Reconciling the irreconcilable

The eighth MEDEF "Summer University" conference, which was held late August at the Jouy-en-Josas HEC campus, broke an all-time attendance record with more than 3,000 participants. During three days, 157 contributors from all walks of life spoke about various issues extending well beyond sheer economics and politics, and thus participated in a wide-ranging debate of ideas. Among topics ranging from "democratic reconciliation" to "reforming social dialogue", via "the confrontation of models", and before endeavouring a "global geopolitical assessment", the "fears" formulated by the French vis-à-vis Europe and globalization were naturally addressed. The aim of the conference was indeed to "reconcile the irreconcilable" ! Renowned French and foreign experts were looking forward to the presence of Alain Juillet. The Chief Adviser on Competitive Intelligence to the Secretary General for National Defence (the SGDN reports to the French Prime Minister) elaborated on the role of the "Strategist State" and ran through the reasons for which the latter should engage in competitive intelligence, this although many firms well represented at Jouy-en-Josas enjoyed, if not the full required capability, at least that sufficient to begin involving themselves in that task, since the State cannot obviously do everything on its own. This article, first published in "Défense" review [1] issue n°123 dated 1^st October 2006, is reproduced here with its author's permission (© Joël-François Dumont and Défense).

In his opening remarks, José-Manuel Barroso, quoting a recent survey on the "perception of globalization and market economy in 20 countries... reported that "74 % of the Chinese support market economy, versus 65 % of the Germans, and only ...36 % of the French !"

To the President of the European Commission, "France's opening to global economy is not a figment of the imagination. Its present international exchanges of goods and services account for 26 % of its GDP, which is much higher than the corresponding 13 % for the United States. Globally, France ranks 5^th as exporter of goods and 4^th as exporter of services. It is a leader in direct external investments: 3^rd host country and 4^th country of origin. Foreign investors are responsible for 45 % of French exports."

José-Manuel Barroso, President of the European Commission - EC/Breydel © Photo

Mr. Barroso briefly wondered at "this discrepancy between opinion indicators and economic indicators", then went on to analyse this phenomenon and the transformations it has brought about: "globalization translates into an unprecedented interdependence between economies through the combination of several complex phenomena – the market of goods and services turned global, the 'transnationalization' of firms, financial globalization, the revolution of information and communication technologies, and an evermore intense international movement of people. It is a fact that globalization creates new tensions and confronts us with new challenges. These powerful and sometimes ominous forces bear upon local and social balances that had hitherto withstood the trials of time. But to new realities, new responses." Unfortunately, this is where the shoe pinches ! One is at loss to comprehend how Europe, "the world's leading commercial power", could check the globalization phenomenon. But try and tell people who believe their jobs are being threatened that "we are changing our paradigm.." that "economy is tending towards a society of knowledge; the economic fabric is evermore specializing in high added value products and services; and technological evolution is accelerating." Even if this finding is correct, it does not rally in France any more than in Portugal or in the Netherlands.

On August 29, during the 14^th Conference of Ambassadors, Catherine Colonna has perhaps very well analyzed the reason why Europe does not rally any more: we must urgently, she said, "give priority to the Europe of projects."

The Minister Delegate for European Affairs admitted that extension and globalization had transformed into "destabilizing elements" for the conventional European model. "We are now living in a world-scale open and competitive economy. Not long ago, the European scale appeared to be extending prospects; its scale now seems to be diminutive. Furthermore, Europe's performance remains for the time being modest in this economy which is more competitive in terms of growth, employment, or resources dedicated to research & development. Finally, the rule of the market bears harshly on one of Europe's ambitions, which is to maintain a balance between economic dynamism and social dimension."

It is probably for this reason that Mr. Barroso, taking the measure of the long way still to go in that direction, did not hesitate to quote André Malraux: "There aren't fifty ways to fight, but only one: that's to win" ! Ideally of course, to win with minimum risks and maximum glory...

• Economic patriotism

Among the most anticipated contributions at Jouy-en-Josas was naturally that of Alain Juillet, who had been invited to explain the unexplainable: "how to justify economic patriotism in a globalized economy, where even French firms position themselves on foreign markets."

