"SMEs should not be deterred by trade barriers."
Despite mounting globalization, companies are increasingly being confronted with trade barriers. Customs duties and regulations hamper trade. Daniel Küng, CEO of Switzerland Global Enterprise, encourages small and medium-sized businesses (SMEs) to venture into exporting regardless.
Mr. Küng, how do you explain the fact that protectionism is currently growing in many countries?
* Daniel Küng: Thanks to globalization, wealth has grown in many countries. Many people who once lived in poverty have moved up to the middle class. That's the top-down perspective. At a deeper level, you can see that not everyone has benefited from globalization, which is reflected by populist political movements. It is up to politicians to ensure that profits from globalization are distributed fairly.
How seriously should people take this new protectionism?
In Switzerland, we are not really affected by the trade dispute between the US and China. Rather, we have to worry about the indirect effects. In Asia, for example, more and more multilateral trade agreements are being concluded. This excludes many countries that are not members of the agreement.
Switzerland is also excluded. How dangerous is that?
Countries with numerous free trade agreements are in a comparatively strong position. Switzerland has a network of 30 bilateral trade agreements with 40 partners outside of the EU – notably including China and Japan. That is a huge advantage. However, this network must be expanded further. It would be important to sign the free trade agreement with India. We are also in talks with Indonesia, Vietnam, Thailand, and Malaysia. Indonesia alone would provide Swiss companies access to a market with 260 million inhabitants. In addition, a free trade agreement with Mercosur – the country grouping of Argentina, Brazil, Paraguay, Uruguay, and Venezuela – is also key, as this is a market of over 250 million inhabitants. The EU would like to conclude a free trade agreement with this organization soon. Switzerland is also in talks. It is very important that we are not left behind.
How might Swiss SMEs react to protectionism?
It is important to note that it's not the tariff trade barriers, like customs duties, that present the greatest hurdles, but the non-tariff barriers, such as disproportionately high administration fees, complicated technical regulations, a minimum ratio of domestic employees, or obligations to transfer technology. From time to time, companies have to comply with a whole host of regulations. Because they aren't as comprehensible as customs duties, they are more restrictive for SMEs. I advise entrepreneurs to be well informed, but undeterred by trade barriers. It's helpful to have checklists that can be worked through systematically.
Enter emerging markets now so you are in a position to benefit in 20 years' time.
Daniel Küng, CEO of Switzerland Global Enterprise
Emerging markets are increasingly gaining in importance. How important are they for Swiss SMEs?
The growing middle class in emerging markets offers a great opportunity. Today, emerging markets have approximately 2.5 billion middle-class consumers. By 2030, this figure will have doubled. Populations are growing strongly, while many people are succeeding in escaping poverty. Asia in particular is setting the tone. In terms of value, two-thirds of consumption today happens in North America and Europe. By 2030, two-thirds of goods will be consumed in Asia and, to some extent, Latin America.
What risks do SMEs have to consider for exporting to emerging markets?
Population growth harbors a major risk. Because when it comes to population growth, not only does the number of consumers increase, but so does the number of workplaces needed – and that leads to more competition. The growing competition will also have an impact on the traditional export markets. In addition, these countries will trade more with one another. Local transportation routes are shorter, more agile, and faster. It will become more difficult for us to enter these markets. That's why we have the following advice for SMEs: Enter these countries now so you are in a position to benefit in 20 years' time.
Does "Swiss Made" still help in times of trade barriers?
Yes. The strength of the Swiss franc has shown that focusing on "Swiss Made" helps a great deal. Companies were able to use this to stand out in the price war. There are numerous studies showing how strongly Swiss products are associated with positive aspects such as quality and sustainability. Switzerland is a strong brand and helps – especially in times of trade barriers. I don't think any other country provides as strong an overall brand as Switzerland.
Another aspect is technologization. How important is it for Swiss exporters?
It changes the economy and the social world. Digital transformation will drive globalization further. Borders will disappear. It can't be stopped – not even by Donald Trump. Trade barriers certainly have a restraining effect. At the same time, digital tools open unknown possibilities. In the past, people had a long way to go to tap into a new market. Today, it's much easier to work with local partners. You can create a website today and sell your products in China tomorrow. Digital tools break down trade barriers.
The network of free trade agreements gives us a good head start. But we still cannot rest on our laurels.
Daniel Küng, CEO of Switzerland Global Enterprise
What support does S-GE offer for tapping into new markets?
We offer information about the markets – in particular with regard to opportunities. For example, Brazil is developing new passports – a great opportunity for Swiss security companies. At the same time, we are pointing out trade barriers. Advice is key. We have experienced country advisors in Zurich, Renens, and Lugano. At our Swiss business hubs and trade points in 27 countries, we provide contacts and help SMEs network.
The Forum for Swiss Foreign Trade and Investment, organized by S-GE, recently took place in Zurich. The slogan was "Growing internationally – between globalization and protectionism." What knowledge do you give Swiss SMEs to take along the way?
Despite the intensified political trend of trying to get globalization under control, it is indispensable. SMEs should be not be deterred, but should check to see how they can overcome trade barriers. As a small country, Switzerland is well positioned globally. Over the last 30 years, we have significantly increased our presence abroad. Today, one in three workplaces with Swiss companies is located abroad. The network of free trade agreements also gives us a good head start. But we still cannot rest on our laurels; we have to be proactive and position ourselves well in areas such as digitalization.