Evening star. [volume] (Washington, D.C.) 1854-1972, 1949-09-11
Swiss-Germon Trade Pact

between Switzerland and West Germany
is another step in the sustained initiative
of the Swiss toward the restoration of
normal economic relations with their
European neighbors. It likewise illustrates
the complex difficulties in attaining that
goal.
experts who took part in the negotiations
as "in the interests of all of Europe" and
hailed by leading Swiss newspaper as
"the decisive turning point in the whole
shackled trade policy of the last decade
and half" the agreement has neverthe-
less been criticized in Swiss financial quar-
tiers, especially by the great commercial
banks, as hindering that investment of
Swiss capital in Germany which could no.
tably further the progress of West German
industrial recovery.
The outstanding feature of the agree
ment is return to the principle OF supply
and demand in Swiss German trade. On
the German side, this reflects the tradi-
tional economic liberalism of the new
Christian Democrat Government as voiced
by its economic spokesman, Professor
Erhard, champion of ''free-market econ
omy." It supersedes determinations hith-
erto in force in West Germany between
essentials" "semi-essentialS and mon
essentials" in import quotas, which have
badly hampered Swiss-German trade. The
cover the entire field of Swiss production,
percentage categories being set up to as
sure fair spread, reckoned on a monthly
basis. Since Switzerland follows the "open
door" policy on trade, no restrictions
whatever are placed upon German exports
to Switzerland.
The controversial aspects of the agree
ment concern methods of German pay
ment. What the Swiss banks object to is
that no adequate provision has been made
to cover payments by Germany for "in-
visibles" such as interest on loans, divi-
dends on investments, amortizations, in
Surance premiums, patent fees, licenses,
royalties and travel. The banks contend
that this handcaps the flow of Swiss in
vestment capital urgently needed in Ger
many, because Swiss investors will not
undertake it until there Is adequate as
surance that the security is ample and
that at least capital yields will be promptly
paid, transferred, and converted into Swiss
francs. The answer of the negotiators is
that, If Germany spends large part of its
swiss-franc proceeds on payments for Gin
visibles," the rate of increase of its export
capacity will be notably retarded. They
60 on to argue that, once Germany exports
as much as the Swiss market can absorb,
provision for "invisibles" payments can be
made without handicapping trade or COM
plicating the investment picture. If this
contention be sound the combined effects
should be considerable; because, in many
lines Of manufacture-automob for ex-
ample-Germany can already supply prod
ucts of equal quality and at lower prices
than her industrial competitors. But West
Germany cannot yet supply as much as it
could sell. It needs. first to step up its
output. And that requires moro capital
equipment of the kind Switzerland is able
to furnish. But that, in turn, needs
financing over and above what trade bal
ances can quickly yield. So that is where
potential Swiss investment comes into the
picture once more.
From this, two conclusions logically
emerge. The first Is the way all factors in
economic recovery, from trade and ex-
change to foreign investment, are in
timately related. The second conclusion
is the constructive economic role which
Switzerland plays in Europe's economy.
This role, far larger than this small coun-
try's size and natural resources might in
dictate, is due to number of causes, in
Guiding an economy unscathed by war, a
currency hard" as our own dollar, and
perhaps above all the economic wisdom
and long experience of the Swiss them
selves.