 Alain Juillet, Chief Adviser on Competitive Intelligence to the SGDN - E-S © Photo

Since his appointment in January 2004 as "Chief Adviser on Competitive Intelligence" to the SGDN, Mr. Juillet has never ceased reminding that competitive intelligence, far from being accessible only to the initiated, was the business of all those charged with assuming responsibilities. [2] The State should set itself as a role model in that domain where the French, for essentially cultural reasons, are lagging far behind Anglo-Saxon or Asian countries.

• The role of the State

While it is hard to imagine France or Europe following the example of the American federal State which allocates, according to former CIA chief (1991-93) Robert Gates, 40 % of its intelligence-gathering resources to competitive intelligence, one can ask in what capacity should the State engage in this competitive intelligence activity, when numerous firms already enjoy the required capability ?

"There should be no ambiguity concerning the role of the State, which is to support and protect French firms, this implying neither protectionism nor unfair practices" explained from start Alain Juillet, for whom "protectionism, in addition to being adverse to our interests, simply cannot be contemplated within the framework of our Community and international commitments." As for suspected unfair practices, they should be resolutely ruled out by stating that, "in France, competitive intelligence is being conducted in the strict respect of national and international rules", before going on to elaborate:

"The legitimacy of a public competitive intelligence policy rests on the State's regal powers and their structuring influence." For obvious reasons: "The State is responsible for legislation, sets the technical standards, regulates the markets and conducts international negotiations, all those tools contributing to establish the rules of the economic game." Therefore, this "Strategist State" stands "indeed at the core of competitive intelligence since it acts as an 'uncertainty reducer' when it takes into account a perspective that is generally much broader than that of the market. It can therefore provide the latter, not only with 'signals', but also with relative security in the mid-term." Last but not least, if the need arose "for an extra justification of the State's action", it could still be found "in the need to provide all our firms with the means to fight on equal terms."

 Therefore, it has been a step-by-step approach: after some thought was given to its concept, competitive intelligence was defined as being "the control and protection of strategic information for any economic player." The Institute for Advanced National Defence Studies (IHEDN) was the first institution in France to dispense a specific course. An awareness campaign aimed at the business world followed, together with governmental actions in all sectors, including in the public administration down to the regions. Persuading mentalities to change did not prove an easy task; however, over two years, one can say that the progress recorded shows that with determination and methodology "things are beginning to move."

Then emerged the concept of "economic patriotism", and in the world media France was accused of not being competitive and was branded as brandishing the standard of protectionism ! Of course, there lies a wide gulf between this virtuous indignation and the actual facts, and this is a godsend opportunity to recall some facts and figures, including from foreign sources, which speak for themselves [3].

• Control the drifts of liberalism without checks by maintaining the perenniality of our industrial tool

To Alain Juillet, the emergence of this concept "is due to the need to control the drifts of liberalism without checks in which the possession of wealth tends to replace the sovereignty of States. The aim is to defend the major national economic interests by including know-how, research and innovation, with employment as the end result." Quoting the words of the Defence Minister, Michèle Alliot-Marie, Mr. Juillet was crystal clear: "France shall in no circumstance submit to its providers'  goodwill, or be denied components or weapons required for its national security. It is also normal for the State to take political action, as it did for Alstom, in order to preserve a national economic activity which creates jobs and innovation. The point is then to maintain what is required to ensure the perenniality of our industrial tool and of our defence capability in the long term. All major States, and the United States first of all, have understood that." Thus, imagining "barriers to prevent the normal interplay of competition and exchanges in our country" would be "absurd."

"Economic patriotism at governance level means a commitment to not considering systemically that the grass is greener in the neighbouring country. [3].

It is also a voluntarist approach which holds that the internationalization of exchanges is not an excuse for any type of behaviour. To support economic patriotism is to admit that, beyond its rights, a citizen firm also has duties. Frantic competition and the desire to optimize profits should not lead to ethics being forgotten and rules not being respected"... explained Alain Juillet before concluding on this subject that "the point is not to block anything, but to bring executives to think about their children's future and to understand that the creation of value must be set in a much broader domain than that of the sheer shareholders. Employment stands at the core of economic patriotism."

