Business | French investment abroad

Behind the bluster

Anti-globalisation in France is more appearance than reality

|paris

IT WAS more than a symbolic defeat: on May 16th, Robert Mondavi, a big Californian wine maker, announced that it had abandoned plans to build a winery in Aniane, a small village in France's Languedoc region. The recently elected mayor of Aniane had denounced Mondavi's plan, which had been approved under the previous mayor, as a capitalist plot designed to benefit shareholders rather than locals and the environment. In March, demonstrators had smashed toll-booths and fought with police in protest. Mondavi pulled out, citing personal and political interests that it did not understand.

The episode was reminiscent of the anti-globalisation campaign led last year by José Bové, a one-time nuclear protester turned small farmer who became famous for his protests against McDonalds. It also echoed the recent fuss over Marks and Spencer, a British retailer that has been attacked for shutting its French stores, with the loss of 1,700 jobs. But such well-publicised behaviour disguises the truth, which is that French companies are quietly furthering their own globalisation, even as they noisily defend their home turf.

Mondavi's defeat coincided with a rush of controversy generated by French companies seeking to increase their presence abroad. On May 18th, it emerged that Alcatel, a big French telecoms-equipment group, had reopened multi-billion dollar merger talks with Lucent, a struggling American rival. Three days later, Vivendi Universal, a media group based in France, announced that it had offered to buy MP3.com, an American online music-sharing company; and on the following day, Vivendi did not deny that it was in the early stages of negotiating to buy Houghton Mifflin, an American publisher that could be worth around $1.7 billion. Such a flurry of Franco-American deals is unprecedented in recent years.

Meanwhile, state-owned Electricité de France (EDF) has become mired in ugly battles in both Spain and Italy. At the start of May, the Spanish government suspended the voting rights of two foreign companies that had bought shares in a small utility. One of those companies is controlled by EDF. The Spanish accuse the French of double standards on market opening and are considering whether to restrict voting rights so that EDF is held at bay.

The Italian fight is even dirtier. It arose after EDF took a 4% stake in Montedison, a holding company that is under pressure to break itself up and put into play Edison, Italy's second-largest electric utility. Italians have expressed outrage that a protected foreign state monopolist is butting into their electricity market. The government is even toying with imposing legal curbs on foreign state-owned companies' investment. Unabashed by the fuss, EDF has blithely raised its stake to more than 20%.

Yet a picture of French companies bestriding the globe while refusing to allow competitors into France is altogether misleading. Levels of foreign direct investment (FDI) into France have never been higher. Last year, for example, France recorded 563 inward investment deals, up from 447 in 1999. America accounted for 178 of them, with Germany the second-biggest investor with 102. More than 35,000 new jobs will be created over the next three years by such investments.

Longer-term figures from the OECD tell a similar story. In the late 1980s, France invested nearly twice as much overseas as it received from abroad. Until 1998, the gap remained much the same. Although the trend appeared to go into reverse in 1999 and last year, this can be explained largely by the effect of a few huge deals, notably Vivendi's $34 billion acquisition last June of Seagram's Universal business.

This is consistent with other measures. Research by J.P. Morgan on global mergers and acquisitions suggests that activity by French companies is in line with the size and influence of the French economy. European companies in general have been big buyers of their North American counterparts, snapping up $1.16 trillion-worth of assets there since 1988. Britain has been by far the biggest acquirer, with $504 billion-worth. France's $186 billion places it a distant second.

EDF's belligerence and Mondavi's retreat, it seems, are exceptions to the broader trend of France's active participation in the globalisation game. But the episodes carry a warning nonetheless. France has its sacred cows—nuclear power and gastronomy among them. It also has a populace that has, for over two centuries, never been slow to take to the streets. Foreigners wanting to enter the French market should pick their targets with a careful eye towards national sensitivities.

This article appeared in the Business section of the print edition under the headline "Behind the bluster"

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