Switzerland and neighbouring regions an industrial powerhouse
Switzerland and its immediate neighbour regions form a highly potent, cross-border production and research network at the heart of Europe. The market these regions provide for the Swiss mechanical and electrical engineering industries (MEM industries) is as important as the United States and China put together. This is the conclusion reached by a new study drawn up for Swissmem by Basel-based economic research institute BAK Economics. What’s more, the study found very close ties between businesses and an exceptional number of research and development partnerships. Switzerland’s bilateral agreements with Europe contribute significantly to helping this network function. Both Switzerland and its neighbouring regions have a vital interest in seeing that the bilateral agreements are preserved and further developed. For this to happen, an institutional framework agreement is a must. Swissmem therefore welcomes the Federal Council’s positive response to the framework agreement. The three disputed points must be clarified with the EU quickly. Swissmem also proposes that Switzerland and its immediate neighbour regions increasingly act in concert on areas of common interest and also deepen the existing working relationships.
With an eye to this year’s Swissmem Industry Day, economic research institute BAK Economics has made a study of the economic significance of Switzerland’s neighbour regions for the Swiss mechanical and electrical engineering industries (MEM industries). The study focused on Baden-Württemberg, Bavaria, Vorarlberg, North and South Tyrol, Lombardy, Piedmont and the neighbouring French departments. The results show that the level of networking of the MEM industries with Switzerland’s neighbour regions is unusually high and, in the context of the broader economy, particularly strong. Collectively, Switzerland and its neighbour regions form a highly potent, cross-border production and research network at the heart of Europe. This network is of major economic significance to the regions on both sides of the border, generating value, jobs and wealth.
As important as China and the United States put together
In 2018, goods exports by the Swiss MEM industries to these neighbour regions reached a value of CHF 13.4 billion. That’s almost as much as the exports to the two biggest economies in the world, the United States and China, put together (CHF 13.7 billion). In the Swiss MEM industries, 45,000 employees are directly involved in producing this export volume.
Our neighbour regions are also a key procurement market for the MEM industries. A quarter (26%) of Swiss MEM companies’ total visible imports (CHF 8.7 billion) originate from these regions. Moreover, one in every ten or so employees in Swiss MEM businesses is a cross-border commuter from these regions. Without these employees, the skills shortage in Switzerland would be even more pronounced than it is already. What’s more, reciprocal secondments of specialist personnel are very common.
Widespread partnerships in research and development
However, the linkages with businesses in the “neighbourhood” are even closer than already implied by the movement of goods and people. One in every two Swiss MEM companies with its own business premises abroad has such premises in the neighbour regions. In many cases both these operations and third-party businesses are closely integrated into the Swiss MEM companies’ value chains. The working relationship also extends to development and innovation activities. More than half of all Swiss MEM companies running cross-border research and development partnerships have such a partnership with a company from the neighbour regions. There are also close links within the context of the EU’s “Horizon 2020” research programme. In around 60% of Swiss MEM projects, at least one partner institution from the neighbouring regions is involved.
Need for a framework agreement with the EU evident
Switzerland’s bilateral agreements with Europe contribute significantly to the viability of this cross-border production and research network. It is thus not surprising that 88% of Swissmem member companies designate the Bilateral Agreements I package as important to indispensable for their particular business. This very high regard for the bilateral agreements is not just a snapshot. A similar survey in 2015, set against a weaker economic backdrop, resulted in a similarly high approval rating. The value placed on the bilateral agreements has trended even higher in the last four years. This is particularly true in the case of collaborative research.
“These study results encourage me to continue fighting vehemently for the preservation and further development of the bilateral approach. To achieve this, we urgently need a framework agreement,” says Swissmem President Hans Hess. This would bring legal certainty for Swiss MEM businesses, Hess feels. “I am therefore delighted that the Federal Council is in favour of the present framework agreement. But the planned clarifications have to be done quickly.” Without a framework agreement, the risk would be that in future Swiss businesses would invest first and foremost in the neighbouring regions and no longer in Switzerland.
Deepening collaboration with the neighbouring regions
Another conclusion which can be drawn from the BAK Economics study is that Switzerland is just as economically significant to its immediate neighbour regions as they are to us. Therefore, they likewise have a vital interest in seeing the close linkages and contractual agreements preserved and further developed. If the framework agreement founders for the time being, new paths for collaboration with the neighbour regions will have to be found. Especially in the research and development field, it should be possible to do a great deal at the company, university and research institution levels without coming into conflict with superordinate EU law.
Hans Hess further proposes that: “Switzerland should act more in concert with the neighbouring regions on areas of common interest and bring these, in a targeted way, into the political dialogue with the governments of our neighbouring countries and with the EU.” Together with Switzerland, the neighbour regions constitute a market of 52 million people. After Brexit, this will make up no less than 11.6% of the EU as a whole. Hans Hess is convinced that “a regular, cross-border dialogue with our neighbour regions could start up a development process which could provide a much more local, rapid and pragmatic solution to the issues at our borders. “We want to be partners as well as neighbours.”
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