Analysis of the Economic Situation of France and Canada

France has been one of the largest economies in Europe as well as the whole world for many years. The economy of this state sank into recession during the global financial crisis and the country has experienced a stagnant growth rate since the global financial crisis. By contrast, Canada`s economy is a high-tech industrialized one that has a close resemblance to the economy of the United States. Canadian petroleum sector is currently flourishing making it the largest economic driver of Canada`s economy in the recent years. Both states under analysis have major strengths and weaknesses that play a huge role in the development of the economies of the two countries. Therefore, the analysis economic outlook, labor laws, foreign investment laws and risks of France and Canada is critical for sound decision-making of a suitable investment country.

Economic Outlook of France and Canada

Canada has great business relations with the United States since the former is its major supplier of energy. After World War II, Canada experienced a rapid increase in its economic growth rate and became one of the most urbanized and industrialized nations in the world. Canada`s rapid economic development is driven by the highly skilled labor force, great technological advancements and sufficient natural resources. On the other hand, France has the capitalist economy and all it sectors have been diversified. France preserves capitalism by sustaining its social equity through statutes, tax regulation and social spending by minimizing income disparity and the effects of free markets on public health and welfare of its citizens. French economy has the minimal growth rates and the level of unemployment there is high compared to other states in Europe. The country has experienced a stagnant growth rate and many fiscal challenges over the recent years.

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Gross domestic (GDP) product of France is greater than GDP of Canada and the former is ranked sixth by the International Monetary Fund. However, Canadian GDP per capita, gross domestic product purchasing power parity (GDP PPP) and its purchasing power parity per capita has a higher ranking than France (International Monetary Fund). Nevertheless, the gross national income in France is twice as large as that of Canada whereas the inflation rate of France is higher in comparison to Canada. The latter has a larger population who live under the poverty line since its poverty rate is twenty-one percent higher than in France (Country vs Country: France and Canada Compared). On the other hand, the unemployment rate is greater in France. The business regulations in Canada are more flexible than in France, which has adopted more complex regulations. Canada has a ranking index of eighteen in the ease of doing business in the country while the index of France is thirty-one (World Bank Group). Hence, this means that it is easier to establish and conduct a business in Canada than in France, which has stringent policies. Therefore, each country has its own set strengths and weaknesses in the economy.

Labor Laws

The labor laws of any particular state define the relationship between all the major stakeholders of the national workforce. Labor laws address the key aspects of employment, which include minimum wages, working conditions, health and safety, maximum working hours, termination of contracts and leaves that an employee is entitled to every year. Labor statutes define the rights and responsibilities of both the employers and staff members and how to resolve any conflicts that may arise in the working environment. Labor laws that govern employers and employees are established by the relevant authorities of a particular country or the established international bodies. France has more stringent labor laws compared to Canada, which has greatly contributed to the high rate of unemployment in the country. French complex labor laws are also unfavorable to investors thereby making them to decide on alternative investment opportunities in other states. Besides, French labor statutes contain a higher minimum wage rate that workers should be paid in contrast to the Canadian labor laws. For instance, the minimum wage rate in Canada is eleven dollars per hour (Minister of Justice). On the other hand, the minimum wage for employees in France is approximately ten euros per hour (Shaw). Hence, this has increased the cost of labor for employers in France since all organizations have to remunerate their workers according to the minimum wage rate. Therefore, Canada has the favorable minimum wage rate, which makes the country more attractive to investors than France.

Another important aspect in the labor laws is average working hours for employees. Different countries have established the maximum hours that staff members can work per day, the maximum overtime working hours and the remuneration rate. The number of working hours in France are extremely low compared to other states, because France has a limit of thirty-five working hours per week (Shaw). In contrast, the limit in Canada constitutes forty-eight hours per week (Minister of Justice). Hence, this has made French employment segment more unattractive to potential investors since the cost of labor is high due to the minimum set standard yet employees work only for a few hours compared with other countries, which have more working hours with lower wages and salaries. In addition, strict labor regulations in France have greatly contributed to the increase in the rate of unemployment since organizations avoid new recruitments due to the lack of flexibility in the national labor laws. Moreover, companies minimize the rate of recruitment and focus on maximizing the output of the existing workforce by improving their production per hour. Therefore, the working hours limit imposed by the Canadian labor statute has enhanced the competitiveness of the national labor segment.

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Unionization is another important aspect of labor statutes in every country. The rate of unionization in Canada has decreased over the recent years (Minister of Justice). Besides, this was due to the changes in the employment rate of several major industries in Canada, which weakened the national labor unions. On the other hand, France has strong labor unions with an average unionization rate. Although France does not have a high unionization rate by contrast to most countries, its unions have an enormous influence on labor laws that are implemented in the state (Shaw). All sectors of the economy have unions, which allocate employees with considerable collective bargaining power. The strengths of unions have greatly affected the minimum wages and salaries that workers receive and the maximum working hours limit established in the country. The presence of strong unions has always crippled any efforts to bring major reforms to the national labor sector since the unions always have divergent views on the impact of reforms on the French economy. For instance, unions in France rejected the controversial labor law reforms that were advocated by the government without using the parliamentary vote. Labor unions in France are known for using industrial strikes and hostile demonstrations to voice the public opinion on any unfavorable law that is imposed by the authorities. Therefore, this has made the labor division in the country more unattractive to potential investors because of strikes that may damage the operation of an organization.

