Mitterrand's France

The platform of the Socialist Party of France describes multinational corporations as "the principal beneficiaries of the world economic crisis instigated by the Right to install its politics on a world level."

While Socialist president Francois Mitterrand, and the Socialist Party-dominated parliament, have shown more restraint in their first few months of government than their party platform would suggest, there are major changes afoot for foreign multinationals in France and for French-owned multinationals.

This autumn the government intends to nationalize eight large industrial groups, as well as the largest of the banks, insurance and financial corporations that are not yet publicly owned. All told, these firms employ about one million workers, and have gross annual sales of U.S. $50 billion.

The nationalization program will place most major French multinationals in state hands, including the whole nation's arms industry, which is the third largest in the world.

Throughout August, cabinet ministers met to resolve difficulties involved in the large-scale nationalization operation.

One issue is whether the program of nationalizations should go ahead immediately; another is whether the state should assume 100% or only a controlling interest in the targeted firms. On both, President Mitterrand has taken an aggressively pro-state intervention stance. "Too many people believe, wrongly, that we want to nationalize only for symbolic reasons," explains one Socialist Party leader. "If we want to take over the private sector rapidly, it is so that these enterprises can, as quickly as possible, play their pilot role in industrial policy-not just to keep a symbolic promise."

For the government, that "pilot role" is to create jobs, to reconquer the French market from foreign firms, and to capture foreign markets-all within an overall national economic strategy. The government is not nationalizing simply to save specific ailing companies, according to Michel Charzat, the Socialist Party Secretary and spokesperson on the public sector.

Disagreements persist both within and outside the ruling Socialist Party. The Confederation Francais du Travail (CFDT), the nation's second largest union organization, is demanding that workers be immediately involved in the running of newly nationalized companies. The union has proposed to the government that a shop committee be elected at each affected worksite, to work with management until new structures are in place.

Within the Socialist Party there is faction fighting over who is to control the nationalized companies: the Ministry of the Economy, or the Ministry of Planning, which is headed by Michel Rocard, who challenged the leadership of Francois Mitterrand prior to the elections.

While this debate continues, plans to nationalize three foreign-owned multinational corporations have been postponed. The three firms are:

• Compagnie Internationale pour l'Informatique Honeywell Bull (CII Honeywell), 47 % owned by Honeywell USA, 53% by the French company Compagnie des Machines Bull
• ITT France, 100% owned by International Telephone & Telegraph
• Roussel Uclaf, 58% owned by the German Chemicals firm Hoechst.

The delay in fulfilling a Socialist Party Promise to take over these companies is due in part to the government's eagerness to reassure foreign investors. The Paris stock market fell 30% in the first few days after Mitterrand's victory, mainly as a result of sales by British industrialists and emirs from Qatar. All Arab nations' deposits in the form of short- and medium-term loans total 40 billion francs, ($6.7 billion) and their withdrawal would be a serious blow to the French economy. Then late last month a major deal between a French Company and the Continental Telephone Corporation of Atlanta, Ga., was abandoned, principally because of the new French rules for foreign investment. The French communications-equipment manufacturer, Thomson-CSF, was to partner Continental in a U.S. $400 million joint venture, but the new regulations require that any foreign investment by a French firm valued at over the equivalent of $168,500 must be 75% financed by foreign borrowing. Continental found the delays, and Thomson-CSF's borrowing requirements, unacceptable. The Wall Street Journal quoted Continental chairman Charles Wohlsletter as praising Thomson-CSF- "Their technology was excellent," said Wohlsletter, "but it was a political thing."

Even though the stock market index has returned almost to its pre-election level, Party spokesperson Charzat admits that legal battles could erupt over the formula for compensating stockholders of nationalized firms. Trading in shares of companies slated for takeover was suspended for one day in July when speculators tried to profit from rumors about various forms of indemnification being considered for shareholders.

According to the law, indemnification must be "equitable, just and negotiated," vague terms which the commercial courts will have to define in the next few months. Two proposals have been discussed by the government: one would tie shareholders' compensation to the future performance of the companies; the other would pay shareholders with state bonds redeemable in 15 to 20 years, in amounts based on averages of the past two year's stock prices, indexed to compensate for inflation. (U.S. companies would also receive compensation from the U.S. Overseas Private Investment Corporation.)

