Switzerland is strategically positioned at the crossroads of several European trade routes. This explains why it mainly relies on external exchange. At present, it serves as one of the commodity trading centers on the globe. Another reason why Switzerland strongly relies on its foreign trade is because it lacks mineral resources and has a very small domestic market. These factors have motivated production businesses in Switzerland to open more branches in other countries. International markets are attractive for these companies since they provide profitable returns on their investments in various aspects of their businesses.
Ranked among the most "internationalized" economies, Switzerland is one of the most developed countries on the planet. Mainly, the country imports raw materials and semi-finished products and exports manufactured products with a high degree of processing. The country is accustomed to importing raw materials and semi-finished products and exporting manufactured products with a high degree of processing.
Many companies in Switzerland practice a so-called "niche strategy" that focuses on a limited variety of greatly specialized products. This strategy has proved to be successful, and is the reason why some foreign companies have established businesses in Switzerland to dominate the world market in their activity field. The chemical industry is an eloquent example in this regard, niche products representing approx. 90% of marketed products. One of the advantages of this strategy is that it stimulates the diversification of production. Thus, the chemical industry offers over 30,000 different products. Swiss products sell for high prices on foreign markets, as consumers are willing to pay for quality and innovation.
In certain sectors, over 90% of goods and services sell as exports. The most renowned examples are products from the watch industry, chocolate, and cheese. However, mechanical, electro-technical, and chemical industries have over 50% of Swiss exports. Switzerland is one of the main exporters of products such as textile machines, paper industry machines, printing machines and materials, high-precision machine tools, lifts and escalators, railroad rack construction, among others. However, manufacturing of many of the components of these products happens overseas. Switzerland excels also in exports of services, particularly counseling management, insurance, and tourism.
Key centers for trading and shipping include the canton of Zug and the city of Geneva. The logistics sector and the most modern merchant navy in the world are concentrated in Basel. In Switzerland, they are among the biggest global players, such as Nestlé, the largest food company in the world. Although approximately 97% of employees work outside of Switzerland, the company's base is Vevey, located on Lake Geneva. Other multinational companies, such as Kraft, have chosen Switzerland as the place for their European headquarters.
Free Trade Agreements
The Swiss economy is significantly dependent on external processes. In the context of increased pressures of globalization, Switzerland has a modern approach to specific issues related to international relations. The external economic policy is thus oriented on three axes. Agreements with the European Union, free trade agreements concluded within the EFTA or bilaterally and the progressive liberalization of international trade, through the continuous improvement within the WTO (World Trade Organization).
Although Switzerland is not part of the European Union, it is its main trading partner. The concern to mitigate the negative economic consequences due to non-participation in the European single market resulted in the signing in 1999 of a first package of seven bilateral agreements with the EU (called "Bilateral Agreements I"). There were in areas of common interest:
free movement of persons,
technical barriers to international trade,
research and development
A second series of eight bilateral agreements ("Bilateral Agreements II") signed in 2004 refer to Switzerland's cooperation with the EU in new areas of common interest. These are:
cooperation in the fields of justice, police, asylum and migration
The European Free Trade Agreement (EFTA) does not play a decisive role in a global context, but the importance of the regional level is not negligible for Switzerland, the economic weight that it has in the association can determine significantly its policy.
The development and implementation of both the Swiss Economic and Trade Policy, by the Federal Department of Economics through the State Secretariat for Economic Affairs - SECO applies domestically and externally. Externally, the main mission of SECO is to initiate, negotiate and conclude agreements on economic and trade cooperation in order to open new markets for goods, services and investments. This center has a constant concern over the private sector in developing countries, emerging markets and transition economies, with the main objectives of developing trade, increasing the capital invested and transferring expertise to these markets.
Switzerland’s top 10 exports
Exported goods and services in Switzerland account for 65.1% of total Swiss production, estimates the Central Intelligence Agency’s World Factbook. Below, you can find an analysis focused only on exported products.
Looking from the continental perspective, 45.9% of the valuable goods goes to European countries and Asian importers buy 35.1% of the goods. The total exports to North America hold 14.9%. Latin America recorded the lowest percentage (1.8%), with the exception of Mexico, Africa (1.2%) and Oceania (1%) led by Australia.
The total amount obtained from exports in 2018 was 310.7 billion dollars, which means about 37,500 dollars for every resident, reporting to only 8.3 million population in Switzerland. In addition, compared to last year, the unemployment rate in Switzerland decreased to 2.7%, from 3.3%.
Based on the World’s Top Exports rankings, you can find below the top 10 categories of exported products, which correspond to the highest dollar values for Swiss global shipments in 2018. The percentage of total Swiss exports is also shown. As expected, gold seems to be the Swiss number one product that, at the more granular four-digit Harmonized Tariff System code level.
Precious metals and gems with an amount of 81.5 billion dollars, representing 26.2% of total exports
Pharmaceuticals, 75.2 billion dollars value, with a percentage of 24.2%
Machinery including computers, exports worth 24.9 billion dollars, 8% of total Swiss exports
Clocks and Watches, including parts, amounted to 21.6 billion dollars, representing 7% of the total exports
Exports of organic chemicals, worth 20.8 billion dollars (6.7%)
Optical, technical, medical equipment, amounting 17.3 billion dollars (5.6%)
Electrical machinery, equipment, totaling 12.8 billion dollars (4.1%)
Plastics and plastic articles, 5.6 billion dollars (1.8%)
Perfumes and cosmetics exports, 3.7 billion dollars (1.2%)
Iron or steel items, 3.1 billion dollars (1%)
In 2018, Switzerland's top 10 exports represented 85.8% of the total value of its global deliveries.
In terms of improving exports, the biggest increases registered emanated from perfumes and cosmetics, 13.5% over the previous year. The beauty field, especially make-up and cosmetics, has led to this upward trend. The second biggest increase in terms of improving exports belongs to plastic and items made from plastic, by a rate of 9%. The following categories of goods are optical, medical and technical equipment (up 7.9%), then watches and clocks, including parts (up 6.9%).
If you want to know the legal frames in conducting trading activities in Switzerland, our Swiss consultants can provide you with complete information regarding the most suitable business structure for your needs.