Translated by an automated translation plugin.
China controls key raw material stages, Taiwan dominates chip production - and Switzerland is caught in between. In the second part of our series, Alessa Hool analyses how well prepared Switzerland would be for a geopolitical shock and why free trade agreements alone are no longer enough. She shows where Swiss trade policy is reaching its limits and which diversification approaches actually work.
The Federal Council says that it is not necessary or practicable to include the topic in free trade agreements. How convincing is this assessment from a technical and geopolitical perspective?
Presumably the idea is that the more politically sensitive issues are "negotiated" into every free trade agreement, the more complex the negotiations become. That is understandable. This approach worked well in a phase of relatively stable supply chains, but in the current situation it is reaching its limits. We are increasingly seeing export controls, sanctions packages and deliberately exploited dependencies - especially for critical raw materials and chips. In such an environment, a general commitment to free trade alone is no longer enough.
Clauses on critical raw materials could enshrine more transparency, information obligations and certain limits on abruptly imposed export bans. While the USA, the EU, Japan and Korea are developing strategic commodity alliances, without such elements Switzerland runs the risk of being given lower priority in the allocation of scarce goods.
Switzerland is traditionally sceptical about an active industrial policy and relies primarily on open markets when it comes to supply chain risks. This is precisely why it could make sense to specifically deepen these trade relations in the area of critical raw materials - not as the sole answer, but as an important component of a forward-looking security of supply policy.
The Federal Council emphasises that Switzerland obtains many critical materials indirectly via the EU. How realistic is it to reduce this dependency through free trade agreements?
Free trade agreements with other countries should not be seen as a substitute for trade relations with the EU. The EU is Switzerland's main trading partner - even for critical raw materials. Although many technology metals physically originate from third countries, the EU acts as an important hub for transport, processing and distribution.
However, free trade agreements with third countries can make an important contribution to diversification. They create additional supply channels in the event of disruptions in the EU. Specifically, they can reduce tariffs, establish cooperation platforms and increase legal planning security.
China dominates key raw material stages, Taiwan chip production. How high is the risk of a geopolitical shock - and how well prepared would Switzerland be?
The risk of a geopolitical shock in East Asia hitting Switzerland hard economically is high. Taiwan dominates the production of highly integrated semiconductors, while China controls key raw material and processing stages and is rapidly expanding its capacities in older chip technologies - the so-called legacy processes. An escalation would very likely lead to a shortage of semiconductors across all technology segments.
This would have direct consequences for Switzerland: Production interruptions in mechanical engineering, medical technology and electronics, greatly extended delivery times and significantly higher hardware costs as well as delays in digitalisation and infrastructure projects because many components are not technologically substitutable.
At the same time, major disruptions in global transport and commodity trading could be expected. Insurance and freight costs would soar, and extensive sanctions could lead to additional export restrictions on China's critical raw materials.
Beyond these immediate shocks, such a crisis would expose Switzerland's structural dependency. The risk would not just be temporary bottlenecks, but lasting competitive disadvantages: If central digitalisation and innovation projects in key industries are delayed, the attractiveness of the location will decline. Overall, I believe that Switzerland is currently inadequately prepared for such a scenario.
Which approaches to diversification really work in practice?
For Switzerland, the diversification approaches that work best are those that are realistically linked to the country's own size. New partnerships make sense if they open up real alternatives - in other words, if they involve other production countries, groups of companies and, if possible, other transport corridors.
Early warning mechanisms are a key lever for a small, highly interconnected country: monitoring markets, prices, export restrictions and political risks can help to recognise bottlenecks at an early stage. However, in order to be effective, the economy and administration must be prepared to accept the consequences - such as higher storage costs or longer-term supply contracts.
In general, Switzerland tends to overestimate its ability to actively manage global value chains and at the same time underestimate the benefits of "invisible" measures such as data collection and scenario analyses. Effective diversification is achieved through a combination of a broad supplier base, intelligent stock and contract policies and systematic monitoring. We should also build on our strengths in innovation and recycling.
