Does "Switzerland first" make sense economically?
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Does "Switzerland first" make sense economically?

International integration is the bedrock of Switzerland's prosperity. Rather than engaging in a strategy of isolation and autonomy, the need to improve our security of supply is best filled by economic openness.

Images of empty store shelves dominated media reports during the first wave of the COVID-19 pandemic. A flurry of panic buying broke out among the population, fueled by fears of shortages in food and household goods. Consumers literally filled their carts with spaghetti and toilet paper. Even single-person households suddenly needed the jumbo package of 30 rolls. Retailers were barely able to keep shelves stocked at times. Despite the fear of shortages, there was never any real risk that our daily needs could not be met. On a related note, labor law reforms aimed at increasing staffing flexibility could help to ensure that retail shops are able to restock shelves at night in the case of future, similar situations. This would be one step towards staving off the psychological phenomenon of panic buying, which is driven by the sight of half-empty shelves.

When it comes to the international division of labor, Switzerland has the highest fair trading profits worldwide.

Peter Grünenfelder

That said, everyone is suddenly talking about supply security, followed by politicians' calls for re-nationalization and driven by concerns of a lack of access to essential items in an emergency. The Swiss Social Democrats hypothesize about "reindustrializing" the domestic economy by onshoring production chains to Switzerland. The Greens consider this perceived supply shortage to be an opportunity to completely revamp the free market economy in the direction of a national Green New Deal, to be funded, of course, by billions in subsidies from the general public.

Even the Christian Democratic People's Party is in favor of what it calls a "degree of self-sufficiency" when it comes to healthcare personnel. The Swiss People's Party advocates jettisoning the country's agreement with the EU on the free movement of people in favor of preserving bureaucratic and time-consuming border controls. Easily forgotten against a backdrop of such vocal demands is the fact that EU/EFTA citizens currently hold 19 percent of all jobs in the healthcare field, and 4 percent of those workers are cross-border commuters.

A jubilant anti-globalization movement

In the era of the coronavirus, a rallying cry of "America first" for economic re-nationalization policies is no longer reserved for the US alone. In many countries and around the globe, "our country first" is the sentiment behind a push against global cooperation, bans on exporting essential wares and closing the borders to the free movement of people. In the spring of 2020, symbolic policies – though unproductive in economic terms – gave people the feeling that, by retreating to their own domestic markets and raising barriers against the foreign countries where everything was supposedly much worse, they held the reins in their own hands. Apologists for the anti-globalization movement already rejoiced and redoubled their claims that international value chains had intensified the risk of losing access to the production of much-needed goods.

Would "Switzerland first" work? Switzerland is one of the most globalized countries in the world today. When it comes to the international division of labor, Switzerland has the highest fair trading profits worldwide. Switzerland's export economy is enormous, at 96 percent of the gross domestic product. Since 2002, the export ratio has grown from 8 percent to 52 percent of GDP. All of this also generates jobs. Around 1.9 million employees in Switzerland benefit from access to foreign markets. Clearly, Switzerland's prosperity is rooted in international integration.

It would be impossible to profitably produce and sell all of the goods and services needed to meet Switzerland's domestic demand simply because our domestic market is so small. The hallmark of the Swiss economy is a specialization in the sectors, goods and services – or parts of value chains – in which it is competitive on an international level.

Diversification of sources

Appeals to increase the security of supply can be traced back to the political fallacy of greater self-sufficiency being the sole means to this end. But supply security is not the same as self-sufficiency. Take food for example. When it comes to ensuring that food supplies are secure, the answer is more complex than simply producing as much food domestically as possible at all times. A much more effective approach is to diversify food sources (for instance, by signing as many free trade agreements as possible) while conserving the natural infrastructure and biodiversity for the food industry so as to protect future productivity.

For many years, importing food has been crucial to Switzerland, even during the Second World War and the legendary "cultivation crusade." For numerous other essential goods, such as power or medical products, the strategy should be economic openness rather than isolation and self-sufficiency.

Expanding free trade agreements would assist businesses in their efforts to diversify their sources for upstream products and components. Besides helping each individual company, such diversification on the procurement end as well as on the sales end also bolsters the resiliency of the economy as a whole.

Subsequently, the openness of the Swiss economy plays a pivotal role in successfully managing a major crisis like the current pandemic. If national policies were to compel Swiss businesses to reshore their production from lower cost regions back to the more costly Swiss domestic market, it is unlikely to bring about any new jobs in the country due to the high input costs. On the contrary, the companies would put their efforts towards accelerating the pace of automation.

Such a politically driven re-nationalization could even force the fundamental relocation of production sites to foreign countries. In other words, the re-nationalization of Switzerland's economy is an economic dead-end street.