The compensation issue is the major reason for the delay in nationalizing C11 Honeywell. Honeywell's agreement with its French partner, Cll, specifies that the U.S. company receive about $250 million in the event of nationalization-an amount well in excess of Honeywell Bull's total capitalization. In light of this, the government is backpedalling on its commitment to buy the subsidiary. "If they (Honeywell) are willing to work with the state company," says spokesperson Charzat, "then we won't nationalize their part."

Even if France had more favorable terms of purchase, CII Honeywell would be difficult for anyone but the U.S. parent company to operate: the French firm is dependent on Honeywell U.S. for all its technology. The majority of goods sold by CII Honeywell are currently made in the U.S., so foreign buyers would be likely to buy direct rather than support a French government-run license-holder.

Socialist Prime Minister Pierre Mauroy has, however, argued that nationalization will not harm France's chances of competing in the world's markets, frequently citing Renault, nationalized shortly after World War II, as an example of an extremely successful French state-run multinational. Socialist deputies have repeatedly asserted that nationalization will not lead to bureaucratization, and that the state-owned companies will have complete independence in their operation. Chase Manhattan Bank President, William Butcher, seems to agree: "The tendency has been," says Butcher, "to run nationalized industries in France as if they weren't."

However, this hasn't stopped the Conferation Nationale du Patronat Francais (CNPF, the federation of French industrialists) from attacking the nationalization program. "They are [nationalizing] all the best companies. It is like demoting the best generals in time of war," says CNPF president Francois Ceyrac.

For many people, the changes which may take place in the nationalized companies will be a test of the new Socialist government. If nationalizing just means carrying out the same policy as before, than one may as well economize on nationalization," says one of Mitterrand's own ministers.

Philip Brooks is European editor of Multinational Monitor, based in Paris.

Nationalization and the Law The legal aspects of the French nationalization struggle will center on two documents: The first paragraph of the preamble to the French constitution proclaims adherence to the bill of rights as defined by the Declaration of the Rights of Man and of the Citizen of August 26, 1789 - a bill inspired by the bills of rights of some early American state constitutions, and perhaps the most hallowed document of the French Revolution. It says that property is an "inviolable and sacred right, of which none may be deprived, if it is not obviously required by public necessity and on condition there be fair and advance indemnity." The French constitution, which was drafted largely at the behest of the socialist and Communist Parties to legalize an earlier round of nationalization. It says in part that "any enterprise, the exploitation or which has or acquires the character of a national public service or de facto monopoly, must become the property of the community." In quoting these legal passages, the New York-based daily Journal of Commerce suggested that they would be used by lawyers for the larger banks and the five big industrial groups (CGE, Rhone-Puolec, Pechiney-Zugine-Kuhlmann, St. Gobain-Pont-a-Mousson, and Thompson-Brandt) as grounds for arguing that none of these firms meets the criteria for nationalization. At least, the lawyers believe, the government will be dragged through very lengthy court procedures before succeeding with many of their nationalizations plans.

Foreign Ownership In France Of the six nations that dominate the world market-the USA, Japan, Great Britain, the Federal Republic of Germany, Sweden and France - has the highest level of foreign investment in its economy. Comparative figures, according to the French government's index of foreign "penetration" (see below for definition) are: France 23.1 Britain 18.7 Germany (F.R.) 17.3 Sweden 9.9 USA 5.0 Japan 2.8 Foreign investment in France in 1979, including property holdings, amounted to 10.3 billion francs(US $1.72 billion), 52�l0 of which came from European Economic Community (EEC) nations, 18% from the USA, 210lo from other Organization of Economic Cooperation and Development (OECD) countries, and 9% from the rest of the world. United States direct investments in France diminished in the period 1971-1979, from 26% to 18%, but ownership of French firms by European subsidiaries of U.S. companies expanded appreciably during the same period. Controls on foreign investment in France are already the strictest in the European Community, which has been a point of complaint for the CNPF (Confederation of French Industry). ' The controls in particular cover the movement of capital, transfer of dividends, loans and borrowing when the parent company is an overseas firm. For foreign interests to take over more than 20% of the capital of a French firm, authorization form the Ministry of the Economy is necessary. According to the Ministry of the Economy there will be little change in any of these regulations under Mitterrand. In 1976, of 24,499 French companies employing more than 20 persons, only 6.507o had any foreign participation. However, figures on investment and sales are a more important guide to foreign control. As the following table shows, foreign control is strongest in technologically advanced industries: Subsection of Industry Penetration Index* Office machinery, computers, data processing 81.30 Gasoline and natural gas 68.21 Agricultural machinery 59.80 Chemicals 51.37 Extraction and preparation of iron, copper ore 41.39 Other minerals 40.41 Pharmaceuticals 39.10 Industrial starch 37.10 Precision instruments 35.88 Base chemical industry 28.25 Electronic appliances 28.28 Ceramics 21.21 Machine tools 20.36 * The Penetration Index: The French government considers foreign investment in a French firm of less than 20% to be merely a financial interest, which implies no desire to influence the company's operations and thus firms with less than 20% foreign equity are not included in the Index. An investment between 20% and 50% is included in the Index at the actual % level. Investment of 50% or more is considered a controlling interest, and is this treated as 100% penetration. Source: French Ministry of Industry.

