as a partner for safeguarding our prosperity via free trade and innovation
01 — The key questions for the Partner-Atlas
RELEVANCE: What relevance does Switzerland have for Germany with regard to “safeguarding our prosperity via free trade and innovation”?
In many ways, Switzerland is a key partner for Germany in terms of values and interests, particularly in the area of trade and innovation. The economies of both countries are closely intertwined: Germany has been Switzerland’s most important trading partner with more than 22 percent of foreign trade. Conversely, Switzerland is also a key economic partner for Germany: in 2018, it was number 9 among Germany’s foreign trade partners (and thus the fourth largest non-EU country after the USA, China, and the United Kingdom).
Swiss direct investments in Germany amounted to 49.5 billion Swiss francs in 2017 (7th position out of all investors). Swiss companies employ 260,908 people in Germany (2nd position). According to Deutsche Bundesbank, Switzerland was the fourth most important investor in Germany at the end of 2017. In 2016, more than 2,000 companies were based in Germany, the majority of which belonged to a Swiss parent company. Swiss companies directly employ 458,000 people[i].
The partnership in the area of innovation is similarly important. Switzerland is one of the most innovative countries in the world. For Switzerland, Germany is by far the most important partner for research and innovation (especially in information and communication technologies, health sciences and nanotechnology). Much of this cooperation happens within the EU research framework programme, Horizon 2020: there is a total of 800 collaborative projects with a funding volume of 7.6 billion euros. Between 2013 and 2018, the Swiss National Science Foundation supported more than 2,000 projects with German participation.
At the global level, the similar regulatory approach (market economy, strong export orientation, innovation potential) and the compatible ideas regarding the role and reform of the World Trade Organization (WTO) are just as important as the figures mentioned above.
WILLINGNESS: To what extent is Switzerland willing to work with Germany in realising this interest?
Essentially, the two countries are very willing to work together. This is illustrated, among other things, by the numerous meetings at all government levels: there are annual meetings between the Swiss State Secretariat for Education, Research and Innovation (SBFI) and the German Federal Ministry of Education and Research (BMBF).
There is some tension in the debate on the modalities of cooperation, such as the free movement of German and European workers in Switzerland. A referendum was held in September 2020 on the termination initiative introduced by the national-conservative, Eurosceptical Swiss People’s Party (SVP), the acceptance of which would have meant an end to the free movement of people.
The initiative was clearly rejected by a 61,7% majority of voters. A serious crisis in the bilateral relations to Germany and the EU was thus averted. However, in May 2021, the Swiss Federal Council officially terminated the talks about a joint framework agreement with the EU after 7 years, before the Swiss parliament or the public were given the chance to vote on the agreement. An opportunity had thus been missed to put the cooperation that had been based on bilateral agreements on a basis promising more long-term stability. What is now looming is not a massive crisis but the gradual drifting apart of these two judicial areas. While Switzerland, generally, demonstrates a high willingness to cooperate, the country wavers between pragmatism in economic policy and very clear reservations about possible constraints curtailing its own sovereignty.
STATUS QUO: How close is Germany and Switzerland's current cooperation in this area?
A close network of partnerships links Switzerland and Germany at the federal level and also between the federal states, cantons (Euregio Bodensee, RegioTriRhena, Internationale Bodenseekonferenz), and municipalities.
Especially in the area of trade, imagining German-Swiss relations without considering the European level would be impossible . Switzerland has had extensive access to the EU single market since 1999 due to seven bilateral agreements. According to a study by the Bertelsmann Foundation, Switzerland is the country that benefits most from the single market[ii]. What impact the failure of the framework agreement will have on bilateral relations is still an open question.
Switzerland and the EU are working closely together in the context of the Covid crisis. For this and other reasons, Switzerland is seeking a bilateral health agreement with the EU.
POTENTIAL: What is the potential for strengthening the partnership between Germany and Switzerland in this area?
Considering how broad the existing cooperation is in the area of trade and innovation, there is no need for a fundamental change. However, there is still enormous potential for cooperation and mutual learning, especially in the field of digitalisation. The same applies to the future of data protection, a field in which both countries are currently undergoing a comprehensive reform. The added value of closer cooperation in the healthcare sector has become abundantly clear during the Covid crisis.
For now, an important opportunity for fully exploiting the potential of closer European cooperation has been missed by the Swiss Federal Council’s decision to end the talks on a framework agreement. Now, pragmatic solutions need to be found, in order to update some bilateral agreements and to re-start discussions on the future design of relations. The debate on the EU’s next Multiannual Financial Framework (MFF) should include provision of sufficient funds for the next research framework programme.
POLICY RECOMMENDATION: What in German foreign policy has to change in order to fully exploit this potential?
Germany’s relations with Switzerland are a multi-layered network that stretches from the municipal to the European level. This means that German foreign policy towards Switzerland must also be conceived at the European, municipal and regional levels. When it comes to understanding Swiss sensitivities, there is room for improvement. As a country surrounded by large neighbours, there is always a slight fear of being disadvantaged and dominated. Questions that seem technical from a German or European point of view are sometimes interpreted in Switzerland in a very political manner.
Even if there is no substantial reason for blaming Germany and the EU for the failure of the framework agreement, they should be more mindful of Swiss sensitivities (no unnecessary barbs) and idiosyncracies (limited role of the Federal Council, involvement of parties and associations) in discussions on future relations.
It would also be important to understand Switzerland as part of the global west and as a key ally in strengthening a rules and values-based multilateral world order, because Switzerland is much more than just a partner in terms of trade and innovation. It offers (based on its image as an honest broker) dialogue and mediation platforms, not least due to the international importance of Geneva. Moreover, its position in United Nations bodies makes it clear that it is one of the partners with whom Germany has closely matching values and interests. This has also been evident during the Covid crisis: Switzerland has opposed protectionist tendencies in the WTO. At the same time, like Germany, it made it a point to back up the World Health Organisation which was coming under criticism. Furthermore, Switzerland has officially submitted its candidacy for a non-permanent seat on the United Nations Security Council in 2023-4. The seat elections will take place in June 2022.
Even with regard to security policy, Switzerland is therefore an important partner for Germany – despite its neutrality and non-membership of NATO. The country participates in several UN and (civilian) EU missions and is a partner in the area of counter-terrorism[iii]. Closer cooperation in cyber security matters would be of added value for both sides. Overall, Switzerland undoubtedly belongs to Germany’s closest circle of trade, economic and value partners worldwide.
Olaf Wientzek heads the Multilateral Dialogue in Geneva for KAS.
Last update: July 20th, 2021
[i] Find more information here: https://www.seco.admin.ch/ seco/de/home/Aussenwirtschaftspolitik_Wirtschaft- liche_Zusammenarbeit/Wirtschaftsbeziehungen/laende- rinformationen/europa—zentralasien.html [20/01/2020].
[iii] Lago, Pascal 2019: Switzerland – Perspectives for a More Transnational Swiss Security Policy, in: Avenir Suisse – An International Think Tank Report on Security in Europe, in: https://www.avenir-suisse.ch/publication/ security-in-europe/ [30/01/2020].
02 — Foreign Office
Regional Programme Multilateral Dialogue
Avenue de France 23
04 — The region
Europe and North America
In many ways, Switzerland is a central partner for Germany in terms of values and interests, particularly in the area of trade and innovation. The economies of both countries are closely intertwined: Germany has been Switzerland’s most important trading partner with more than 22 percent of foreign trade. Conversely, Switzerland is also a key economic partner for Germany: in 2018, it was number 9 among Germany’s foreign trade partners (and thus the fourth largest non-EU country after the USA, China, and the United Kingdom).
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