However, when the aircraft is operated within a foreign country, a pilot license issued by that country may be used
So this is what the FARs say.
So when the French say they recognise the JAR license are they not issuing the pilot with a license to operate in their airspace - in other words what is a license? If DGAC write to me to tell me this piece of paper is a license to operate in our airspace, is that not a license which has been issued by that country. I cant imagine the FAA taking issue. Why would they?