Fringe benefits are an essential component of the remuneration package that any employee receives from the employer. Canadian labor laws include two types of fringe benefits that workers are entitled to (Minister of Justice). The first type of fringe benefits in Canada are the legislated benefits, which consists of mandatory benefits for all staff members. The legislated fringe benefits include employment insurance, pension plan, and the workforce insurance coverage. Competitive fringe benefits that are offered by employers in Canada encompass health insurance plans, employee assistance programs, employment and development programs as well as flexible working arrangements between workers and employers. In contrast, French labor laws ensured that the workforce is entitled to a wide range of fringe benefits from their employer. According to Shaw, the benefits include overtime pay, subsidized travel plans, restaurant vouchers, paid off days, subsidized healthcare plans, leaves and bonuses. The fringe benefits offered to the employees to motivate them and increase the competitiveness of the national workforce. Therefore, the laws in both Canada and France secure that employees are entitled to a competitive remuneration package with numerous fringe benefits in order to increase the overall performance of the human resources in two countries.

Foreign Investment Laws

Foreign investment laws consist of the implemented policies by a particular country to regulate the decisions that are made by investors from other states. The French government has always encouraged foreign investments as a method of enhancing the economic growth rate and reducing the level of unemployment. Thus, the highly skilled workforce, technological advancements, good infrastructure and the location in Europe attract many investors to France who seek to invest in Europe. However, high taxes, the considerable cost of labor, stringent labor laws and negative regulations that are imposed on foreign investors always act as a disincentive for potential investors in the country. Nevertheless, France has always promoted foreign direct investment through establishing an investment promotion agency that supports foreign investors minimizing statutory regulations on ownership and control of organizations by foreigners, conducting regular reviews of foreign investment policies and partnering with other countries to form bilateral investment agreements that will facilitate the growth of foreign investment division in the country. Consequently, foreign investment laws in France are favorable and flexible enough to attract foreign investors in the state.

On the other hand, foreign investment laws in Canada are more restrictive because the statute does not allow significant investments from foreigners unless the investment will be more beneficial to the economy of Canada. The statute encourages foreign investments that will enhance the economic development and provide employment opportunities to the citizens of Canada. However, the state has greatly benefited from direct investment agreements with the United States since each country has made significant investment in the other country. Canada has restricted direct foreign investment in various sectors of the economy such as transport and energy. Thus, the stringent nature of Canadian foreign direct investment policies acts as a barrier to potential foreign investors since they cannot freely operate in the state due to the limitations that have been imposed by the Canadian government. Therefore, foreign investment regulations in Canada minimize the growth of the foreign investment segment thereby substantially decreasing the development of Canadian economy.

Risk Analysis

The gross domestic product growth rate of the country has been gradually rising over the recent years although the country has experienced an increase in the rate of inflation. The main strengths of the Canadian economy include a wide range of diversified energy resources in the country, which make the energy sector of Canada highly competitive in the world. Moreover, Canada is one of largest countries globally in oil and gas production. Another merit of Canada is the dynamic population growth due to migration, which has significantly boosted the demand of the goods manufactured in Canada. The population growth has also improved the skills of the Canadian workforce (Economic Studies: Country Risk Assessment). Finally, the stability and advancement of the Canadian banking sector is also an asset of the country since it has substantially increased the national economic growth. However, the main weaknesses of the Canadian economy embrace its overdependence on the economy of the United States. Hence, this is indicated by the business relations between the two countries whereby the majority of Canadian direct foreign investments are from the United States. Other flaws of the Canadian economy include insufficient spending by the government on research and development, significant increase of the public debt of the country, the threat of other energy resources to Canada`s energy exports, as well as inadequate infrastructural systems in the economy (Economic Studies: Country Risk Assessment). The inability of Canadian manufacturing organizations to have a competitive advantage over emerging rivals is also a major weakness of the country. .

On the other hand, the French economy has several strengths and weaknesses too. Its merits incorporate high quality infrastructural systems and public services. Moreover, France has a highly skilled and productive labor force due to its dynamic demographics. In addition, French organizations in the major sectors of the economy are very competitive. Thus, the country is recognized for its competitiveness in the agricultural sector and the population of France has a high purchasing power (Economic Studies: Country Risk Assessment). However, weaknesses of France include a crippling public debt due to huge government spending. The national stringent rules have also contributed greatly to the high rate of unemployment in the country. Furthermore, France has an insufficient number of export companies thereby decreasing its market share and competitiveness in export business. Lastly, the state technology and innovation are still low thereby reducing the competitiveness of the manufactured products in the global market.

Investment Decision

I would invest ten million dollars in Canada. The primary reason is the rapid growth of the Canadian economy, which creates more investment opportunities in the country. In addition, despite a higher gross domestic product in France, Canadian GDP per capita and purchasing power parity (PPP) are still high. Moreover, Canada has favorable and flexible labor laws, which decrease the cost of labor in the country. Besides, although Canada has more restrictive foreign investment laws, it has established strong bilateral foreign investment business relations with the United States. Therefore, investing ten million dollars in Canada will be much easier.

Conclusion

To conclude, the analysis of French and Canadian economies indicates that the two countries have major differences in there economic outlook, labor laws, unionization rate, fringe benefits and policies governing the direct investment. For instance, the gross domestic product of France is higher than the one of Canada whereas the latter has a higher gross domestic product per capita. In addition, French labor laws are more stringent than the regulations controlling the Canadian workforce division. Hence, this is indicated by the considerable cost of labor in France compared to other countries. On the other hand, foreign investment laws in Canada are more restrictive than French policies governing direct foreign investment in the state. Therefore, each of the two countries has its own share of strengths and weaknesses in the economy.

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