Overview and position on competitiveness

The Swiss chemical and pharmaceutical industry is a world leader in terms of competitiveness and plays a key role in Switzerland's growth and prosperity. However, in order to defend this leading position and promote Swiss prosperity, it is dependent on business-friendly framework conditions - both nationally and internationally.

When it comes to competitiveness, Switzerland is consistently ranked among the top nations. However, in the 2022 ranking by the Lausanne-based business school IMD, Switzerland had to cede first place to Denmark. Switzerland is now in second place. Switzerland remains first-class in some areas. For example, in the areas of state functionality and infrastructure. Switzerland also performs well when it comes to business performance (fourth place). However, the country is weaker in terms of economic performance, where Switzerland only ranks 30th. This is mainly due to the high price level, which traditionally performs worse.

The Global Industry Competitiveness Index (GICI), published for the fourth time in 2023 by BAK Economics on behalf of scienceindustries, measures competitiveness in four domains: "Performance", "Market position & performance", "Innovation & technology leadership" and "Location quality". As in previous years, Switzerland is in third place this year, beaten only by Ireland and the USA. More than any other country, Switzerland has a very balanced profile of strengths.

For a country like Switzerland, which is poor in raw materials, competitiveness is a decisive factor if it is to be successful in international competition. In the age of the international division of labour and global value chains, there are fundamentally different strategies for surviving international competition. Due to the high wage and cost levels, internationally orientated companies in Switzerland are particularly dependent on gaining a competitive advantage through quality and product innovation. However, external factors that have a general impact on Switzerland as a business location also play a decisive role. These include, in particular, tax and customs regulations, international trade agreements and good relations with the European Union.

International tax reform targets Switzerland's locational advantage
The OECD has been working on the redistribution of corporate tax revenues for some time. The proposed tax models aim to ensure that international corporations - from which Switzerland receives substantial tax payments - pay tax on a larger proportion of their profits in the countries of their sales markets. While these countries receive more, those countries in which value is created in accordance with the Base Erosion and Profit Shifting (BEPS) guidelines adopted in 2015 are to receive less. For scienceindustries, it is crucial that Switzerland plays an active role in shaping the new requirements. The reorganisation of corporate taxation may even result in new opportunities for Switzerland: a (not too) low general tax rate combined with internationally accepted solutions to promote research activities should represent a promising way to secure Switzerland's economic success.

Abolition of industrial tariffs strengthens business location
In uncertain times, in which global risks for the Swiss economy are increasing, margins are falling and international competition is increasing, the attractiveness of Switzerland as a business location can be significantly increased by abolishing industrial tariffs and administrative hurdles. It is now important and urgent to support the economy with simple, demonstrably and broadly effective instruments and to send a signal against isolationist tendencies at international level. The dismantling of industrial tariffs improves the framework conditions for Swiss companies in the long term and on a permanent basis. The introduction of new, trade-inhibiting regulations should be avoided.

Bilateral agreements are key framework conditions for our industry
From the perspective of the research-intensive, export-dependent chemical and pharmaceutical industry, the existing bilateral agreements with the EU are an important location factor with no prospect of an equivalent alternative. With an export share of almost 50%, the chemical-pharmaceutical industry is Switzerland's largest export industry and therefore a key pillar of its economy. With a share of over 47% of total exports and a share of around 70% of total imports in the chemical, pharmaceutical and life sciences industries, the EU is the most important trading partner. The bilateral agreements are a prerequisite for regulated access to the EU internal market and therefore an important location factor for international companies in Switzerland.

The following aspects are particularly important for the chemical, pharmaceutical and life sciences industries:

1. The removal of technical barriers to trade,
2. the free movement of persons and
3. cooperation in research.

Accordingly, both industry and science are hoping that negotiations between Switzerland and the EU will begin soon, so that sustainable relations and thus legal and planning certainty can be created in the long term.

Research and innovation need qualified specialists
The chemical-pharmaceutical industry is extremely research-intensive and innovative. This makes our industries all the more dependent on highly qualified specialists. Foreign labour is strongly represented among employees with university degrees and in research and development. The acquisition of foreign skilled labour helps to counteract the effects of demographic ageing, promotes the exchange of knowledge and talent and contributes to increased productivity and more tax revenue. Labour migration from the EU has no negative impact on the employment prospects of Swiss nationals.

At the same time, Switzerland would do well to prepare for the future today and take early measures to alleviate the structural shortage of skilled labour. These include in particular:

• Promoting STEM professions: Training and careers in the STEM sector must be promoted, including female representation in STEM professions or promotion of vocational training such as chemical and pharmaceutical technologists.
• Acquisition of foreign skilled labour and talent: Various efforts are needed to increase the attractiveness of Switzerland for foreign skilled labour and talent and to reduce the hurdles for companies as far as possible.
• Create suitable framework conditions: These include, in particular, regulated free movement of persons between Switzerland and the EU, better exploitation of the potential of skilled workers from third countries, simplified retention of foreign students after graduation, fewer obstacles to cross-border intra-company mobility and greater digitalisation of approval processes.

Protection of intellectual property as the basis for innovation
Patent protection enables innovative companies to bear the high investment costs required for research and development. Without the incentive of the patent system, Switzerland's innovative strength would not exist. The patent system is therefore at the heart of the success of innovative Swiss companies, because the patent protects the inventor from a third party using the patented invention commercially without the permission of the patent holder.

It is imperative that Switzerland advocates for an effective set of patent rules, for example in the context of free trade agreements. The life sciences industry, as well as other branches of industry, are strongly in favour of Switzerland and EFTA adopting a clear position on safeguarding patents and other intellectual property rights. At the same time, the Swiss patent system must be held in high regard internationally so that it can be a good example for countries that want to orientate their economies towards more innovation.

The regulations in the WTO TRIPS Agreement provide a good legal basis for international harmonisation in the area of intellectual property protection. However, abolishing compulsory licences sets a dangerous precedent and sends the wrong signal to innovative companies. In order not to jeopardise the ability of healthcare systems to prepare for future pandemics, there must be no extension of the vaccine TRIPS decision to COVID-19 therapeutics and diagnostics.

We must keep our aces in our hands
From a global perspective, scienceindustries companies are among the technology leaders and are well placed to remain successful in the innovation competition in the future. However, as global players, these companies are also constantly reviewing the suitability of their structures and the sustainability of their location conditions in Switzerland. At present, they still consider the general conditions in this country to be very favourable. This is evidenced by the billions invested in the country's research infrastructure. The challenges are more likely to be found at the political level. Switzerland's reputation as a centre of business as a guarantor of (economic) political stability and legal certainty has suffered as a result of various votes in recent years.