Switzerland
Trade, Migration, Exchange Rate, Capital Account Policies, and Globalization
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Introduction
Switzerland has one of the growing economies in the world, with an average gross domestic product of $703,165 million in 2019. It is ranked at position 20 out of 196 most established economies. By 2018, Switzerland had an average of 1900 Euros gain in real per capita GDP (Trading Economics, 2020). The economic growth realized in the country is associated with relevant trade, migration, and exchange policies. Switzerland has implemented desirable economic models and policies that have resulted in an exponential economic boom. Due to globalization, the country enjoys the free movement of labor and transfer of technology, free movement of goods and services, and flow of capital. Other benefits include subsequent evolution in its size, level of development, trading patterns, degree of macro volatility, and trade mix, and factor empowerment (Trading Economics, 2020). The emergence of globalization in Switzerland led to transformational growth in the pre-globalization levels making the country’s economy, one of the strongest in the world. The purpose of this paper is to discuss the relationship between Switzerland’s experiences on various economic policies. Using models learned in class, this paper will analyze how the country has managed globalization. A critical examination of trade, migration, exchange rate, and capital account policies helps to provide an insight into Switzerland’s experiences in relation to globalization.
Trade Policies in Switzerland
Switzerland has several Free Trade Agreements with the European Union since 1972. Currently, the country belongs to over 30 free trade agreements worldwide, with approximately 40 partners. In the framework of the European Free Trade Association, Switzerland partners with trade partnerships with many countries such as Japan, China, Norway, and the United States, among others. The primary objective of Switzerland’s trade policy is to improve and enhance framework conditions for economic relations with various economic partners. The policies are also to enable domestic firms in the country to operate efficiently and provide an unobstructed no-discriminatory market. Through various foreign trade policies, Switzerland opens export markets, which is essential for trade growth. Stabilization policies have helped the country to ensure economic stability through controlled economic elements such as employment, inflation, growth rate, among others. Switzerland also joined EFTA Declaration on Cooperation that provides channels for institutionalized dialogue on economic matters. The country’s economic structure is integrated into the world economy characterized by outward orientation. The prosperity of Switzerland’s economy relies on international trade and foreign investment. With current globalization effects on the economy, the trade policies are based on export and import policies.
Price et al. (2015) noted from the State Secretariat for Economic Affairs, Switzerland is ranked number 18 as the world’s largest country in terms of exports. By 2017, the total exports from the country amounted to $285 billion. Its major export countries include Germany, China, India, the United States, and Hong Kong. The implementation of globalization policies has resulted in an increase in exports for the past five years by 0.4% (Peterson & Jungluth, 2018). Import policies are meant to promote the entry of goods and services from foreign countries into Switzerland. For the past few decades, the country has registered an exponential decline in imports by 2%, giving a total import of $273 billion in 2017 (Peterson & Jungluth, 2018). Both import and export trade policies have made Switzerland realize their competitive and comparative advantage. By adopting a common space policy with the EU, the country has benefited in various sectors such as health, education, among others. Free trade policy has led to several improvements in the economic sector in Switzerland by opening, expanding, and exploring markets for domestic firms. It has also created a positive relationship between Switzerland and its trade partners, enabling the sharing of information. This establishes a stable and robust trading market for both local and foreign producers.
Migration policies
In the greater hope of finding compromises that would work in appeasing the Brussels while at the same time addressing the results of the 2014 referendum of the country, to cap EU migrations, Switzerland parliament passed into low an i9mmigratsione law that avoids outright quotas on the EU migrants. This had initially been demanded by but also did prioritize The Swiss job seekers in the process. The country’s policy seeks to develop and pursue its key elements. These elements include; a proper migrations policy hat grants protection to individuals who are really persecuted as it befits the country’s humanitarian tradition. According to it individuals who are forced out of their homes; as a result, of wars and other forms of persecution should be able to find refuge in the country. The other elements of this policy that aims at a scenario whereby both natives and immigrants do feel safe in the country. And lastly, a policy which works to safeguard and avenues the prosperity of the nation. For this reason, the countries policy encourages all the individual citizens of Switzerland to feel free employing individual from other countries (European Commission 2019).
The country is among those in Europe which the considerably higher percentages quota of the foreigners compared to the permanent population. In Switzerland, 21.9% of the people in the country are foreigners. Concerning various element of immigration, for asylum, the country’s quota has been considered as the greatest among other related nations. The current massive number of migration according to the country’s migration policy included the increase in absorption of asylum seekers, foreign with criminal’s record ad their rights stay in the country. The system also tends to look into the issue of a shift of paradigm for purely restrictive kind of migration measures to more kind of cooperatives and partnership-based agreements with the origin countries. The immigration policy of the country is considered one of the most robust in Europe. This is perhaps due to the considerably more significant number of individuals that it admits in the country and the peace and smooth process associated with it (Jungluth et al., 2018).
