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“The uptick in protectionist measures has me concerned”

Interview with Stefan Brupbacher

Renationalization trends in nearly every country as well as gridlocked domestic policy discussions on the framework agreement with the EU are having a detrimental impact on Switzerland’s export dependent economy. Stefan Brupbacher explains in an interview how Swiss companies from the mechanical engineering, electrical and metal industries are coping with these challenging developments.

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Stefan Brupbacher

Stefan Brupbacher, Director of Swissmem

Swissmem unites the Swiss mechanical and electrical engineering industries (MEM industries). How would you rate their ability to compete, both nationally and internationally?

The Swiss industrial sector exports some 80% of its output abroad, around two thirds of which to the European Union. That translates to exports worth more than 250 million francs every business day. Figures like those attest to the fact that companies face stiff international competition and are generally able to cope with it quite well. Favorable general economic conditions lay the foundation for Swiss companies’ ability to compete on an international market. These include, where possible, barrier-free access to key sales markets, a liberal labor market, outstanding institutions of education and further education, a good infrastructure and an attractive tax environment. Players on the Swiss political stage need to take responsibility for preserving this favorable overall environment and expand it even further. In the process, they will also be strengthening the foundation for the 320,000 jobs that exist in the MEM industry.

The MEM industries depend heavily on exports. The US, and consequently the EU, adopted protectionist tariffs on steel and aluminum imports in 2018. How do these and other protectionist measures impact Swiss companies?

The volume of Switzerland’s steel and aluminum exports to the US is relatively small so these protectionist tariffs are fairly insignificant. The same can’t be said of the country’s situation with the EU, though. Steel exports worth around a billion francs could potentially be affected by these protectionist measures. A revised regime has been in place since February 2019, however, under which the EU allows country-specific quotas that are less detrimental than the previously applicable global quotas. The fact that Swiss imports are no longer competing against imports from other countries will ease the situation somewhat since it improves companies’ ability to plan Switzerland’s steel exports. I still can’t give the all-clear, though. We have to wait and see whether the country-specific quotas are enough. If not, a customs duty of 25% will be levied on any exports that exceed these quotas, which would make Swiss exporters unable to compete on the EU market. Generally speaking, I’m concerned about the uptick in protectionist measures we’re seeing around the globe. That’s not in the interests of a heavily export-dependent economy like Switzerland’s.

To what extent are Swissmem’s members feeling the impact of the renationalization trends currently being observed in large portions of Europe, China and the US?

Customer proximity has always been the name of the game in industry and that’s how the foreign branches of Swiss companies should be viewed. It’s the only way for them to meet local needs. If customers’ sites are shifted to another country, then these companies will also be flexible enough to adapt to those changes.

Just how urgent and vital is a framework agreement between Switzerland and the EU?

The EU is Switzerland’s most important sales market by far, particularly for the MEM industries. Bilateral agreements currently give us nearly barrier-free access to the European Single Market. The draft framework agreement can safeguard and modernize this access. That’s a crucial factor in terms of promoting business investments here and preserving both jobs and Switzerland’s prosperity. And we need this framework agreement now. Progress needs to be made before the summer recess. Any delay could increase the risk of new retaliatory measures being taken by the EU, plus, the European Commission’s leadership will change come autumn. When that happens, the EU will be playing with a new deck. Whether our trumps will still take the trick is anyone’s guess. 

How important is the free movement of persons to Switzerland’s MEM industries?

The free movement of persons forms part of Switzerland’s bilateral agreements with the EU. With respect to Swiss industry, it’s a kind of fallback. When recruiting experts and leaders, companies mainly look within Switzerland. The growing shortage of skilled labor, however, means that their searches aren’t always a success. If they can’t find a specific expert or special profile within the country, this free movement of persons clause means that the company can also recruit a person from Europe’s labor market. That’s why canceling the free movement of persons would be fatal. It wouldn’t merely result in the elimination of all bilateral agreements, it would noticeably exacerbate the shortage of skilled labor.

Swissmem plans to promote the digital transformation of Switzerland as a place to work within the scope of the Industry 2025 initiative. Where do MEM-industry companies stand in terms of digitalization?

Digitalization is a huge opportunity for Swiss industry. Surveys have revealed that the vast majority of companies have addressed the topic of digitalization and already implemented numerous projects. More and more businesses are using digitalization solutions to boost their productivity or add digital services to expand their offerings. Swissmem has a variety of different measures designed to help companies get started, ranging from best-practice guidelines to training sessions to questions about how to finance digitalization projects.

There’s also a political component. Since digitalization is always an open-ended process, it’s important that the state only define a framework for it and take a cautious approach on the regulatory side. It’s also important that digitalization be prevented from being used as an excuse to restrict the liberal labor market. 

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