Is China using Switzerland as a fig leaf?

Dear reader,

China and Switzerland have recently updated their existing free trade agreement. If the new version comes into force, over 99% of trade in goods in both directions will be completely exempt from customs duties.

Some say that political symbolism is more important than the economic benefit: the fact that Switzerland, a rich European democracy, wants to deepen its relations with the country is a welcome symbol for the Chinese Communist Party. Authoritarian China is using democratic Switzerland as a fig leaf, according to certain critical voices.

Criticism is growing worldwide that China is using its exports strategically to weaken countries or make them dependent. The EU and countries such as the US, Canada and India are taking protective measures against this.

However, the renewal of the free trade agreement with China has another dimension: Swiss manufacturing is under pressure due to protectionism (especially from the EU) and tariffs (from the US). In addition, the strong franc is affecting competitiveness. The government is looking for new markets and China is Switzerland’s largest trading partner after the EU and the US.

Switzerland established diplomatic relations with the People’s Republic of China as early as 1950. Photo of a scene at the Comptoir Suisse trade fair in 1958, where China was the guest of honour. Keystone / Joe Widmer

In any case, it is striking how much Switzerland has always strived for a close economic relationship with China. In 1980, for example, the Swiss lift manufacturer Schindler was the first foreign company to conclude a joint venture with a Chinese state-owned company. Schindler’s manager in charge, Uli Sigg, later became the Swiss ambassador in Beijing and built up the largest private collection of contemporary Chinese art.

In 2001, China joined the World Trade Organization, for which Switzerland was strongly committed behind the scenes – accession had a massive impact on world trade. In 2007, Switzerland was also the first Western country to grant China market economy status, and in 2014 it became the first European country (at the same time as Iceland) to enter into a free trade agreement with China. And thus secured access to a huge, growing market.

So who uses whom? It is a relationship between unequals but both seem to benefit.

Do you have any interesting stories about trade relations? As always, you can write to me on [e-mail]

Best regards,

Giannis Mavris

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