• Then, quoting Thierry Breton, Mr Juillet warned the executives in the audience:

"One should not shift from economic patriotism to economic nationalism and confuse protectionism, which is dangerous, with patriotism, which is a normal behaviour in every country. Patriotism has never been an aggressive attitude, as nationalism can be, since it expresses a reaction of defence and safeguard."

Obviously, foreign investments should be welcomed in our country, since they bring along jobs, create wealth, and enable us to benefit from imported techniques and know-how.

"Supporting or defending our national champions when interesting solutions are available at national or European level can only contribute to the public good. I found that we are not the only ones to think that way, but paradoxically, we are the only country where some are shocked by this attitude. In fact, all countries act that way, but in different forms. Some will block an operation in order to protect technologies that are indispensable to the maintenance of their national sovereignty, others will restrict it by means of regulated domains with a view to safeguard their national independence and to protect their economic heritage, others again will set up extremely restrictive regulations to deny the buyer any operational control following his purchase. Even in the United States, free enterprise stops when apparently required by  national interest, and in that case, everything goes, in contradiction with international rules governing free trade. I note that India or China are going that way too."

• What criteria to define a firm's nationality ?

As we have seen in the case of Arcelor, it is not always easy to "define" a firm's nationality. Basically, the important criterion does not lie in the firm's capital, but in the way this capital is being managed within the firm. Defining a firm's nationality by the location of its head office or by who controls the majority of its shares is outdated, since more than 40 % of the CAC 40 firms are in that case.

Alain Juillet is convinced that, at present, "we lack a multi-criterion assessment guide, as used by American embassies or by the British in the defence sector. To the latter, a foreign firm which, on British territory, creates jobs, develops research, produces added value, gives local executives a chance, participates in the societal life and respects the standing social and economic rules, must be treated as a British firm." It is the case for Thales in the United Kingdom or Sodexho in the United States !

Should head offices and research centres be maintained on our national territory ? Head offices are indeed "more emblematic", but given the harsh competitive struggle which is waxing between emerging and developed countries, relocating research centres would be a mistake, admits Mr Juillet, for whom "Our only weapon to remain competitive is our innovation capability, this in order to remain one technology ahead or invent really new products, in industry as well as in services."

• Technology transfers

Even if they are "unavoidable" in contracts with emerging countries which see there "a cheap means of making up part of their industrial and technological lag. This is why we should preserve our future by never giving away our latest technology"..."The State can edict strong rules", elaborated Mr Juillet, for activities that are deemed strategic, and this is what the Americans, the Japanese and the Swiss do. Likewise, "the State should make sure that firms are made aware of the risk of diversion or copy of patents, and of know-how piracy."

• The stakes of competitive intelligence

"The greatness of patriotism – whether economic or other – is to transcend personal interests to benefit the common good. Ensuring that our firms and the others compete on equal terms in France as well as abroad entails that the State sees to it that the rules of the game are strictly respected by all the players. This is the application of the principle of reciprocity, since there is no reason for French or European Laws to be less protective than those of other countries. To this end, and in order to anticipate which actions should be taken, all the necessary information must be collected, which entails an actual public/private partnership. We must stop being naive" [4] explained Alain Juillet, pleading, as President Chirac also did recently, [5] for Europe's capability to be "a reference political player", for "a Europe of projects", for a real "European economic patriotism".

"It is now time to stop hiding behind an obsolete protectionism, but to regroup our forces to proceed in the same direction and firmly assert our global interests. European preference has a meaning: it reminds us of our duties towards each one of our fellow citizens."..."Defensive behaviours" are not shocking at all, and "the State plays its role there" recalled our Chief Adviser on Competitive Intelligence, whose action is beginning to bear fruit beyond our borders, before concluding:: "France is not Monsieur Seguin's goat, and anticipating crises does not mean building Maginot Lines."

