Our clients in the Alsace-Lorraine / French Alps region of France are involved in manufacturing fine machine parts and agricultural products. Like most French companies, they are closely held enterprises. While their manufacturing operations are small by comparison to U.S. standards, they are dominant in their industries because of quality of finished product. In fact, the Marne Valley is referred to as the “Silicon Valley” of fine machining in Europe.
I recently posed a question to our clients in the region on how global events are affecting their desire to invest in the United States. They indicated that their desire to do business in the U.S. is stronger than ever. In fact, for one of our clients, their business in the U.S. increased by 38% last year. This was due in part to a declining interest in doing business in China because of uncertainty of regulations as well as poor quality manufacturing. They have found that automation in France has equalized the lower labor costs in China.
Our French clients anticipate some downside impact to them from Brexit because the declining value of the pound may make British exports less expensive than French exports. However, while they express a certain “sadness” for the exit of the Brits, they believe that the British had special standing in the EU without a common currency for too long.
The horrific terrorist attacks in France have reduced tourism by nearly 20% in August, but has not dampened at all the appetite for investment in the U.S. As one of our clients pointed out, Franco-U.S. relationships are never as close as when either country is attacked. France and the U.S. are the oldest allies, and unique in that we have never fought against each other. French companies still find it somewhat daunting to invest in the U.S. While they acknowledge that regulation and taxes are worse in France than in the U.S., they are at least familiar with the French system.
While the French have very little trust in their government, they are watching closely the outcome of our general election. Of all of the global factors on which I asked them to comment they cited as the single most important factor for future French investment in the U.S. this one: the outcome of the U.S. presidential election.