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Why competitiveness is so crucial for Switzerland

Dossiers - Competitiveness

Why competitiveness is so crucial for Switzerland

23.07.2021

The Swiss chemical and pharmaceutical industry is one of the world’s best in terms of competitiveness and plays a key role in Switzerland’s growth and prosperity. In order to defend its top spot and promote Swiss prosperity, however, it is reliant on business-friendly conditions – both nationally and internationally.

For a country lacking in natural resources like Switzerland, competitiveness is key to successfully holding its own in the face of international competition. In the age of the international division of labour and global value chains, there are fundamentally different strategies to succeed in international competition. Due to the high level of wages and costs, internationally oriented companies in Switzerland are particularly dependent on gaining a competitive edge through quality and product innovations. However, external factors that have a general impact on Switzerland as a business location also play a decisive role. In particular, these include tax and customs regulations, international trade agreements and good relations with the European Union.

International tax reform targets Switzerland's locational advantage

The OECD has been working on the redistribution of corporate tax revenues for some time. The proposed tax models want international corporations – from which Switzerland collects considerable tax payments – to tax a larger portion of their profits in their sales market countries. While these will receive more, countries that generate value in accordance with the Base Erosion and Profit Shifting (BEPS) guidelines adopted in 2015 will receive less. It is crucial for scienceindustries that Switzerland plays an active role in the drafting of the new provisions. The restructuring of corporate taxation may even give rise to new opportunities for Switzerland. scienceindustries is also firmly convinced that Switzerland has taken the right path with its AHV and tax proposal. A (not too) low general tax rate combined with internationally accepted solutions for promoting research activities is likely to be a promising way to safeguard Switzerland’s economic success.

Abolition of industrial tariffs strengthens business location

In uncertain times when global risks for the Swiss economy are increasing, margins are falling and international competition is increasing, the abolition of industrial tariffs and administrative hurdles can significantly increase Switzerland’s attractiveness as a business location. The coronavirus crisis is posing major challenges for companies. It is now important and urgent to support the rapid recovery of the economy with simple, proven and broadly effective instruments and to send a signal against isolationism at the international level. The abolition of industrial tariffs will also improve the framework conditions for Swiss companies in the long term and on a permanent basis. However, further trade facilitation is needed.

Bilateral agreements are key framework conditions for our industry

scienceindustries is disappointed at Switzerland’s unilateral termination of negotiations for an institutional framework agreement with the EU and regrets that the technical negotiations on a framework agreement are not being continued at a political level. From the perspective of the research-intensive, export-dependent chemical and pharmaceutical industry, the existing bilateral agreements with the EU are an important locational factor without any prospect of an equivalent alternative. With an export share of 51 %, the chemical and pharmaceutical industry is Switzerland’s largest export industry and thus a cornerstone of its economy. Accounting for 46 % of the total exports and 71 % of the total imports of Chemistry Pharma Life Sciences, the EU is the most important trading partner. The bilateral agreements are a prerequisite for regulated access to the EU internal market and therefore an important locational factor for international companies in Switzerland.

We must keep our trump cards in our hands

The companies of scienceindustries are among the global technology leaders and are well equipped to successfully compete for innovation in the future too. However, as global players, these companies are also constantly reviewing the suitability of their structures and the sustainability of their locational conditions in Switzerland. They still rate the framework conditions here in Switzerland as very favourable, as demonstrated by the billions invested in the local research infrastructure. The challenges are more pronounced at the political level. The reputation of Switzerland as a centre of business and industry as a guarantor of political and economic stability and legal certainty has suffered as a result of various referendums in recent years.

 


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