After wooing DC, Hollande faces tougher task: winning over Silicon Valley

The first two days of French President François Hollande's state visit with US President Barack Obama have been replete with mutual praise, references to historic alliances, and discussion of shared goals in the Middle East.

Yet today, as President Hollande travels westward from Washington to the heart of the American technological industry, he faces a much harder task: convincing his hosts that France and the US have much in common.

It is the first visit of a French president to the Bay Area in 30 years. Hollande is scheduled to have lunch today with the heads of Internet giants, including Facebook and Google, and will later inaugurate a US-French tech hub.

But the overall message of Hollande, who once famously said he didn’t “like the rich,” is that France is not only business-friendly, but that it too could boast its own Silicon Valley.

With centuries of state-centered thinking and practice, France is not exactly the place one imagines when thinking “start-up,” says Patrick Cheenne, the director of economic development for the Paris-Saclay Development Authority. “There is little ecosystem in place that allows people to take risks for creating new companies.”

But the Paris-Saclay project, which is turning a thinly populated plateau outside Paris into one of Europe’s biggest education and innovation clusters, is an example of change under way.

Mr. Cheenne, who has worked both in Cambridge, Mass., and Silicon Valley, says that Paris-Saclay project aims to foster a synergy between universities, research centers, and future start-ups. He says Hollande’s visit to Silicon Valley today – and the government’s recent unveiling of new business-friendly policies – could help steer the country, and its entrepreneurs, in a new direction.

“I think that the general message is that people are really becoming aware of the fact that something has to change,” he says. “The fact that the state is acknowledging that competition is lagging compared to other countries … is making people realize they should do something differently, without waiting for the state to solve the problem."

The differences in American-style capitalism and France’s business culture were put into stark relief last year when the CEO of an American tire company wrote a letter that took on the French working mentality. "The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three and work for three," the CEO wrote. "I told this to the French union workers to their faces. They told me that's the French way!"

The French were enraged by the undiplomatic criticism. But the debate had minimal impact, with Hollande doing little to convince other investors that France was worth it. Through his term, unemployment has been stuck at around 11 percent and the economy has barely grown. The country is known too for its rigid labor system that makes it hard to fire inefficient employees.

In the business world, Hollande has been best known for his highly unpopular 75 percent tax on salaries exceeding 1 million euros. As taxes overall have risen, protest groups have emerged in frustration, from the "red caps" in Brittany to "the pigeons," representing start-ups, some of whom have relocated to Silicon Valley.

But in January he made a U-turn, promising to cut payroll taxes, specifically in family welfare contributions, by $40 billion and reduce government spending by $62 billion by the end of his term.

Laurence Nardon, head of the United States Program at the French Institute of International Relations (IFRI), says Hollande’s policy turn in January aligns the American and French leaders closer together, as they both emphasize growth. “But what matters is [whether] this change by Hollande is possibly going to make France more attractive to US companies,” she says.

That is still the big unknown. As Hollande tries to woo investors today in California, he also has to tackle domestic demands, including mounting anger that foreign tech giants are trying to get out of paying France’s high taxes, as well as ongoing cultural conflicts over Internet privacy issues for European users of American interfaces.

Heading into the trip, Hollande has chosen to focus on what he hopes to gain in terms of innovation and competition. 

“This economic recovery in the United States is an opportunity for Europe but it also is an example to be followed,” he said at a press conference yesterday, according to Bloomberg. “That is precisely the meaning of my visit to the Silicon Valley.”