European Commission (2019) pointed out that migration policies in Switzerland focus on free entry into the country for EU and EFTA members without restrictions. Schengen citizens can move into Switzerland without limitations to get residence permit every year. Schengen, EU and EFTA members can migrate into the country without a visa and later apply for the residence permit to stay in the country. State Secretariat for Migration states that immigrants with a valid residence permit or work permits are legally recognized (European Commission, 2019). Some of the national migration policies are meant to protect migrant workers and take care of their welfare while working in Switzerland. Some policies limit “brain drain,” and this is done through restricted outflows. In this policy, the number of immigrant workers hired to work in the country is restricted. Besides, it also limits the number outflows of both skilled and unskilled labor into foreign markets. In Switzerland, some policies optimize the benefits of organized labor migration. This way, the country can maximize the utility gain from migrant workers (European Commission 2019).
Further, migration policies are meant to regulate the inflow of foreign labor to ensure citizens get opportunities. By controlling the influx of foreign labor into the country, job opportunities are secured for the local people. Currently, Switzerland has in the process of implementing new post-admission management of migrants to help control the number of total immigrants into the country. The new post-admission management is automated using technological data management that can provide detailed information about immigrants.
The Swiss policy of immigration works to gets migrants to the centre as quickly as possible, then to in the best way distribute them among cantons those who have the right of staying in the country. It has been considered that the distribution of this policy to the European level would be a great solution which has not appropriately had been instituted (European Commission, 2019). The administration of the country regarding migration is believed by many to be one which can also help most European country. The crises has been considered as the one which has helped most countries in solving some of the crisis most nations in Asia and another part of Africa are faced with. The country has admitted a considerably larges number refuges.
Exchange Rate and Capital Account Policies
Swiss National Bank sets exchange rates following the world market considering the economic factors. In 2011, the rate was at 1.2 Swiss francs to the euro. The rate has then been depreciating by over 8% until 2015 (European Commission, 2019). Currently, Switzerland National Bank keeps checking the amount of money circulating in the economy through fiscal and monetary policies. With a monitored flow of money in the economy, the country has been able to maintain stable exchange rates that are economically desirable for both foreign and domestic investors in the country. The national bank uses fiscal and monetary policies to control economic elements such as inflation and unemployment and lower rates to enhance faster economic growth. Swiss National Bank is also responsible for formulating appropriate capital account policies (Jungluth et al, 2018). Newly formulated capital account policies are being implemented, and they focus on yearly information on current capital controls. In connection to capital accounts, policies are made to regulate capital inflow, which measures quantitative and price-based inflows. Switzerland, through the national bank, implements macro-prudential policy regulations that control the capital inflow and outflows in the country (European Commission 2019).
From the analysis of migration, trade, exchange rate, and capital account policies, it can be drawn that there is a relationship between the policies and globalization. In various ways, globalization impacts how Switzerland formulate and implement trade, migration, and exchange rate policies. As noted earlier, globalization is an international economic process that has led to the progressive integration of the worldwide economic order through the elimination of trade barriers and enhancement of the factor of production mobility. The process of globalization is enhanced by technological innovation, which provides momentum to the progressive intermigration between nations. The characteristics of globalization include free movement of labor and transfer of technology, free movement of goods and services, and flow of capital with advancements in, level of development, trading patterns, degree of macro volatility, and trade mix and factor empowerment. This implies that globalization directly impacts Switzerland’s policies and affects its experience with such policies. Globalization enabled Switzerland to increase its financial market integration (Jungluth et al, 2018). Due to the excess capital in Switzerland’s economy, economic integration increased the domestic income. Also, the commercial combination enhanced the investment opportunities hence reduce the overall risks of investors’ portfolios. It is, therefore, essential for the country to put much focus on ways to increase the globalization rate to realize the benefits of trade and migration policies (European Commission 2019).
Conclusion
In conclusion, from the previous assignments, it was noted that since Switzerland adopted globalization, it has undergone transformational growth in the pre-globalization level and subsequent years to make itself an economic powerhouse. However, based on the above policy analysis, it is clear that globalization has a significant impact on trade, migration and, exchange rate, and capital account policies; thus, it requires more attention. It is recommended that some national resources should be diverted to help facilitate the process of globalization in Switzerland.
References
European Commission. (2019). Switzerland – Trade – European Commission. Retrieved from https://ec.europa.eu/trade/policy/countries-and-regions/countries/switzerland/
Peterson, T., & Jungluth, C. (2018). Globalization Report 2018: Who Benefits Most from Globalization? Retrieved from https://ged-project.de/research/studies/globalization-report-2018-who-benefits-most-from-globalization/
Price, B., Kienast, F., Seidl, I., Ginzler, C., Verburg, P. H., & Bolliger, J. (2015). Future land-scapes of Switzerland: Risk areas for urbanization and land abandonment. Applied Geography, 57, 32-41.
Trading in Economics. (2020). Switzerland GDP Growth Rate | 1980-2019 Data | 2020-2022 Fore-cast | Calendar. Retrieved from https://tradingeconomics.com/switzerland/gdp-growth