Economists shrugged off the threat of a boycott of French products by some Muslims in the Middle East, saying the effects would be minimal and short-lived.
As French President Emmanuel Macron refused to condemn the publication of cartoons of the Prophet Mohammed, analysts said any boycott would have little effect from a macroeconomic stance, as the proportion of exports heading from France to the Middle East is relatively small and similar protests in the past were short-lived.
"There be some armament exports and some luxury brands where you might see some impact but the percentage of French exports that go to those countries will be very, very small. So if you're thinking, what's the impact on the economy overall, it wouldn't be very big at all, especially now, given everything else going on," Andrew Kenningham, chief Europe economist at Capital Economics, told The National.
“There are so many other variables pushing exports around, that it would be lost in the middle of those things.”
Turkish President Recep Tayyip Erdogan called for a boycott of French goods on Monday following Mr Macron’s stance on freedom of speech following the murder of a French schoolteacher who had shown his class cartoons of the Prophet Mohammed.
French goods have already been pulled from supermarket shelves in some Gulf states, while in Syria people have burned pictures of Mr Macron and French flags have been torched in the Libyan capital of Tripoli.
Agathe Demarais, Global Forecasting Director at the Economist Intelligence Unit, said she expected the boycott to be short-lived based on the events of 2015, when a similar protest was called for following the murder of 12 people at the satirical magazine Charlie Hebdo in Paris over the publication of cartoons of the Prophet Mohammed.
“This is a remake of what happened in 2015 when there were calls for a boycott of French products in parts of the Muslim world. These were very short-lived and I don’t think French companies had any real issues selling their products in the Middle East at the time,” said Ms Demarais.
“Judging by history, if things go the same way as they did in 2015, I don’t think there are any worries for French companies in the Middle East. Sometimes it’s difficult to know if a French company manufactures specific French products and the boycott calls are not necessarily shared by everyone in Muslim countries … certainly not everyone would like to take a stance against France and French products.”
However, Mr Kenningham said some luxury brands may experience a hit if a significant share of their exports are heading into GCC countries.
“Every lost export is lost revenue, so it would still have an effect for companies for whom sales to the Middle East are important," he said. "But it would probably be much, much smaller than the impact that we've had from Covid and the lockdowns.”
Luxury brands are insulated to some extent by the recovery in China, a big consumer of luxury brands, which Mr Kenningham said would be much “more important than what will happen in the Middle East, even if there's a boycott”.
On Monday, the head of France's MEDEF employers' federation said the boycott, which he described as "foolishness," was clearly bad news for companies already hard hit by the coronavirus pandemic.
"But there is no question of giving in to blackmail," Geoffroy Roux de Bezieux told broadcaster RMC. "It is a question of sticking to our republican values. There is a time to put principles above business."
His call came after various versions of the #boycottfrance tag began trending on social media sites, such as Twitter, with supporters urging followers not to buy goods produced in France.
In Saudi Arabia, calls for a boycott of French supermarket chain Carrefour were trending on social media, while luxury brands such as L’Oréal, Garnier and Lancôme were targeted in lists of brands to avoid in social media posts.
None of the companies responded for a request for comment from The National.
The impact of boycotts and sanctions, that look to “gain political benefit from economically strangling” trade with another country, is rarely effective at a macroeconomic level, said Mr Kenningham.
“The sanctions in South Africa are rare example where you've been achieved something, but otherwise, it's much more symbolic and political in terms of the impact it potentially could have. But you might get the owner of some perfume brand in Paris finding that the value of his company has been affected and that this becomes an irritant.”
Fawad Razaqzada, market analyst at ThinkMarkets.com said there is a perception that France’s stance towards Muslims has not been positive and “Macron’s refusal to condemn cartoons of the Prophet Mohammed is not a surprise”.
“With so much uncertainty over the pandemic, it is difficult to say that the boycotts have hit shares of French companies. But boycotting of French goods in the Middle East will only gather pace if the issue is not addressed and this would be a big blow for the nation’s suppliers and retailers, which could hurt their bottom lines and share prices," Mr Razaqzada told The National.
A Muslim boycott of Danish goods in 2006 led to a 15.5 per cent drop in total exports between February and June of that year, according to Danish government statistics.
Exports to Saudi Arabia fell by 40 per cent following the boycott, while those to Iran fell by 47 per cent, national data showed. Exports to Libya, Syria, Sudan and Yemen also suffered big falls.
The cost to Danish businesses was around €134 million ($158.4m), when compared with the same period in 2005, the statistics showed, with food companies, particularly those selling dairy products, among the worst affected.
"There is little doubt that this is a result of the caricatures crisis," Peter Thagesen, head consultant of Denmark's industry federation, Dansk Industri, said at the time. “This is serious for the affected businesses.”
Ms Demarais said she was surprised that Denmark’s export levels were so badly affected.
“I expect Denmark’s exports to be much smaller than France’s exports and this may explain why the drop was so significant,” she said. “Maybe the response at the time was stronger and I expect their exports to be more concentrated on a few products. French exports are much more diversified and much higher so I don’t think it can get to that high a level.”
Ms Demarais said the French government is taking threats “very seriously” and is in touch with a number of companies, particularly in the food sector.
“French exports to the Middle East would be mostly concentrated in defence products, so I don't think that there will be any issues around these, then it would be luxury products and I do not believe there will be any issues with French luxury products. And then there's food which is a category that would be most at risk, especially dairy products. But then I would expect … short-lived disruptions,” she said.
In 2006, the Centre for Economics and Business Research looked at Danish exports to 39 Islamic countries to analyse the possible effects of the boycott on the economy.
In the year to October 2005, exports amounted to 11.8bn Danish kroner ($1.88bn) or 2.4 per cent of Danish exports of goods, Cebr found, equivalent to 0.5 per cent of the country's gross domestic product.
The think-tank said at the time that in the worst scenario, Danish GDP might drop by that amount if Danish exports to those countries disappeared completely for a year.
Ms Demarais said the best strategy for French companies now is to carry on as normal.
“I'm no adviser to companies, but my advice is to stay quiet and carry on. I think that they can expect some support from the French government but I'm not especially worried for them,” she said.