Socialist France and the Third World Mitterrand's cabinet has begun to articulate a Third World policy markedly different from the previous administration's. Perhaps the most visible new cabinet member is Foreign Minister Claude Cheysson. In his first major foreign policy speech, Cheysson stressed the need to revive the North/South dialogue. The minister recently visited Central America, where he made a point of voicing his support of Nicaragua's Sandanista government, and last month France and Mexico issued a joint declaration in support of the right of the Salvadoran opposition front to negotiate that nation's future. Last month, Cheysson also met, in the full glare of press lights; with Palestinian Liberation Organization chairman Yasir Arafat. Cheysson has declared that two countries-South Africa and Chile-will be singled out for less favorable treatment by the Socialist government in Paris. South Africa will not receive "even a bullet," says Cheysson, and Chile will not receive military equipment "which could be used for internal repression." Minister of Co-operation and Development Jean-Pierre Cot says he will redefine the role of French foreign aid. "In no case will France intervene in the internal affairs of African countries," he has promised. Officials in Cot's ministry told Multinational Monitor that there will be increased technology transfer to Third World countries, particularly in field of solar energy. And more fixed, long-term price agreements for commodities will be sought, which may not please some of France's large agro-industrial multinationals, but will be welcomed by Third World producing countries. Cot's advisers warn, however, that much depends on whether the European Economic Community's trading relationships with the South are to become more equitable. "Mitterrand can't afford to go it alone and have higher prices in France than elsewhere [in EEC nations]," said a ministry official. Mitterrand's Third World policy may get its toughest test in Namibia. The Socialists have party-to-party contacts with the nationalist South West Africa People's Organization (SWAPO). However, French companies-all but one of them state owned-are involved in the exploitation of Namibia's natural resources, directly contravening a U.N. ban on such activities. Total Compagnie Francaise des Petroles (CFP) and Pechiney-Ugine-Kuhlman each hold 10% shares in the Rossing Uranium mine, the largest in Namibia. Total is government-owned; Pechiney soon to be. The national oil company, Elf-Aquitaine, prospects with Minatome (a 50%-owned subsidiary of Total) in Namibia. Electricitie de France (EDF) the state-run gas and electricity company-receives 2% of its supplies from Namibia. No decision on the future of this controversial investment has yet been made. Four months into Mitterrand's seven-year term, it is still too early to tell what changes-if any-are in store for relations between France's state-owned multinationals and the Third World. -P.B.