• Sovereignty and the Maginot Line

French jobs cannot be protected by building a Maginot Line [6]. Regretting "the purely defensive features of the measures that have been announced, this when competition in a globalized economy also requires an offensive approach", Sorbas Von Coester, a highly respected expert in the security domain and more particularly regarding State sovereignty issues, has long been recommending a more European approach, even if it has to be limited to a hard core that would stand as a role model." Confronted to the paradigm change in international business, the promotion of our interests and the optimization of our firms' marketing  position cannot any more be based on a preactivity policy and a logic of 'coups', but will require a finer, proactive and largely upstream approach. This finding pleads for the creation of geostrategic investment funds, albeit necessarily together with our European partners, this for critical mass and influence reasons.

Like it or not, no European State is today in a position to base its economic security and sovereignty strategy on its own resources and on its own single action. The defence of French interests goes through strategic regrouping, resource sharing, and increased cooperation in sensitive domains, this if not at European Union level, at least at the level of a hard core of European States that share the same vision and the same ambitions. Obviously, the path won't be easy, since mentalities will have to change and some intellectual habits to be done away with. Without a real political will to quickly steer into that direction, with open, competent and convinced people at the controls, our future bodes darkly, a future not of vassals, but of serfs."

Definitely, the day will come when the Europeans will have "to leave the option they have been dwelling in for too long ' be strong and you will have friends, be weak and you will have a protector' or to think seriously about it." [7] If sometimes we cannot "reconcile the irreconcilable", let us simply become realists, and, to quote a favourite line of Alain Juillet, "let's do away with ideological fantasies and bring the debate to the harsh reality of facts." [3].

Joël-François Dumont

(Translated from the French by Michel Pochoy) 

[1] Défense is the bimonthly review of the Union of IHEDN (Institute for Higher National Defence Studies) Auditors Associations. Subscriptions: BP 41-00445 Armées).

[2] Competitive Intelligence in France in 2004: Three rules for success by Alain Juillet (30 October 2004)

[3] "The grass is not greener on the other side" (see Alain Juillet's editorial on the HRIE website). Is French economy more restrictive than other national economies ? An OEDC study published in January 2006, titled "Competition on product markets and economic performance in France" and drafted by Jens Hoj and Michael Wise, states that the United States and the United Kingdom are among those countries that are the most restrictive concerning foreign investments on their territories, while France stands among the less restrictive. A proof of openness, the "IPO Watch" study by the PriceWaterHouseCoopers professional services firm states that Eurolist has enabled 16.2 billion € to be raised in 2005, thus placing Euronext at the top rank in European stock exchanges in terms of raised funds, ahead of London (12.5 billion €) and Frankfurt (3.5 billion €).

[4] The OECD Convention: "The adoption, in 1999, of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions is seen by the general public as a watershed breakthrough in the struggle against practices that: undermine global economy; destroy trust, which is the cornerstone of a modern and highly financial economy; trap developing economies inside a vicious circle which links corruption to under-development; finally, that feed international criminality, based on the "dirtying" of clean money with a view to paying commissions, an activity perfectly complementary to that of money laundering, to which weapons or drugs traffickers have to resort to.

However, some experts, while not denying the need to fight corruption, think that the Convention is the result of an instrumentalization of International Law by the United States in order to provide its national firms with an important competitive upper hand." Excerpt of "Thinking beyond the OECD Convention", a study published by Sorbas von Coester in issue n°10 (Summer 2002) of the "Prospective stratégique" review of the Centre for Strategic and Prospective Studies (CEPS).

[5] Opening remarks of the 14th Conference of Ambassadors by Jacques Chirac, President of the French Republic, at the Palais de l'Élysée. Paris, 28 August 2006.

[6] "French jobs cannot be protected by building a Maginot Line": a critical analysis of the Report of the Finance, General Economy and Plan Commission on the Finance Bill for 2005, (October 2004) by Sorbas von Coester, Managing Partner, Gheran, a graduate of École Polytechnique, Ph.D (Econ.) of the London School of Economics. By the same author, also read:

• Europe must redefine its priorities in terms of space technologies, network-centred warfare, and the Internet and:
• Do some American investment funds weaken European Defence ?

[7] A quote from Admiral Guy Labouérie of the Académie de Marine in his "Nicolas Polystratu's letter to John Smith"

• Concilier l'inconciliable

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