The United States and Switzerland: Strengthening Our Economic Ties

31.01.2019

Ambassador Martin Dahinden, Ambassador of Switzerland to the United States of America 

On the Occasion of the U.S. Chamber of Commerce Breakfast Roundtable at the U.S. Chamber of Commerce,  Washington, D.C.

Speaker: Ambassador Martin Dahinden

I would like to thank the U.S. Chamber of Commerce for inviting me to the Breakfast Roundtable. 

Last week, for the third consecutive year, Switzerland was ranked the no. 1 country in the world by U.S. News and World Report.[1] The rankings cover a range of categories, from economic influence and military might to education and quality of life. For a long time, Switzerland has ranked among the top countries in categories such as Citizenship and Entrepreneurship. Respondents to the survey consider Switzerland the top country in terms of economic stability, access to capital, as well as a strong legal framework and prestige according to U.S. News and World Report. 

I will now give you succinct information on Switzerland and its economy and on Swiss-American economic relations in particular. I am deeply convinced that there is still much untapped potential to strengthen and expand the economic relations between our two countries. And one of the most promising avenues is a bilateral free trade agreement.

 

The Swiss Economy 

Switzerland is a federal republic bordered by Italy to the south, France to the west, Germany to the north, and Austria and Liechtenstein to the east. The country is landlocked and not a member of the European Union. It has a population of approximately 8.5 million people concentrated mostly on the plateau, where the largest cities are located, including the two centers Zurich and Geneva. The federal institutions are in Bern. 

Switzerland has the second highest gross domestic product (GDP) per capita in the world. At the end of 2017, Swiss GDP per capita amounted to CHF 79,104 (approx. USD 80,000). 

About 74% of Swiss GDP is generated by the service sector and 25% by industry. The contribution by the agricultural sector is less than 1%. 

The European Union is Switzerland's main trading partner. Around 71% of Swiss imports are from the EU, while 53% of Swiss exports are destined for EU countries. 

Most Swiss firms (over 99%) are small and medium-sized enterprises (SMEs). They are defined as companies with fewer than 250 employees. But there are companies with a global footprint like Nestlé, ABB, Novartis, Roche, UBS, and Credit Suisse. 

The public debt-to-GDP ratio in Switzerland has fallen considerably in recent years, from 58% in 2000 to 42% in 2016. 

Switzerland has the lowest rate of value-added tax in Europe;  7.7% is levied on most goods and services, 3.7% on accommodation services, and 2.5% on basic necessities and other everyday items. 

Each year Switzerland spends close to 3% of its GDP, more than CHF 22 billion (around EUR 19.4 billion or USD 22 billion), on research and development . Over three-quarters of this funding comes from the private sector.

 

Strong Economic Relations 

The economic relations between Switzerland and the United States have been strong for decades. The two countries are key trading partners, with trade in goods and services exceeding USD 120 billion. The United States is Switzerland’s second most important export market worldwide (after Germany). Over the past twenty years, Swiss exports to the United States have more than tripled. 

Both countries are also significant mutual investors. The United States is both the most important destination for Swiss direct investment abroad and the most important country of origin of foreign direct investment in Switzerland. At less than 1% of the size of the U.S., Switzerland is the 7th largest foreign direct investor in the United States with USD 309 billion. 

Seven hundred fifty thousand American jobs are directly supported by Swiss foreign direct investment and trade with Switzerland. That number is three times higher when indirect job creation is taken into account. There are more than 500 Swiss companies with some 3,500 business locations present across all 50 states. And they pay the highest average salaries among all foreign affiliates. 

These impressive facts and figures are the fruits of smart private decision-making done in that entrepreneurial spirit typical of both the United States and Switzerland. The role of the government is to ensure favorable conditions for the private sector to succeed. 

The Swiss network of representations in the United States plays an important role in supporting these efforts. We inform political decision makers in Switzerland about important developments in the United States, we interact with the U.S. government, and we help to identify opportunities and risks, while at the same time trying to increase the knowledge about our country, particularly about economic opportunities in Switzerland, among our U.S. partners. 

 

Why is a U.S.-Swiss free trade agreement attractive to the United States? 

I am convinced that a U.S.-Swiss free trade agreement (FTA) has a significant potential to foster our economic ties. Let me tell you why. 

The U.S. and Switzerland share a commitment to democracy and the rule of law, free market capitalism, free enterprise, and entrepreneurship. The existing economic relations between both countries are very strong. Those shared values and interests as well as close bilateral relations create an excellent basis for a free trade agreement (FTA) between two like-minded economic partners. 

An FTA would promote Swiss investment, job creation, and workforce development in the U.S.:

In addition to the hundreds of thousands of highly qualified and well-paid jobs created by Swiss investment, Swiss companies invest heavily in American workforce development, thereby contributing to the closure of the current skills gap. An FTA with Switzerland would enhance existing cooperation between the U.S. and Switzerland on workforce development. 

A wide range of Swiss-based multinationals and small and medium-sized enterprises invest in all sectors of the U.S. economy. 

An FTA would strengthen research & development, innovation, and competitiveness:

Twenty percent of all foreign R&D investment in the U.S. originates from Switzerland, making Switzerland the no. 1 foreign investor in R&D. An FTA would increase Swiss investments in American R&D. 

The U.S. and Switzerland top the rankings of the most innovative and competitive economies in the world.  Deepening bilateral trade ties will strengthen innovation and global competitiveness for both countries. 

An FTA would enhance mutually beneficial relations with a fair, important and like-minded economic partner: 

Switzerland is a G20 country in terms of GDP. It is among the 15 top trading partners of the U.S., with a bilateral trade volume of USD120 billion annually. 

Both the U.S. and Switzerland are among the most advanced free-market economies. Switzerland has again been ranked as the freest economy in Europe and the 4th freest worldwide according to the latest Index of Economic Freedom, which was just published. 

An FTA could eliminate all tariffs on industrial goods, lower non-tariff barriers, and increase regulatory efficiency. 

An FTA would open up U.S. opportunities in a high-value and high-quality market: 

Both the U.S. and Switzerland are on the top in terms of income per capita and quality of life. 

Switzerland has a highly educated workforce with a high purchasing power. Consumers in both markets value high labor and environmental standards. 

The Swiss market is attractive to the U.S. because its consumers are willing to pay for high value and top quality products.

 

Where are we now?

Exploratory talks between the USTR and the Swiss State Secretariat for Economic Affairs are ongoing. They are not  formal negotiations yet, but an inquiry to determine whether an FTA is achievable. Neither country is interested in entering into negotiations with an uncertain outcome. We understand that the USTR is under significant pressure, with the ongoing talks with China, the European Union, Japan, and with Brexit ahead. But I am convinced that a U.S.-Swiss FTA would benefit both economies and that an FTA could be concluded quickly and easily. 

Switzerland is a pragmatic partner: a negotiation process with Switzerland could be pursued swiftly and with few resources. 

Switzerland is an experienced partner: it has one of the biggest networks of FTAs in the world. 

Switzerland is not a member of the European Union and is therefore independent in its trade negotiations. 

The U.S. could demonstrate that it is serious about “free, fair and reciprocal trade” by rapidly concluding an FTA with one of the freest, most competitive, and innovative economies in the world.

 

[1] Best Countries Report, a rankings and analysis project by U.S. News & World Report, BAV Group and the Wharton School of the University of Pennsylvania: https://www.usnews.com/news/best-countries/overall-rankings 

Check against delivery