February 7, 2012 / 12:25 PM / 8 years ago

French trade deficit hits high, competitiveness at issue

* End-2011 trade gap widens 35 pct to near 70 bln eur

* Competitiveness gap a factor in election run-up

* Data contrasts with huge surplus in Germany

By Matthias Blamont and Brian Love

PARIS, Feb 7 (Reuters) - France’s trade deficit hit a record high of just shy of 70 billion euros in 2011 as sharply rising energy import costs and lower export growth combined to underline the country’s struggle to keep competitive globally.

Farm produce and luxury goods such as handbags and perfume were the exceptions, France’s customs office said on Tuesday, in a dismal year for exports that contrasted sharply with bumper returns in neighbouring Germany.

It said there was a deficit of 69.6 billion euros, at the lower end of government forecasts but still 35 percent higher than in 2010.

In Germany, the main engine of European growth and a global exporting superpower, data due on Wednesday is expected to show a trade surplus of around 156 billion in 2011.

The imbalance has become an issue in France’s presidential campaign, with President Nicolas Sarkozy blaming a relatively higher cost of labour.

France’s figures, however, also reflected a long-time reliance on domestic rather than foreign demand as the main generator of economic growth.

They showed an 11.7 percent increase in imports, measured in terms of value in euros, and an 8.6 percent rise in the value of exports in 2011, compared with export growth of 14 percent in 2010.

Along with luxury goods, healthy agri-food exports, notably of grains and drinks, helped offset weaker export growth in the car and aerospace sectors and a contraction in pharmaceuticals.

Higher world oil prices raised the import bill, which while up 11.7 percent in 2011 from the previous year rose a slightly less striking 7.6 percent when the impact of dearer energy import costs was stripped out of the calculation.

Exports to European Union countries grew at a slower pace of 7.5 percent in 2011, down from 11.5 percent in 2010, while the growth beyond the bloc shrank to 8.8 percent from 18.6 percent.

A significant slowdown in exports to Asia was offset in part by sales of wine and aerospace equipment to China, while within the EU, German demand for exports from France remained relatively healthy, the customs office said.

“Today’s figures are clearly not good but I am happy at the same time to see that our foreign trade position is becoming an issue as the presidential election approaches,” trade minister Pierre Lellouche told reporters.

“Foreign trade and the national debt are benchmarks of a country’s independence ... It’s time to shake off this idea that industry is a dirty thing and that the domestic market is the only route to economic growth,” he added.

Three months from an election, Sarkozy and his centre-right government have used the competitiveness argument to justify proposing a reduction in corporate contributions to public welfare funding, offset by a 1.6 percentage point rise in VAT sales tax next October, to 21.2 percent.

Sarkozy badly trails Socialist candidate Francois Hollande in the polls ahead of a two-round presidential vote taking place on April 22 and May 6 and followed by parliamentary elections in June. Hollande and even some in Sarkozy’s own camp oppose the idea of a VAT rise.

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