Lack of supportive policies puts French chems competitiveness at risk – UIC

PARIS (ICIS)–The new French government should pass specific measures targeting the chemical industry if it wants to keep the second largest exporter in the country competitive with its peers in Europe, according to the two top executives at the country’s trade group.

Magali Smets, managing director at the Union des Industries Chimiques (UIC), and its president Pascal Juery said this week the French chemical sector, with sales in 2016 of €71.0bn, would need more German-like measures that would allow a more competitive environment.

In a plea shared with the Spanish chemical trade group FEIQUE, Smets highlighted two aspects that are dragging down French chemicals: high electricity costs and a lack of specific legislation targeting chemical parks.

In Germany, chemical companies enjoy lower electricity costs thanks to exemptions as well as legislation that allows several companies in a chemical park to share the services, splitting the costs.

Those services can range from utilities, waste management or logistics, for example.

“We have seen this in the region of Lyon [southern France], where with specific policies aimed at the chemical parks they have managed to attract €400m in foreign investment,” said Smets, pictured above.

“The achievement was down to measures taken at a regional level, but it shows that when we want, we can. Now we need to make this approach more systematic and extend it to the whole country.”

UIC has embarked on a campaign to convince policy makers in France and the EU of the importance of the industry, and how it needs specific measures to keep it competitive.

Employing 200,000 people, the French chemical industry is the second largest exporter of goods in the country, according to UIC, and its performance in 2016 and year to date has been higher than its peers, according to Juery.

He said sales volumes growth in 2016 stood at 2%, and year to May volumes would have risen by 3% compared to the same five-month period of 2016.

“I can say that when we are promoting such measures [with the French authorities] we are meeting with people who are at least ready to listen to us,” added Juery.

“The signals we hear from the new government are encouraging, and at UIC we have regular contact with the ministry for industry promoting what we think it’s important to make sure the chemical industry in France remains competitive.”

However, the two UIC executives admitted public perception of the chemical industry in France is very different to that of Germany. The latter country has had a long tradition of chemical production, dating back more than 100 years, and its nearly half-million employees are a good testimony of its powerful position among German manufacturing.

To achieve a better understanding of what the chemical industry does and how, Smets and Juery said they are committed to improving its image among French public opinion so when measures to facilitate chemical investments are passed, they would not be met with resistance.

A key issue to achieve a better perception of the industry needs to be constant transparency in the way companies operate and how they handle chemicals, they said.

Related to transparency on chemical substances management, the EU regulation Reach would be an example of how things need to be done, they said, although they warned against “duplication and overregulation” which would only add a burden for chemical competitiveness.

However, the European Chemical Agency (ECHA) has repeatedly said dossiers filed by chemical companies on substances are often incomplete, which slows the registration process. Reach started to be implemented in 2007 in several phases, the last one to come in 2018 when chemical quantities between 1 and 100 tonnes need to be registered.

“The dossiers are extremely complex, each can be hundreds of pages long,” said Juery, pictured right.

“The chemical industry expects these products to be regulated through science-based approaches, and has never challenged Reach. However, it has been a costly exercise, spread over a number of years, but the cost comes whether we like or not – if you want to operate in the EU, you need to be Reach-compliant.”

However, the safety of chemical substances is continuously reviewed by regulators and in the last two months two French studies were the trigger for ECHA to classify two widely-used chemicals as potentially carcinogenic – bisphenol A (BPA), used to produce polycarbonates (PC), and titanium dioxide (TiO2), which is intensively used in the inks and coatings sectors.  

Any potential ban on those products would cause quite a shift in the chemical industry, which would have to rush to find substitutes. Although still not in a panic mode, players in both the BPA and the TiO2 markets have expressed concern at that potential outcome.

“We need to listen to the population’s concerns about these substances but we need to take this to the next step, and regulate at an EU-wide level because taking national measures would only benefit other chemical producers within the EU, since there is hardly any control on imports and we operate in a EU internal market,” said Smets.

“You probably might think you have solved the problem [legislating at a national level] but the consumers will have the same product, with the same potential health impact and pollution, but produced in a country next door. We advocate more coordination between the different chemical agencies [within the EU].

“Having more coordination, the decisions would be taken faster, facilitating less uncertainty for investments and securing the population and policy makers received unified arguments about chemicals safety,” she concluded.

Smets and Juery are hopeful about the chances the new French President has to pass economic reforms which, in their view, would boost the economy.

A widely expected reform is that of the labour market, which some analysts see as too rigid. By making hiring and firing simpler, they argue, entrepreneurs would feel more confident to extend their workforce.

The main French trade unions have already said they are alert and ready to fight reforms that in their view may put workers’ job security at peril.

Without commenting on the details of that potential labour reform, the two executives at UIC praised the French chemical industry’s long history of social dialogue and collaboration between employers and employees.

“One recent example is how we have been working together with the unions to reshuffle the collective bargaining agreement for the industry, which we are trying to cut down from 500 pages to 200 pages – that is quite an achievement,” said Smets.

Juery said he was “sad” about the UK’s decision to leave the EU, adding France exported to the UK €4bn worth of chemicals in 2016 while it imported €2bn from its neighbour.

Although the predominant feature of Brexit is still uncertainty, Juery said he would like to see a free trade agreement (FTA) with the UK post-Brexit.

However, like the UIC’s chief economist Didier Le Vely had done in the immediate weeks after the UK’s vote to leave the EU in 2016, Juery sent the UK both a wish and a warning.

“I don’t have a crystal ball to tell you what’s going to happen but we are advocating for an FTA with the UK, but making sure we have a levelled playing field, both in terms of Reach but also for carbon emissions,” said Juery.

“Brexit made me sad. I am still sad today – I believe Europe needs to be united and I very much regret the uncertainty the decision has caused, which is good for no-one,” he concluded.

Outside UIC, Pascal Juery is member of the executive committee at Belgium chemical major Solvay.

Interview article by Jonathan Lopez