Clouds on the trade horizon: framework agreement and Brexit

Switzerland is one of the countries that benefit most from globalization and the European single market. And trade, as Switzerland's largest employer and trainer, is right in the middle of this development with 680,000 employees.

Keynote speaker Prof. Dr. Dr. Hans-Werner Sinn, Germany's best-known economist and one of the defining figures in economic and social policy debates, explained today's global economic situation and outlined possible future developments.

EU agricultural deal with Trump and Brexit

For example, the US has long since lost economic dominance to China - thanks to the fact that China is the largest creditor of US government bonds. The sale of these securities is expected to have a strong impact on the American economy. As soon as the trade agreement between the USA and China is concluded, Trump will turn his attention more to the EU. This recommends Prof. Sinn, who is counted among the world's best economists, to secure free trade on industrial tariffs and to grant the USA facilitations in agricultural trade. This would lower prices for agricultural products in the EU, which would be good for consumers; moreover, this deal would protect the auto industry.

If the escalating trade dispute with the U.S. were prevented, the EU would be better able to counteract the possible turbulence surrounding the Brexit. After all, as Prof. Sinn pointed out on Trade Day, the UK's exit will greatly change the EU - after all, the trade volume of the fourth-largest EU member is equivalent to that of 18 of the 28 EU members. With Brexit, the current balance of power between the north and south of Europe would shift significantly in favor of the poorer south.

Country club for emissions trading

Sinn estimates that economic problems can be expected between fall 2019 and the second half of 2020, which could also affect Switzerland. After all, the EU is Switzerland's most important trading partner. Prof. Sinn warned: "Protectionist forces arise in difficult times. That's when you should become politically active and put barriers in the way of protectionism." The importance of trade should not be underestimated in any way, he said, because "global economic prosperity comes from trade and the division of labor in trade. Free trade is the basic prerequisite for general prosperity." Trade makes it possible to buy goods where the energy is available, for example, to import agricultural products from sunny countries instead of growing them in greenhouses with environmentally harmful fertilizers and a lot of energy at high cost. Prof. Sinn has been working intensively on the subject of energy for many years. He sees the solution to the climate crisis in a follow-up project to the Paris Agreement, which also provides for sanctions in the event of violations. In terms of implementation, global emissions trading under the supervision of the UN would be expedient. Country solutions, on the other hand, would have too little effect, according to Prof. Sinn. Instead, the leading economist supports the proposal of the American Nobel Prize winner William Nordhaus: In a preliminary stage or transitional phase to global emissions trading, a club of countries could be created that would engage in multilateral emissions trading. If a country that did not belong to this club wanted to export to the club countries, it would have to pay drastic tariffs.

Framework agreement: Set the course now for Switzerland's prosperity

In the subsequent panel discussion, moderated by Marc Lehmann, head of the daily talk show at SRF, the framework agreement was one of the key topics. Elisabeth Schneider-Schneiter, President of the Foreign Policy Committee APK and National Councilor CVP, appealed to the companies. They should make it clear to politicians and the population how good framework conditions for imports and exports ensure the continued existence and success of trade. She would like to see unity from the Federal Council: "The Federal Council must decide whether it wants to go down the bilateral path. In recent years, it has been torn on this issue. Let's get this EU dossier wrapped up now - that way we'll create legal certainty for Swiss companies." Christa Markwalder, APK member and National Councilor FDP, stressed that the majority of the Swiss population is already very sensitive to the need for good relations between Switzerland and the EU: "Switzerland has a foreign trade quota of 93%. Every day, goods worth CHF 1 billion cross the border. Market access and openness are the most urgent issues so that we can maintain and develop our prosperity. On the other hand, we have to do our homework in Switzerland: Reduce bureaucracy, curb regulatory frenzy and use digitalization intelligently." Both National Councilors wanted the Federal Council to take a similarly clear stance as it did with the Schengen Agreement. There, the Federal Council stood before the people and clearly signaled that this was the right solution for Switzerland.

Andreas Aebi, President of the APK and SVP National Councillor as well as farmer and travel entrepreneur, also backed free trade and, for example, a new free trade agreement with the USA. For him, however, the framework agreement with the EU affects Switzerland's sovereignty, which is why he and his party reject it.

Courage for the next step

Marco Düerkop, trade counselor from the European Commission's delegation in Switzerland, said on the sidelines of the event that from the EU's perspective, the framework agreement is the next step in making the bilateral agreements future-proof. "This is the wish we have expressed for several years. Brexit reinforces this concern. After all, we are not only linked to Switzerland by common values, but also by a very special partnership. Switzerland is in the middle of Europe and, on the one hand, does not want to be a member of the EU, but on the other hand wants to participate in this large single market. There is no other country with which we are linked by contractual framework conditions like Switzerland," emphasized the economic attaché. "Framework conditions like Switzerland have so no other country, Turkey not and Ukraine not. Nor do Norway and Liechtenstein, both of which are integrated through the EEA." Marco Düerkop appealed to Switzerland's courage to take the next step in its decades-long successful relations with the EU.

The president of Handel Schweiz, Jean-Marc Probst, explains in his speech the position of Handel Schweiz on the framework agreement. As is well known, the umbrella organization of trade demands leadership from the Federal Council and an immediate signing of the framework agreement. Jean-Marc Probst also stressed that transparency is no substitute for trust. Rather, in a time of increasing supposed transparency, we all need to learn to trust again. Kaspar Engeli, Director of Handel Schweiz, announced that Handel Schweiz would not only be involved in the discussion on the Framework Agreement, but also in the Fair Prices and Termination Initiatives. The aim is to find solutions that move Switzerland forward instead of blocking it.

Source and information: Trade Switzerland