Reporter's Log | Li Xiang

Inflammatory comments by a US tire company boss about the French workforce have reignited a heated debate about France's competitiveness and its labor reform efforts.

In a letter to France's Industry Minister Arnaud Montebourg, Maurice Taylor, CEO of tire manufacturer Titan International, attacked French workers for receiving high wages but only working three hours a day.

"They get one hour for breaks and lunch, talk for three and work for three. I told the French union workers to their faces. They told me that's the French way," Taylor wrote in the letter, published in the French business newspaper Les Echos on Wednesday.

He went on to say that it would be "stupid" for his company to take over an unprofitable tire plant in northern France.

The blistering criticism of the French workforce was denounced by Montebourg as "extremist and insulting". French media later replied to Taylor's attack by citing figures from the Organisation for Economic Cooperation and Development, showing that French productivity remains among the highest in Europe.

According to OECD figures for 2011, French workers create $57.70 worth of output per hour, higher than $55.80 in Germany and $47.20 in the UK.

Taylor's comments are being viewed by some observers as an overstatement, running the risk of overgeneralization, and distorting the picture of France's industrial productivity.

But they did alert the French socialist government to the fact that foreign investors may see the pace of its ongoing labor reforms as being too slow.

As Laurence Parisot, president of MEDEF, the employers' union in France, told reporters the following day, while Taylor's words are totally unacceptable, they did highlight the "anomalies and malfunctions" that France needs to correct.

One brutal fact facing France is the latest wave of company closures resulting from the country's declining industrial competitiveness. In 2012, 266 enterprises filed for bankruptcy, a year-on-year increase of 42 percent, according to a report by French newspaper Le Monde.

A study by accounting firm PricewaterhouseCoopers also found that France lagged behind Germany and the UK in terms of attracting new foreign investment projects.

It would be wrong to criticize the government of Francois Hollande for doing little to revive the country's industrial strength. Last month, employers and unions in France managed to clinch a reform deal, which boosted employers' flexibility on hiring and firing at difficult times.

But foreign investors worry that France appears not to be making sufficient and decisive moves in relation to the scale of the challenges it faces.

Last week, the government broke its promise, saying it won't be able to meet the goal of reducing the public deficit to 3 percent of GDP because of the weaker-than-expected growth of the overall economy.

There is clear consent that France's high labor costs and the rigid labor system are constraining its growth. The barely moving economy is putting the government under greater pressure to undertake bolder reforms, and it has a huge task to dispel foreign enterprises' doubts.

Hollande is set to pay an official visit to China in a few months. Besides securing purchasing contracts for French enterprises from China, a key purpose of his trip is to convince Chinese investors that France remains an attractive destination.

France's highly skilled workforce, good infrastructure and its strategic position in Europe are often cited by Chinese companies as the reason for France remaining a popular investment destination. But some analysts warn that the reluctance of the French government to make bold and deeper reforms may deter future foreign investment.

French Finance Minister Pierre Moscovici has repeatedly emphasized that increasing productivity and competitiveness is the essential pillar of the country's structural reform to maintain its attractiveness to foreign enterprises.

Foreign investors, including the Chinese, are now watching to see how the French government will roll out its reform plans, which will be a painstaking but necessary process.

(China Daily 02/23/2013 page8)