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Business lobby wary of creeping protectionism

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Business leaders have voiced concerns about the potentially damaging effects of global protectionism as the economic recession takes root.

This content was published on April 6, 2009 - 19:59

The Swiss Business Federation, economiesuisse, has called on the government to limit short-term measures designed to prop up the domestic economy and to align itself with other export-oriented countries to fight against trade barriers.

Fears over protectionism have been thrust into the spotlight in recent months as governments around the world act to guard homegrown companies and industries from the worst ravages of the recession.

The United States and France have both tailored economic stimulus packages to favour domestic firms while other countries have changed import and export tariffs or blocked foreign takeover bids of local companies.

"Excessive economic stimulus programmes and political interference without focus may be popular at present. However, these are not ready-made solutions," economiesuisse director Pascal Gentinetta said at the federation's annual meeting on Zurich on Monday.

Export allies

"We must avoid copying the mistakes of other countries. Switzerland must keep a cool head politically and economically. Only by doing this can Switzerland come out stronger from the crisis," Gentinetta said.

Last week's G20 meeting of the world's most influential government heads failed to send out a strong signal against protectionism, Gentinetta added.

"We are a bit apprehensive that protectionism is increasing around the world. We are asking our government to take the initiative in this matter. They should work together with allies such as Germany and Japan and with the World Trade Organisation," he told swissinfo.

Gentinetta denied accusations that recent measures taken by Switzerland's central bank to weaken the franc in favour of exporters were a protectionist move. He said the actions were necessary to counter the upward movement of the franc, considered a safe haven currency during turbulent times.

The federation welcomed the government's two stimulus packages and a range of cantonal measures, worth some SFr7 billion ($6.2 billion). The business lobby group added that a further federal package would probably be necessary in the summer, even if it increased national debt.

Annus horribilis

But economiesuisse urged the government to apply measures only if they were well directed, implemented at the right time and lasted only as long as the economic downturn.

When the recession is over, Switzerland should re-embark on a series of long-term reforms for the good of the economy, the federation says. Measures could include liberalisation of the state-owned Swiss Post and the energy sector, a renewed focus of bilateral trade treaties, breaking up monopolies and tearing down trade barriers.

Economiesuisse warned that 2009 would be the "Annus horribilis" for the industrial sector following last year's nightmare for the financial industry. In the light of the expected difficulties, the federation has called for an end to proposals for an increased value added tax and discouraged the introduction of a greenhouse gas emissions tax.

"We believe it is the wrong moment to implement these measures and they should be postponed. It is important not to increase the tax burden," Gentinetta said.

swissinfo, Matthew Allen in Zurich

Shrinking GDP

Official government figures, released in March, showed real GDP shrinking 0.6% in the last quarter of 2008 compared with the same period in 2007 (-0.3% quarter on quarter).

Provisional figures showed the economy growing by 1.6% for the whole of 2008.

The export of goods and services plummeted by 8.1% quarter on quarter while imports also fell by 5.8%. Domestic consumer spending grew only by 0.1%.

Economists are predicting tougher times for this year and next:

Seco
-2.2% GDP in 2009, 0.1% in 2010

SNB
-2.5% to –3% 2009

UBS Wealth Management
-1.2% 2009, 0.2% 2010

Credit Suisse
-0.6% 2009

BAK Basel Economics
-2.1% 2009, 0.6% 2010

OECD
-0.2% 2009, 1.6% 2010

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