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Swiss links to the US economy: the global economy has been in the doldrums for quite a while now. Each one of us awaits a recovery. Swiss News looks at how the US economic pick up can influence the recovery of the Swiss economy.

Not only are the United States and Switzerland tied together by a deeply held love of liberty, but maybe, and more importantly, by a close relationship bound by money, investment and trade.

The total Swiss investment in the US last year was $274 billion and the total US investment in Switzerland was $268 billion. In the form of direct investments alone, Switzerland has invested in the US an amazing amount of $8,013.70 per man, woman and child in Switzerland.

Also, the US is the largest direct investor in Switzerland, accounting for 8.5 per cent of US direct investment, and ranking Switzerland as the fourth most important destination for US investment dollars.

So how then does Switzerland manage to attract such a strong interest from the US business community? Well the answer is simple as the Swiss-American Chamber of Commerce (SACC) is keen to point out.

"Switzerland has an effective and transparent tax system, moderate tax rates, accessible tax authorities, and the availability of tax concessions and rulings," states the SACC.

Other factors that swing in Switzerland's favour are its highly qualified labour force and more flexible labour laws than in most other European countries. Add to that the high quality of life, excellent educational institutions and low crime rate and you'll see those US investment dollars queuing up to be let in.

Important Test Market

Switzerland is certainly one of the most sought after business location for major US corporations. Over the last year we've seen such US notables as razor blade manufacturer Gillette. retail giant Wal-Mart, internet auction house Ebay, fashion empire Ralph Lauren and consumer goods giant Procter & Gamble all move their European headquarters to Switzerland.

American businesses are even. being advised to use Switzerland as a test market for products they intend to try and sell in Europe.

The US department of trade's Country Commercial Guide (CCG) describes Switzerland as "an excellent test market for businesses hoping to introduce new products to Europe".

It cites the country's highly developed, multilingual market, its location in the middle of Europe, and its well-educated and affluent population.

This advice is not news to at least two American companies--McDonalds and Starbucks--which have already used Switzerland as a test bed for planned overseas expansion.

Close Economic Ties

US Senator Phil Gramm is also vice president of Switzerland's largest banking concern, UBS. He recently told the assembled members of the Swiss-American Chamber of Commerce that few nations are more closely bound economically than Switzerland and the United States.

"Together our relationship creates jobs, growth and opportunities for both of our countries and the world," noted Gramm. "Needless to say, I'm proud to be a small part of all of that."

The facts regarding the strong link between the US and Switzerland speak for themselves. Some 700 Swiss companies have significant operations in the US, while some 600 US companies operate in Switzerland.

Also there are 69,500 Swiss citizens living and working in the US, while 13,400 Americans live and work in Switzerland.

US-Led Recovery Expected

Despite the economic slowdown Swiss companies have been doing well in the US market, increasing exports by 2.6 per cent over 2002, while US companies saw their volume of exports to Switzerland drop back by 5.6 per cent.

But Senator Gramm is optimistic about the economic outlook for the US and the knock-on effects that will have on the Swiss economy.

"The recovery has already begun," explains Gramm. "The economic growth that was lost in the first quarter in all probability will be realized in the third and fourth quarters as those economic investments now come forward."

This growth will have a positive effect on the economy of Switzerland and the rest of Europe.

Post-War Friction

However, there are some concerns that frictions caused by the war in Iraq will put substantial strains on the relationship between Europe and the US.

"It is clear in retrospect that the US and Europe have been drifting apart for some 20 years," warned Gramm as he highlighted the major difference of opinion between the two over the functions for NATO and the United Nations in the light of the second Gulf War.

"The relevant question now seems to me to be what kind of economic legs do the frictions created by the war in Iraq have?" posed Gramm. "How will they fundamentally impact the relationship between the US and Germany or the US and France?"

"Do people buy products and invest based on hurt feelings and political differences? I think happily the answer is 'no'. In the end, people will want to buy the best product at the lowest possible price and will invest based on expected return and risk. The reality is that Europe and America need each other. As my grandmother used to say "blood is thicker than water, but money is thicker than blood," concludes Gramm with a smile.
Swiss FDI flows abroad by geographical destination,
1997-2001, mio CHF

 1997 1998 1999 2000 2001

EU 12598 10155 21359 28917 10077
USA 7690 3226 13557 33678 9271
Developing Countries 4024 11487 11720 11532 6555
Rest of World 5000 2828
Japan -203 124 628 336 466

Source: Unctad

Swiss FDI flows abroard, 2001

EU 34%
USA 32%
Developing Countries 22%
Rest of World 10%
Japan 2%

Note: Table made from pie chart.

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Author:O'Brien, Tom
Publication:Swiss News
Date:Nov 1, 2003
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