said they are more expensive.

Goods manufactured in France are on average 15 to 25 percent more expensive than in countries such as China, Vincent Gruau, head of Cedre, said in December.

With some products the margins are even higher, Le Parisien showed today. A French-made pair of socks costs 6 euros compared with 1.50 euros from Indonesia. Domestic pasta costs 1.55 euros a kilogram, more than double the 71 cents for imports.

‘Bite Them’

Still, the industry minister is pushing consumers to buy French in the hope it will create jobs in the country, denying that local products are a luxury. He said he’ll contact supermarkets to create an aisle dedicated to goods made in France. The public sector won’t get off either. He plans to name an ombudsman to review their procurements.

“The government is mistaken in terms of consumers and competition, and that pushes them to take positions that aren’t the best,” said Que-Choisir’s Barreiro. “They are making a major strategic error in terms of their analysis that risks coming back to bite them.”

To contact the reporter on this story: Heather Smith in Paris at Hsmith26@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net

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