Swiss Senate Eases Arms Export Rules Amid Industry Struggles

(Bloomberg) — Switzerland’s senate approved proposals to loosen strict controls on exports of war materials, a move that could help its increasingly isolated defense industry.

On Wednesday, the upper house backed reinstating the government with powers to permit passing on Swiss-made arms to conflict zones. The bill would also exempt a list of 25 countries, mostly NATO members, from having to ask for permission in the first place. It still needs approval in the lower house.

The Swiss defense industry has come under pressure since the start of Russia’s full-scale invasion of Ukraine, as the country’s rules — rooted in its neutrality stance — forbid the re-export of war material with more than 50% of domestically produced components. That led several European countries to exclude Swiss firms from their procurement efforts, after requests to send arms and ammunition to Ukraine were blocked.

Parliament had originally scrapped the government powers in 2021 to satisfy backers of a plebiscite that would have stipulated stricter arms export rules in the country’s constitution.

Local arms producers have seen exports for war material drop by 30% since a 2022 all-time high. A number of firms have started to shift production abroad to avoid missing out on lucrative contracts as European nations rearm in the face of Moscow’s aggression and US demands for the region to spend more of its own money on defense.

That has caused worries among Swiss security officials, who say a faltering domestic defense industry diminishes their leverage with foreign arms suppliers. Smaller countries like Switzerland in particular face more challenges to buy war material as producers worldwide hit capacity limits, Urs Loher, the country’s most senior arms procurement official, said in an interview last week.

Switzerland’s arms industry is a small part of the economy, generating just over 0.2% of output. But “armed neutrality” has magnified the sector’s importance, with Swiss law enshrining the need to maintain an industrial capacity “adapted to the requirements of its national defense.”

The breakthrough to relax existing rules was pushed forward by a group of centrist and conservative lawmakers. Mostly left-leaning upper house members rejected the bill, with one saying it would likely trigger a referendum.

“I ask those who advocate for the war material industry in this discussion not to forget that they are simultaneously undermining neutrality,” said Social Democrat lawmaker Daniel Jositsch. 

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