Free trade and independence
Switzerland’s strengths are the result of a century-long-tested trade-off between a relatively conservative value system and a natural propensity to innovate.
While being confronted with virtually the same trends as other advanced societies, Switzerland’s deeply rooted federal governance, at all levels, has become the guarantor of fiscal rigour combined with liberal market regulation.
A strong emphasis on education and training, coupled with largely privately funded pension schemes, makes the country well equipped to face the challenges of demography.
Considering Switzerland’s geo-economic location, the development of state-of-the-art infrastructures and energy supply have been equally crucial ingredients for its successful economic trajectory.
But how does Switzerland’s model allow eight million people to fare among the most competitive economies in light of ongoing integration at European level and a parallel tendency towards block-building at global level?
Three main factors can be mentioned in this respect. First, Switzerland has built its strong global outreach in the trade and direct investment areas on the long-standing tradition of leading trading firms and banks.
Conversely, the country has become home of a large number of multinationals. This process was strongly fostered by a proactive and coherent trade policy based on a commitment to a multilateral rule-based system.
When the World Trade Organization faltered in its delivery, Switzerland became an active mover in the negotiation of free trade agreements with key trading partners.
Second, the emergence of the G20 as a new driver of global governance forced Switzerland to rethink parts of its business model in the area of wealth management, thereby sowing its ability to adapt.
Third, the country was able to count on a highly competent and fiercely independent central bank, guaranteeing stability on the domestic front and a proactive external monetary presence. Its bold initiative to establish a ceiling on the exchange rate with the euro has been a case in point.
Closer to home, Switzerland’s dealings with Europe deserve specific attention. Remaining at arm’s length since the beginnings of European integration, the country opted for softer forms of co-operation by developing both multilateral (European Free Trade Association) and bilateral contractual relations with Brussels.
The deepening of the EU’s integration process, in particular the single market, required a fundamental rethink of the country’s contractual set-up. Following the Swiss people’s refusal to join the European Economic Area, Switzerland engaged in a series of sectorial agreements with the European Union in order to secure orderly market access while progressively adapting its own regulatory regimes to the EU benchmark.
Switzerland shares a number of policy objectives, concerning the EU, with other partners. Among these, the UK stands out both with respect to the underlying policy principles, as well as because of the importance of technological innovation and the role of financial services.
The British Swiss Chamber of Commerce represents 750 companies across both countries and, as part of its bi-lateral work, is focusing precisely on how best to foster such policy convergences for the benefit of both Britain and Switzerland.
Alexis P. Lautenberg is a former Swiss ambassador to the UK and an expert on European affairs.