“Switzerland is under pressure to act”

After negotiations on the framework agreement failed, Switzerland and the European Union have launched a new round of talks. How optimistic are you that an agreement will be reached this time?
Even though I am optimistic, failure cannot be ruled out. Switzerland is under a certain amount of pressure to act. The rest of Europe can operate without Switzerland, even if it is easier for the EU with an integrated Switzerland. Conversely, Switzerland is economically heavily dependent on Europe. It is almost inconceivable for Switzerland to continue to prosper economically without working closely with Europe.

How would you characterise the current economic relationship between Switzerland and the EU?
Switzerland is located at the heart of Europe and is an open economy. Despite the debate about ‘deglobalisation’, Switzerland is becoming increasingly integrated into the global economy – and, therefore, into the European economy as well. Consequently, economic relations are stronger than ever (see chart G 1).

And what is the political relationship like?
The dust has settled politically after the irritation felt by the EU following the breakdown of negotiations three years ago. Brexit has also been finalised and settled. At the time, the EU did not want to make any concessions to Switzerland that would have weakened its own negotiating position towards the United Kingdom. More could now be achievable for Switzerland.

Is Switzerland already feeling the concrete effects of the fact that it has still not signed an agreement with the EU?
Most processes are gradual. That’s why we don't notice them in everyday life. But without adopting a secure, forward-looking, bilateral approach, Switzerland will lose tenths of a percentage point in growth every year. Although that doesn’t sound like much, over the years it results in a significant loss of prosperity. In science, for example, it is becoming more difficult to win international research funding, which makes Switzerland less attractive for leading researchers. This could have a long-term impact on Switzerland’s ability to innovate.

What is the major bone of contention in negotiations with the EU?
The main issue is immigration controls. There is currently strong domestic political opposition to immigration in Switzerland from an alliance on the right and left. Both right-wing populist groupings and the trade unions fear that too much immigration will worsen the situation of Swiss workers and the local population.

The British have also had concerns about excessive immigration. After Brexit they had a shortage of agricultural workers, lorry drivers and abattoir staff.
Without immigration Switzerland would not have been able to achieve such strong economic growth over the last 20 years. Demographic change will tend to further increase the demand for foreign skilled workers in Switzerland. We can learn here from the mistakes made by the British.

If no agreement with the EU is reached, would it also be an option for Switzerland to recruit more skilled workers from countries with younger populations, such as India?
In purely economic terms, yes. However, we must not forget that migration often creates social tensions. It is easier to recruit skilled workers who share the same language and culture because integration is easier.

South Korea and Japan had very little immigration for a long time. Now, out of necessity, social and political attitudes are changing there too and these countries are becoming more open to immigration. Do you believe that demographic pressures will also change attitudes in Switzerland over the long term?
Incentives change behaviour, but such processes take time. In retrospect it would have been economically better for Japan and South Korea to open up to foreign workers earlier. In contrast to Japan and South Korea, Switzerland has been a country of immigration for decades.  

Do you think that joining the EU is a realistic option for Switzerland?
Never say never but, as things stand at present, I can’t imagine that joining the EU will be a politically viable option in the foreseeable future.

Almost all of the world’s leading tech companies such as Microsoft, Apple, Google, Nvidia, Tencent, Alibaba, Samsung and TSMC come from either the United States or Asia. Critics warn that Europe is increasingly becoming a backward-looking laggard owing to its lack of dynamism, while the key innovations are taking place in other parts of the world. Is this criticism justified?
It’s still too early to write Europe off entirely. This region benefits hugely from its history and cultural diversity. Prosperity in Europe is still very high and will remain so for some time to come. Europe still enjoys a comparative advantage in many areas. Many innovations come from Europe. You don’t have to go that far back in history to see this. Coronavirus vaccination, for example, which is based on mRNA technology, was developed by a German company. The currently much-discussed vaccine comes from a Danish company. Europe also has two heavyweights in the fields of digital technology and semiconductors: SAP from Germany and ASML from the Netherlands. In addition, there are many successful SMEs and start-ups – including in the area of artificial intelligence – such as Mistral from France and Aleph Alpha from Germany. Europe can be self-confident and does not have to fear competition from rival economic areas. If it manages to combine its traditional strengths in automotive, mechanical and electrical engineering and its innovation in the pharmaceutical and chemical sectors with new digital technologies and business models, Europe can make headway in international competition and continue to build on its old strengths.