– Global Challenges is a brand of DvH Medien. The new institute aims to promote discussion of geopolitical issues through publications by recognized experts. Today a contribution from Prof. Dr. Renate Schubert, professor of economics at ETH Zurich. Further authors are prof. Dr. Ann-Kristin Achleitner, Sigmar Gabriel, Günther Oettinger, Prof. Dr. Volker Perthes, Prof. Jörg Rocholl PhD and Prof. Dr. Bert Rürup.
The right-wing populist Swiss People’s Party suffered a crushing defeat in the latest referendum. By a clear majority, the population spoke out on September 27 against the ‘restriction initiative’, which was largely initiated by the SVP – they do not want to isolate themselves from the rest of the world, especially from Europe. However, membership of the European Union is not in question, as Switzerland’s understanding of the role of the state and the rights and obligations of citizens differs too much from that of most EU countries.
Precisely because Switzerland values a position that is independent of the EU, it cannot escape taking a position in the geopolitical conflict between the US and China. Does the country’s classical neutrality postulate work in times of increasing rivalry between the two dominant powers? And what are the consequences of the power struggles of the big players for the small, strongly connected Switzerland?
At the moment, there is little to suggest that Switzerland is betting exclusively on the “US” card or the “China” trump card, even though some media are already talking about “submission” to the United States of America. The reason for submitting the thesis was the fact that last year the Swiss Federal Institute of Technology in Zurich asked its scientists not to supply the Chinese company Huawei with research technology with American components.
This was preceded by US President Donald Trump’s directive for US companies to stop selling their own high-tech technology to Huawei. However, the fact that Huawei already has a strong presence in the Swiss economy contradicts the submitted thesis: the Chinese participate in the expansion of the 5G network, were the official sponsor of the traditional Lauberhorn ski competition this year, equipped sports stadiums with wireless infrastructure and funding research centers. as well as lectorates.
Now China has no doubt intended to replace the US as the number one world power – in military terms, but also in terms of trade, technology and financial markets. Americans, on the other hand, are rarely united, be it Republicans or Democrats. Imposing trade restrictions on China in the high-tech sector seems only logical. The US is expected to further disconnect from global supply chains involving China. This can also be useful for medical devices and medicines, as the corona crisis has shown.
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But would “decoupling” also be a promising strategy from the perspective of the Alpine Republic? Probably not. After all, about half of all imports and exports of Swiss goods are part of global value chains. Detaching the links from these chains would be problematic for a small country. This would go hand in hand with diminished trading opportunities, which could not be offset by potential additional opportunities to sell products directly in the US or China. In addition: “Decoupling costs” – prices for consumer goods, which are already at a high level in Switzerland, would continue to rise.
Because of the Chinese-American antagonism, everything currently seems to boil down to a bipolar world of technological standards – a kind of “Tech Cold War” with American standards on the one hand and Chinese standards on the other. Both are unlikely to be easily compatible in the near future. This dichotomy, like most other countries, will force Switzerland to show its colors and choose one world or the other when it comes to industry standards and data storage.
These are costly decisions
If countries or companies were to go both ways and work with both standards, this would result in inefficiently high costs. So the world faces difficult and costly decision-making and negotiation processes. Retaliation from the unsuccessful party is far from unlikely.
When it comes to decoupling the US financial markets from China for general geographic and power strategic considerations, this would play into the hands of European financial centers – not least Zurich. They could then become sought after partners in the US or China. However, there are many indications that it is already too late for a decoupling in the financial sector. American commercial banks in particular are now heavily involved in China as they see profitable and growing industries there.
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Recently, US investors eagerly subscribed to Chinese government bonds, although US President Donald Trump clearly dislikes. It remains to be hoped that the conflicts between the US and China will not turn each other upside down militarily. No less than 90 percent of China’s trade and 40 percent of oil imports depend on sea routes controlled by the US – in the event of a ‘hot war’, the geopolitical maps would be completely rearranged.
So many countries face tough decisions about how to position their trade, industries and financial markets in the future. The challenges are especially great for small, economically well-connected countries. If the technology and financial sector also play an important role, it becomes even more complicated.
Switzerland has distinguished itself as a political mediator
All this applies to Switzerland. A lot of attention to what is happening between the “big players” is essential if Switzerland is to defend its good economic and technological position.
One can be cautiously optimistic about Switzerland’s talent, military and otherwise, to guard against overly full confessions from one side or the other that will also hold true in the US-China conflict. Incidentally, a small, wealthy nation with a firm instinct to gauge negotiating positions is just as interesting to Beijing as it is to Washington. In the past, Switzerland has shown that it can successfully play the role of political mediator for parties to the dispute. The great conflict between the US and China could even fit in well with the Swiss “business model”.