Switzerland embrace of globalization
Globalization has positively affected Switzerland, making it a globalization winner in terms of trade with the most significant growth in real GDP per capita. Switzerland has gained the highest economic profits from global interconnectedness. Switzerland embrace of globalization has made it benefit in many ways.
Firstly, Switzerland has been able to sign over 100 trade deals between itself and the European Union countries and has joined major economic organization such as WHO, EFTA, and OECD which have been very crucial in opening Switzerland’s economy to the international markets for trade. The international business has enabled Switzerland to concentrate on the production of specific products in which they have a comparative advantage.
Secondly, globalization has raised competition in Switzerland tradable goods sectors. International trade has enhanced productivity in the local production line since imports can easily substitute some of the goods. International trade foster relocation of resources towards more productive industries.
Thirdly, Switzerland’s economy’s openness has led to higher labour productivity through fostering capital accumulation. Also, Switzerland’s access to international capital has facilitated the solving of domestic capital shortages through capital importation. The abundant capital stock in Switzerland lead to higher productivity and stable economic expansion compared to countries that have scarce capital.
Lastly, globalization enabled Switzerland to increase its financial market integration. 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. The diversification of risks reduces risk premiums and therefore, production costs, which has positively affected Switzerland’s investment demand.
