What is behind one of the world’s most advanced, resilient and innovative free market economies?

Zurich, 27.05.2024 - Opening address by Federal Councillor Guy Parmelin Head of the Federal Department of Economic Affairs, Education and Research (EAER) at the European Roundtable for Industry Zurich, Monday, 27 May 2024

Ladies and gentlemen,
Dear ERT members,

First of all, I would like to thank you for inviting me to say a few words on a topic that means a lot to me: What is behind one of the world's most advanced, resilient and innovative free market economies?

I'm often asked this question, and when I answer it, I feel a bit like a centenarian being asked the key to his longevity. He might tell you that the secret lies in the love of his family, a bit of exercise or even the little glass of port he allows himself each afternoon.

However, what applies to one centenarian will not necessarily apply to others. So, while the Swiss ‘formula' works for Switzerland, I would not presume to say that it is applicable to all countries. So I'm going to tell you what works for us, with our institutions and our philosophy. It's up to you to decide whether this formula can be exported.

There's a lot of talk about the resilience of the Swiss economy. ‘Resilience' is something of a wonder word, a common notion that gives the impression - wrongly - of being simply a state of mind or the fruit of providence.

But it's no coincidence that Switzerland has weathered the recent crises rather well, particularly the COVID crisis.

This can be explained in part by Switzerland's economic profile, and in particular by the role played by the pharmaceutical industry. Since 2010, value added in this sector has grown by an average of around 11% a year, compared with 1% for more economically sensitive sectors. The pharmaceutical industry's share of GDP has gradually risen to over 10%. This may not sound like much, but it is a real factor of stability for the Swiss economy as a whole, particularly in weathering economic storms.

I don't think the future looks too bright right now. Quite the contrary, in fact. The geopolitical situation remains tense and the economic climate uncertain. But I remain confident. Partly because it's in my nature, but also because the Swiss model seems to me to remain well adapted to current challenges. The proof lies in the leading positions that our country continues to hold year after year in the various economic rankings.

There are a number of explanations for these rankings. Firstly, and this is frequently cited, there is our capacity for innovation, the quality of our teaching and research, and also a labour market participation rate that is among the highest in Europe.

Added to this is the reliability of our infrastructure, the stability of our political and institutional framework, and the stability of our legal system. In short: Switzerland is not a country of upheavals, and that's a good thing. And that's particularly reassuring in an age dominated by uncertainty.

In fact, it is perhaps this very uncertainty that adds to the value of our framework conditions. They are appreciated in normal times, but even more so when the economy loses its bearings, when it is in great need of security and predictability.

And in a world where setting an example is a moral duty, it is fortunate that the business community can see that public finances are largely under control. And that is always a welcome sign when it comes to maintaining an attractive tax policy.

Switzerland is now also making a point of aiming for sustainable economic growth, and not just in environmental terms. Since 2010, all the free trade agreements negotiated by our country - of which there are currently 33 with 43 partner countries - contain provisions on sustainable trade and development.

That is the case, for example, with the free trade agreement currently being negotiated between the EFTA and MERCOSUR countries, the agreement between the EFTA countries and Moldova, and the free trade agreement between the EFTA countries and India, which has just been signed.

Our commitment, anchored in our International Cooperation Strategy, is to contribute actively to reducing poverty and promoting sustainable development in developing countries.

In strictly environmental terms, the Swiss economy is European champion in terms of efficient energy use: no other country in Europe generates so much added value from the energy it uses. What's more, with a tariff of about 122 Euro per tonne, Switzerland already has the highest effective price for greenhouse gas emissions. According to the OECD, it also has the highest proportion of greenhouse gas emissions subject to high tariffs, at over 60%.

Many states have embarked on a process of decarbonising their economies; that extends from the United States to Europe. This opens up avenues which, while restrictive, are interesting from an environmental and health point of view. But it also raises legitimate fears about de-industrialisation and its collateral socio-economic effects.

This trend may be less noticeable in Switzerland, but the fears are the same. Switzerland's manufacturing industry, however, is proving to be resilient: at around 19%, its share of our GDP has barely fallen in twenty years. This is largely due to the factors I mentioned earlier: specialisation, innovation, a skilled workforce and a broad international trade network.

Ladies and gentlemen,

The naturalist Charles Darwin summed it up nicely: "It is not the strongest of the species that survives, not the most intelligent that survives. It is the one that is the most adaptable to change."

What applies to nature can also be applied to an economy's resilience: being able to adapt in a constantly changing world. That is precisely why our framework conditions are never static. That is also why, despite the lengthy processes and drawn-out democratic implementation stages, we are working tirelessly to modernise and expand our free trade agreements. We are also striving to implement e-Government and reduce bureaucracy as much as possible - surely the worst enemy of entrepreneurship in a liberal economy like ours.

As you can see, a resilient economy needs fertile ground in which to flourish. I sincerely hope that the public authorities will remain faithful to their responsibilities in this respect. And I hope that entrepreneurs will continue to inject their spirit of initiative and determination to ensure that our economy continues to maintain its dynamism.

Thank you.

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