China and the West. Cooling conditions could threaten the Swiss economy.

Protesters protest against the treatment of Uighurs and other ethnic minorities detained in forced labor camps in China on 13 May 2022 in front of the UN Commissioner for Human Rights in Geneva.

Keystone / Martial Trezzini

According to a study conducted by Avenir Suisse, Switzerland should examine its relationship with China objectively. Trading with Switzerland’s third largest trading partner is becoming difficult in light of the deteriorating geopolitical situation – and China’s human rights violations.

A loss of the important volume of trade with China would hit Switzerland hard. The economy and federal politics must therefore act agile, according to a study published on Wednesday by the think tank Avenir Suisse “Navigation in troubled waters, three options for Switzerland in relation to China”. The study sees the cooling relationship between the West and China as a threat to the Swiss economy.

The current geopolitical upheaval leads to a tight migration in the relationship between Switzerland and China between fundamental Western values ​​on the one hand and Switzerland’s policy of neutrality and economic interests on the other. According to the study, Switzerland must therefore ensure that, as a small country, it does not end up in the firing line of sanctions from the US and possibly the EU against China.

However, the Middle Kingdom is also increasingly criticized here in Germany for the lack of the rule of law, the prevention of freedom of expression and the oppressive approach to minorities and democracy movements.

Strategies for three escalation levels

The study shows strategies for Switzerland based on three escalation levels. With a little pressure, the main trading partners had to be kept happy. With increasing pressure, Switzerland should concentrate on its most important trading partner, the EU.

In the event of a further escalation, Switzerland should approach the US position “on the trail of the EU” and stand with the West, as in the Ukraine war, because it would be fatal to stand aside from economic sanctions.

If the US-China showdown ultimately resulted in a trade embargo or a military confrontation, Switzerland would have to seek economic alliances with the EU and the US, its major trading partners.

According to the study, the abandonment of China as a sales market should weigh heavier than in the case of Russia. It would risk losing its third most important trading partner.

A two-pronged strategy is then required: to treat China as a partner and economic competitor on the one hand and a systemic rival on the other. In the face of political pressure, a pragmatic approach with diplomacy and communicative skills is still required.

Exports worth 31 billion Swiss francs

Between Switzerland and China, whose economic struggle is impressive, there are long-standing, “though not uncomplicated” political, economic and social relations.

In 2014, Switzerland was one of the few Western countries to negotiate a Free Trade Agreement (FTA), although this was also criticized for the human rights situation in China. Neither the EU nor the US has a similar agreement, but its potential has not yet been exhausted, it says.

Every year, Switzerland exports goods worth 31 billion francs and imports 19 billion francs, it says. 132,000 employees would thus benefit from the export of goods and services to China. A loss of this trade volume would hit Switzerland hard and weigh heavier than in the current case with Russia.

China’s direct investment in Switzerland played a minor role. They would have doubled between 2016 and 2020. Their share of the total foreign capital portfolio is only 1 percent (compared to EU: 27 percent, US: 49 percent). There are also demands from politicians to regulate them more strictly.

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