The defending champion's hopes of retaining its title were shattered by a 40-24 in Cardiff last month, but it might have been a very different story if French official Pascal Gauzere had not awarded Wales two controversial first-half tries.
Gauzere admitted he should not have allowed scores from Josh Adams and Liam Williams to stand at Principality Stadium, but that was no consolation to England.
France travels to Twickenham on Sunday (AEDT) with two wins out of two, but former England wing Balshaw said it should beware the wounded animal.
The Rugby World Cup winner said: "England's discipline really let them down against Wales, but they did a lot of good things in that match.
"If the referee had not made those two calamitous errors then it is a totally different game, as the pressure would be on Wales to chase the game. That said, it was a big worry to see the way England capitulated from 24-24.
"When England had ball in hand I thought we looked very good and dangerous every time, but it is frustrating when you see them kick so often and obviously discipline has been a problem.
"Clive Woodward always used to tell us we must keep the penalty count under 10, otherwise the likelihood of winning goes down considerably.
"You want to see running rugby, because we looked very dangerous when we had ball in hand. I honestly don't think we are far away. I think France know England will be seething and desperate to right some wrongs at Twickenham."
Balshaw says England fans should remember it is not long since Owen Farrell was lifting two trophies, and underlined that ensuring Eddie Jones's side peaks at the 2023 Rugby World Cup in France is paramount.
"People are obviously frustrated with results, but it really isn't doom and gloom. Scotland played the match of their lives in a storming performance and things might have gone differently against Wales. If they beat France then it is a very different story," the ex-Bath and Gloucester flyer said.
"If you look at the past 18 months, we have been in a [Rugby] World Cup final, won the Six Nations and the Autumn Nations Cup. You will get bumps in the road, but the main goal is the next [Rugby] World Cup and I honestly believe we are in good shape."