Strengthening free trade, dismantling customs duties

scienceindustries actively advocates a customs policy that promotes free international trade and dismantles trade barriers. Switzerland must continue to be a preserved as a global trade partner with attractive trade conditions for industry. This also includes support for the existing free trade agreements and a clear position against protectionist tendencies that could hinder international trade.

Customs policy encompasses all measures that a state takes in international trade to regulate the movement of goods across its borders. These include tariffs, import and export regulations, quota systems and other trade policy instruments. It pursues objectives such as protecting the domestic economy, collecting state revenues and managing international trade. Customs duties can also be part of a broader trade strategy aimed at bilateral or multilateral trade agreements and the promotion or restriction of trade relations.

Tariffs can be used as a means to achieve political or diplomatic goals, for example in the context of trade wars or sanctions against certain countries. Overall, they serve not only economic and fiscal policy, but also to promote or inhibit international trade relations. Increasing tariffs always carries the risk of countermeasures. These could significantly disrupt established supply chains and lead to a trade war. “Tariff increases may protect local industries in the short term, but in the long term they have a negative impact on overall economic growth and international trade.” (Paul Krugman, Nobel Prize winner)

Higher tariffs – a risk for companies and consumers

As a country with few natural resources, Switzerland relies on the smooth flow of goods. Accordingly, imports of semi-finished materials are important for Switzerland as a production location. The elimination of Swiss industrial tariffs at the beginning of 2024 strengthened Switzerland as a business and industrial location. The welfare gain is estimated at around CHF 860 million. Thanks to the elimination of customs duties and the associated administrative simplifications in customs procedures, companies in Switzerland benefit from cheaper intermediate inputs, enabling them to reduce their production costs and increase their competitiveness. While tariffs were previously intended to protect domestic industry from foreign competition, today they make the procurement of intermediate materials from abroad more expensive.

The impact of tariff increases on companies depends on factors such as the trading partner, the production location, the supply chains, the type of products and the level of tariffs. Tariff increases carry the risk of countermeasures by third countries. These could significantly disrupt established supply chains, which could lead to a trade war. Such a trade war would not only affect companies active in Switzerland, but also subsidiaries and customers in countries from which the market is served with increased tariffs. Our member companies are embedded in global supply chains. They serve the markets either directly from production facilities in the respective markets or through production facilities outside them.

Relocation of production to circumvent tariffs is not realistic

The former would not be affected at first glance, as long as they can procure the input materials subject to tariffs exclusively in the corresponding market. If this is not the case, production costs will also increase in this market. Overall, the price level in the affected market will rise, with possible negative effects on its competitiveness in exports. For companies with production sites outside the market, there is a risk that they will have to raise their export prices depending on the location, which may reduce their competitiveness compared to local companies or other competitors.

In the chemical-pharmaceutical industry, it is not realistic to relocate production in order to circumvent tariffs in the short term. Building a pharmaceutical production plant is a long-term, resource-intensive process that must meet strict regulatory, technological and safety requirements. It usually takes two to five years for a new plant to be ready for operation. Each phase of the project (planning, construction, testing and validation) must be carefully planned and implemented to ensure that the plant operates efficiently and in compliance with the law.