Weekly Country Focus: Switzerland

The economy of Switzerland is one of the world's most stable economies. Its policy of long-term monetary security and bank secrecy has made Switzerland a safe haven for investors, creating an economy that is increasingly dependent on a steady tide of foreign investment. Because of the country's small size and high labour specialisation, industry and trade are the keys to Switzerland's economic livelihood.

GDP Ranking (2007)
36th

GDP (2006)
CHF486.2, $371.5 billion

GDP growth rate (2006)
4.9% nominal, 3.2% real

GDP per Capita (Q2 '04 annualised)
$33,800

GDP by sector (2004)
agriculture (1.5%), industry (34.0%), services (64.5%)

Inflation rate (Q1 2006)
1.4%

Pop below poverty line (2005)
3.3%

Labour force (June 2004)
NA million (includes unemployed)

Labour force by occupation (2002)
agriculture (4.6%), industry (26.3%), services (69.1%)

Unemployment rate (2007 est)
2.5%

Main Industries
machinery, chemicals, watches, textiles, precision instruments

Trade
Apart from industry, trade has been the key to prosperity in Switzerland. The country is dependent upon exports to generate income and on imports for raw materials and goods. With the notable exception of a strict policy of agricultural protectionism, Switzerland has liberal trade and investment policies. An expansive commercial and bank law system makes Switzerland one of the most secure investment places in the world. The Swiss franc is one of the world's soundest currencies, and the country is known for its high standard of Swiss banking and financial services.

The machinery, metals, electronics, and chemicals sectors are known for precision and quality. Together, they account for well over half of Switzerland's export revenues. The country is approximately 60% self-sufficient, taking only 7.5% of its imports from the U.S.
Switzerland ranks 18th among the main trading partners of the U.S. worldwide. The Swiss economy earns roughly half of its corporate earnings from the export industry and about 70% of Swiss exports are destined for the EU market.

The United States is the second-largest importer (9.1%) of Swiss goods after Germany (20.0%). Germany, on the other hand, exports more to Switzerland each year than to all the countries of the former Soviet Union and Eastern Europe combined. In addition, the United States is the largest foreign investor in Switzerland, and conversely, the primary destination of Swiss foreign investment. It is estimated that 200,000 American jobs depend on Swiss foreign investments. Total U.S.-Swiss bilateral trade, nevertheless, decreased by 12% to $17.16 billion during 2002 compared to the previous year.

Economic policy

Terrorism
Through the United States-Swiss Joint Economic Commission (JEC), Switzerland has passed strict legislation covering anti-terrorism financing and the prevention of terroristic acts, marked by the implementation of several anti-money laundering procedures and the seizure of al-Qaeda accounts. Continued relationship with the United States through the JEC has brought the Swiss economy into closer proximity with that of the Western world, with mutualistic goals in terrorism prevention providing the impetus.

European Union
With exception of agriculture, economic and trade barriers between the European Union and Switzerland are minimal. In the wake of the Swiss voters' rejection of the European Economic Area Agreement in 1992, the Swiss Government set its sights on negotiating bilateral economic agreements with the EU. Four years of negotiations culminated in Bilaterals, a cross-platform agreement covering seven sectors: research, public procurement, technical barriers to trade, agriculture, civil aviation, land transport, and the free movement of persons. Parliament officially endorsed the Bilaterals in 1999 and it was approved by general referendum in May 2000. The agreements, which were then ratified by the European Parliament and the legislatures of its member states, entered into force on June 1, 2002. The Swiss government has since embarked on a second round of negotiations, called the Bilaterals II, which will further strengthen the two organisations' economic ties.

Switzerland has since brought most of their practices into conformity with European Union policies and norms in order to maximise the country's international competitiveness. While most of the EU policies are not contentious, police and judicial cooperation to international law enforcement and the taxation of savings are controversial, mainly because of possible side effects on bank secrecy.

Swiss and EU finance ministers agreed in June 2003 that Swiss banks would levy a withholding tax on EU citizens' savings income. The tax would increase gradually to 35% by 2011, with 75% of the funds being transferred to the EU. Recent estimates value EU capital inflows to Switzerland to $8.3 billion.

To learn more about Switzerland:

• Trade Balance
• UBS Consumption Indicator
• Consumer Prince Index (CPI)
• Adjusted Retail Sales
• Gross Domestic Product