Advancing Swiss interests

Gregor Muischneek, head of the economy and finance section at the Embassy of Switzerland in Japan

FEBRUARY 2022 The Interview / Text by Andrew Howitt / Photos by Benjamin Parks

Since 2012, Gregor Muischneek has served Switzerland in the Federal Department of Foreign Affairs (FDFA). In addition to postings to China, Kenya, and Germany, he has worked in the Directorate of Political Affairs and the Directorate of International Law in Berne. Muischneek was also legal officer and deputy head of the FDFA’s International Humanitarian Law and International Criminal Justice Section (2018–2021) before being posted to the Embassy of Switzerland in Japan last September. He is head of the economic and financial section.

What are your objectives for the economy and finance section this year?

I’ve been told that the Year of the Tiger is characterised by courage and ambition, but also generosity and as a time to do what’s best for everyone. In this spirit, my objective is to advance the economic interests of Switzerland and Swiss companies in Japan, but always with a view to creating mutual benefits.

We remain focused on our core mandate, which is to analyse and understand the economic situation in Japan, identify opportunities, and improve the regulatory environment for Swiss companies. With regard to this last point, our top priority is to convince the Japanese authorities to engage with us in modernising our bilateral free trade and economic partnership agreement.

This year, we are cautiously optimistic that we will be able to welcome political and technical delegations again. For instance, we aim to hold the next round of our longstanding financial dialogue in Tokyo in the first half of the year.

How is your office helping to support and promote Swiss businesses in Japan?

We continuously work with Japanese authorities on reducing barriers to trade. Let me mention one recent success story. In Switzerland, there is a tradition of producing high-quality air-dried beef products. In our free trade agreement, we had negotiated a tariff rate quota for these products, but Japan put import restrictions in place after an outbreak of BSE in Europe. Our efforts recently led to a partial lifting of Japan’s restrictions on our beef products.

In order to identify similar issues, we rely on companies to share their views with us on the business environment and the challenges they are facing. The Embassy of Switzerland is always open for businesses.

In terms of promotion, the Swiss Business Hub plans pavilions at BioJapan in October and the Japan International Machine Tool Fair in November to cater to the strong interest in the Swiss life science and machinery industries from the Japanese market. We also explore how we can best support Swiss businesses in joining up with Japanese companies involved in engineering, procurement, and construction for infrastructure projects.

What changes would you like to see made to the Switzerland–Japan Economic Partnership Agreement?

Back in 2009, Switzerland was the first European country Japan concluded a bilateral free trade agreement with. This pioneering agreement is an important pillar of our bilateral relations. It has served our businesses well and there is still the potential for companies to make better use of existing tariff preferences, such as with regard to the export of organic chemicals to Japan.

While we are proud of the agreement, it is important to understand that both Japan and Switzerland have evolved in their positions on free trade over the past decade and concluded a series of new agreements. Given Switzerland’s close integration into the European market, it is of particular significance for Swiss and Japanese companies that there be a certain alignment of our free trade agreement with the EU–Japan Economic Partnership Agreement, which came into force in 2019.

We therefore seek a comprehensive modernisation of our free trade pact. This would go beyond questions of market access, and may include issues such as rules of origin, trade facilitation, and e-commerce, as well as trade-related aspects of sustainable development. Over the past few years, we have advocated for such an update with the Japanese authorities, and we hope to take a concrete step forward this year

What is the current level of trade between Switzerland and Japan?

Overall, the bilateral trade volume between Japan and Switzerland has doubled in the past 20 years. We knew that the economic ties between our countries are strong and solid, but the pandemic has revealed just how resilient they are. With only a minor decline in 2020, bilateral trade reached €11.7 billion last year, which is 2.5% higher than in 2019.

The pandemic has affected trade in some unexpected ways. Swiss exports to Japan declined significantly in 2020, but recovered well in 2021. However, Japanese exports to Switzerland increased by a substantial 14% in 2020 and remained relatively high last year. This reduction of Japan’s trade deficit is driven in part by pharmaceutical and chemical products. Indeed, these categories now make up more than half of Swiss exports to Japan, and more than a third of Japanese exports to Switzerland.

Have there been any important recent investments from Switzerland in Japan?

With more than 200 Swiss companies in Japan, Switzerland has a significant economic presence here. This year, we want to gain a better understanding of the scope and impact of this Swiss footprint. We know that the pandemic did not deter investors. On the contrary, according to Japanese figures, Swiss foreign direct investment grew significantly in 2020, making Switzerland the sixth-largest investor in Japan. Last year for instance, the Swiss chemicals company Sika strengthened its market position in Japan by acquiring Hamatite, a leading Japanese adhesives business.

How have Swiss firms been involved in combatting the coronavirus?

Switzerland is a global centre for research, development, and production of pharmaceutical products. It is only natural that Swiss companies have contributed to the fight against Covid-19. Prominent examples are Lonza, which produces the drug substance for the Moderna mRNA vaccine, and Roche, which developed both the first commercial PCR test for SARS-CoV-2 and the drug Ronapreve to treat Covid-19 in adults.

In Switzerland, numerous startups and university spin-offs have also risen to the challenge. For example, Diaxxo, a spin-off from the Federal Institute of Technology ETH Zurich, developed a PCR test that delivers results in 25 minutes without having to rely on trained laboratory staff.

Switzerland ranked first in the Global Innovation Index 2021, holding its position at the top of the list for the 11th consecutive year. What factors have contributed to making Switzerland such an innovative nation?

Switzerland regularly takes leading positions in international rankings on innovation. A crucial element of this success story is a division of labour between the public and private sector. In order to remain competitive, we invest a lot in research and development — around 3% of GDP. Crucially, the private sector accounts for two thirds of this expenditure. This framework for innovation generates a strong and sustained interest among Japanese investors. Indeed, in 2020, FDI from Japan grew significantly, making Switzerland the eighth most important investment destination.

International cooperation is equally important. In this regard, Japan is a priority country for us. At the embassy, we have a science and technology office, which connects research institutes, startups, and businesses, and facilitates academic exchanges. Recognising the importance and further potential of Japan, we have strengthened our work in this area by opening a consulate in Osaka with a focus on science and innovation.  •