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“We need non-discriminatory market access”

Interview with Heinz Karrer

As a country dependent on exports and with protectionism on the rise worldwide, Switzerland is under increasing pressure to safeguard its access to key markets. The country also needs to systematically implement its passed Corporate Tax Reform in order to preserve its competitiveness. Heinz Karrer, President of economiesuisse, talks in an interview about these and other topics including diversity, global human rights protection, the environment and digitalization.

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Heinz Karrer, president of economiesuisse

Heinz Karrer, president of economiesuisse

The economic growth outlook has become a bit gloomier, both internationally and in Switzerland. Do you feel that Swiss enterprises are well-equipped for the future? What else do they need to do?

The weaker economy has less to do with our companies’ preparedness than with the global economic situation. If the largest economies try to one-up each other by enacting protectionist measures like punitive tariffs, this would not bode well for export-dependent Switzerland. That makes it even more important for us to focus on our location’s attractiveness and on safeguarding our access to key markets – the European single market, in particular.

Which sectors are particularly competitive? And why?

Switzerland is currently one of the most globalized economies in the world. In other words, most sectors in Switzerland’s economy are extremely competitive on the international market. To help them stay that way going forward, businesses need non-discriminatory access to their key markets, highly-trained specialists and good conditions for research and innovation.

Which of its regulations will Switzerland need to make more flexible or improve to boost its attractiveness as a location?

Implementing the Corporate Tax Reform approved by the cantonal electorate is certainly the highest priority at the moment. Years of uncertainty regarding the precise details of the country’s future tax system need to be put to rest, once and for all. Then, it's a matter of getting the location ready to accommodate ongoing digitalization – by rolling out a nationwide 5G network, for example. Complete energy market liberalization would be an important step in this direction too. And, finally, lifting all industrial tariffs would not only have a positive impact on our foreign trade, but also benefit consumers quite directly.

Part of the ongoing efforts to revise company law also concerns the question of how to deal with issues related to diversity and equality at the workplace. What do you think of the discussion?

Diversity is another important criterion when nominating board members – along with personal skills like expertise and industry- or company-specific know-how, independence, availability and identification with shareholders’ and the company’s long-term interests. Diversity was emphasized in the Swiss Code of Best Practice in Corporate Governance 2014, both in general and also specifically with respect to the gender mix. Unfortunately, the broad focus of diversity – which is not exclusively centered around gender issues – has not been sufficiently reflected in the political debate surrounding company law revision. Political considerations have prompted Parliament to vote in favor of gender quotas, both for company boards and for executive committees. This decision is final and the guidelines will be entered into law – subject to a final vote on the revision of company law. I still think it’s important not to lose sight of other diversity-related criteria like age, ethnicity, and many more.

Where is the Responsible Business Initiative taking us? Will this be beneficial or will it end up tarnishing Switzerland’s standing as a business location?

Although the Responsible Business Initiative’s (RBI) goal might be noble, the means proposed to reaching it are unsuitable. The Federal Council also clearly expressed this opinion in its dispatch to the RBI: While it acknowledges the Initiative’s main concerns, it does not approve of the instruments proposed. The Initiative aims to implement far-reaching due diligence obligations for all customers and suppliers along with extensive liability provisions for third parties and a reversal of the burden of proof. This is the only initiative of its kind in the world, and for good reason. The focus on liability would paralyze any modern company with a sustainability strategy focused on continuous improvement. Due diligence enforcement based solely on the concept of liability is not “smart” in the sense of the “smart mix” proposed by John Ruggie. These liability provisions would open up new potential for civil lawsuits – particularly since they reverse the burden of proof with respect to the question of which Swiss courts have jurisdiction – and would also drive a wedge through our legal system. They would leave our local companies open to blackmail and could usher in a litigious culture in Switzerland that the country has so far been able to avoid.

Recent legislative projects in European countries, in particular, like the law against child labor in the Netherlands, which is expected to come into force on 1 January 2020, do not include any liability-related provisions for enforcing due diligence requirements. The latter relies on transparency and requires that companies submit one-time disclosure statements to an authority describing which suitable measures have been taken to prevent child labor from being used in the production of their goods or services. This law exclusively addresses child labor, not every possible issue relating to human rights and environmental protection worldwide. Nor does it contain any liability-related provisions or reversal of the burden of proof with respect to due diligence.

This also clearly shows that adoption of the RBI would not only harm Switzerland itself, but its approval would also run counter to international trends. After all, only a globally coordinated approach will make any improvements possible with respect to these global challenges. The RBI with its radical demands deserves an unambiguous “No” at the ballot box. At the same time, Switzerland needs to continue pursuing its path of international cooperation, global human rights protection and environmental protection.

economiesuisse has expressed skepticism regarding the political achievements of the legislative period just ending. What are your hopes for the 2019–23 federal legislative period in Bern?

Besides the regulatory improvements I already mentioned, another key issue is finding sustainable solutions for safeguarding the pension system. We can’t just keep putting this issue on the back burner, because the problem is only getting worse. The same thing applies to our relations with the EU. This is an issue where we expect the Federal Council to finally take a clear stand and get the political decision-making process for the framework agreement rolling. But we don’t just need access to the European market, rather worldwide. This will involve negotiating additional free trade agreements and to do that, we need greater momentum in Switzerland’s agricultural policy. Overall, I hope that the new Parliament will be more successful in finding solutions with majority appeal that can bridge ideological divides on all aspects of policy and truly help advance our country.

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