France's Own Multinationals Between 1971 and 1979, there was a three-fold increase in French foreign investment; by 1979 it amounted to 7.25 billion francs (U.S. $1.21 billion). This is the equivalent of only 0.3076 of the French Gross National Product (GNP). In comparison, the equivalent of 0.7% of U.S. and 1.507o of British GNP are invested abroad. Of the world's 862 largest companies, 39 are French, and, those 39 companies have sales of U.S. $171 billion annually, representing 6.1076 of the total value of all international trade transactions. The following two tables present a picture of the French role in the international market. The first lists countries in order of their share of the value of sales made by the world's largest 862 corporations. The second lists the .17 largest French multinational corporations: The World's 10 Largest Trading Nations Country Total Sales   (US $bil) Percent World Market Number of Firms USA 1371 48.0 362 UK 311 10.8 90 Japan 309 10.8 130 Germany 248 8.6 63 France 171 6.1 39 Holland 87 3.0 16 Canada 70 2.4 30 Italy 60 2.1 10 Switzerland 44 1.5 14 Sweden 39 1.3 26 France's 17 Largest Multinationals Company Activity Percent  State Participation 1979 Net Sales (bil. francs) Societe Francaise de Petroles Oil 35 73.6 Peugot Autos 0 72.8 Renault Autos 100 68.5 Elf Aquitaine Oil 100 45.0 Saint Gobain Pont a Mousson Glass, Chemicals, Construction mats. 100* 35.5 Compagnie Generale d'Electricite Electronics 100* 35.0 Pechiney-Ugine-Kuhlmann Metals 100* 33.9 Rhone-Poulenc Chemicals 100* 33.8 Thomson-Brandt Chemicals 100* 30.0 Empain-Schneider (Franco-Belgian) Machinery 0 27.3 Michelin Tires, Rubber 0 26.5 BSN-Gervais-Danone Food products 0 16.4 Charbonnages de France Coal, Chemicals 100 14.5 Aerospatiale Aircraft 100 10.1 Usinor Steel 100* 16.1 Sacilor Steel 100* 15.9 Dassauolt Military Aircraft 100* 7.1

Companies to be Nationalized Company Activity Sales in billions of francs Percent foreign Assets Employees Principle area of operation Cie General d'Electricte Electrical products, nuclear engineering 45.8 26 180,000 Nuclear plant electronics: Romania, Korea Electrical generation: Mozambique, Peru, Cameroon, Indonesia, Greece Other: Abu Dhabi, Brazil, Canada, Germany, India, Iraq, Ivory Coast, Kuwait, Mexico, Morocco, Nigeria, Saudi Arabia, Togo, Tunesia Pechiney Ugine-Kuhlmann Aluminum, other metals and alloys, chemicals 38.1 54 90,000 France, Belgium, Artgentina, Australia, Brazil, Cameroon, Greece, Italy, India, Japan, Korea, Mexico, Netherlands, Spain, Siberia, Sweden, UK, USA The largest company in the U.S. through Howmet Aluminum Corporation (100%) of Houston, Texas. Rhone-Poulenc Chemicals, pharmaceuticals, plastics, synthetic fibers 30.2 56 95,000 Principle subsidiaries: UK (May & Baker), USA (Rhone-Poulenc USA), Brasil (Rhodia) Saint Gobain Pont-a-Mousson Glass, construction materials, pipes and valves, packaging 43.5 53 163,000 Main subsidiaries: Spain, Italy, Germany, Brazil, Belgium Other: USA (Certain Teed building materials, 55%), Argentina, Austria, Colombia, Denmark, Gabon, Mexico, Netherlands, Norway, Sweden The company's major overseas sales are in Germany and the USA (12%). It has a joint venture through Certain Teed with National Semiconductor to produce integrated circuits in France. Thomson- Brandt SA Professional electronics, domestic appliances, lamps, radio and TV sets, medical electronics 36.5 40 128,000 Main subsidiaries: USA (Thomson CSF), Spain, Germany, Singapore Other: Argentina, Belguim, Brazil, Canada, India, Iran, Italy, Mexico, Morocco, Nigeria, West Africa Most diverse division is Thomsan CSF, which makes avionics detection systems, radiocommunications, telephone switching, data processing, scientific instruments, solar energy hardware, electronic compnents, etc. Thomson-Brandt owns only 41.3% of Thomson CSF, whose other shareholders include Saudi Arabian investors. Thomson-Brandt is the only division up for nationalization. Dassault Aircraft and Other arms 10.7 69 18,000 Sales of Mirage and AlphaJet: Argentina, Brazil, Ecuador, Egypt, Iraq, Ivory Coast, Morocco, Qatar, Spain, Sudan, Venezuela Already 20% owned by the state - 77.34% owned by Marcel Dassault, 87 year-old Gaulist member of the National Assembly. Dassault was the only major industrialist to openly accept the prospect of nationalization, calling it "the will of the people." Matra Military hardware, publishing, radio 2.2 NA NA NA The military section of Matra is the only one to be nationalized. Military sales account for 55% of the company's earnings. The Communist Party wants to nationalize the whole company, including its media interests which are closely tied to members of the former government of Giscard d'Estaing.