New Swiss foreign economic policy strategy – new weariness towards regional blocs, including China


On Wednesday last week, the Swiss Federal Council adopted a new foreign economic policy strategy. The last strategy was from 2004, with revisions in 2009 and 2014. The strategy conveys palpable urgency in view of a an increasingly challenging international environment with geopolitical tensions between the US and China, regional block building, growing protectionism as well as complex effects arising from digitalization and novel demands for more sustainability in economic dealings. Against this backdrop, the strategy proposes policy continuity reliant on a well-functioning international rules-based system, liberal framework conditions in the domestic economy and optimum market access for Swiss companies in international markets. For China policy aspects, reference is made to the China strategy adopted in March 2021. Nonetheless, China emerges as a cross-cutting theme.

Assessment

  • The strategy, differing from other Swiss foreign policy documents, emphasizes more the US-China-EU geopolitical triangle instead of a US-China bipolarity. It states for instance regulatory ambitions including extraterritorial effects arising from all three blocks posing challenges to both Switzerland’s foreign economic policy and domestic framework conditions. It further stresses distinct governance, economic and value systems for each.

  • As a result of this, the strategy gives the EU with its “open strategic autonomy” policy a novel prominence in Swiss policymaking, recognizing it as a key external factor impacting Switzerland’s interests. Critically, it describes the EU’s fast-evolving industrial policy, assertive trade policy and ongoing near-shoring assessments with potentially adverse effects for Switzerland’s trade relationship with the EU especially given its formal status as a third-country vis-à-vis the bloc.

  • Despite comments by State-Secretary Marie-Gabrielle Ineichen-Fleisch in the NZZ recently on progress made on the e-commerce plurilateral agreement currently negotiated at the WTO, the topic of global data governance and cross-border data regulation is a top concern. In this, the strategy flags that the Swiss economy has particularly little space to maneuver conflicting data governance rules given its high and direct integration in global value chains.

  • The strategy notes that China is a key trade partner for Switzerland while re-stating fundamental divergence from its political governance and economic system. Moreover, it names further issues related to different roles of China: as a WTO member, China asserts development needs alongside India and South Africa contributing to the reform stalemate, plus as a geopolitical actor with growing regional and global ambitions manifested in the Belt-and-Road Initiative (BRI).

  • On China-specific cooperation: While both the Swiss-Sino BRI MoU and the Strategic Innovative Partnership are seen to facilitate investments, actual projects and investments arising from these collaborations are very few. In any case, the BRI MoU is more about co-financing as well as EPC, services and insurance opportunities for Swiss business in third markets along the BRI. The latter still lacks policy clarity on the Swiss side if Swiss-Sino innovation and S&T cooperation is desired.

  • Further, the new strategy is testament to the heightened domestic awareness for sustainability issues with regards to China, also documented by recent parliamentary interventions such as the one demanding due diligence for Swiss companies doing business in East Turkestan (A. Barrile, 19.4520) or the one to combat forced labor by enlarging due diligence responsibilities of Swiss companies (C. Gredig, 21.427).

Implications

  • The main value of this strategy is an updated issue analysis of the international political environment and trends, as well as the provision of a policymaking framework to guide future foreign economic policymaking along key challenges identified.

  • Switzerland remains committed to open trade also with regards to supply chains. Reshoring is not pursued, but stronger international collaboration shall allow companies to diversify their supply chains for critical goods. Regional value chains and rules and standards are also recognized, and an accession to CPTPP or RCEP is being evaluated on a running basis.

  • In possibly upcoming talks with China on upgrading the bilateral FTA regarding residual industrial tariffs or financial cooperation, sustainability issues would therefore also play a major role.

EAER: Switzerland’s Foreign Economic Policy Strategy