Central banks cannot directly shape the international trading system, nor can they prevent protectionism. Should the current trade disputes escalate into a fully fledged trade war, the SNB would have to adapt to this new backdrop. The uncertainty that a flare-up in protectionism would bring would nevertheless complicate the fulfilment of our mandate. Let me make one thing clear: The tariffs that have been imposed in the past few months will not plunge the world into a recession. Any such fears are exaggerated. As Chart 6 shows, the International Monetary Fund, in its recently published outlook, continues to forecast steady growth in global GDP and world trade. 7 Should the protectionist spiral continue, however, this could stall the global expansion phase and fuel inflation. Switzerland would be well advised to actively advocate appropriate trade rules at the international level, and ensure that these are kept to in spirit and not just by the letter. Free trade is one of the key driving forces behind our prosperity, and we should do our utmost to safeguard its achievements. 7  Cf. International Monetary Fund (October 2018). Page 8/9  Bibliography Autor, David H., David Dorn and Gordon H. Hanson (2016), The China shock: learning from labor-market adjustment to large changes in trade, Annual Review of Economics, 8, pp. 205– 240. Bank for International Settlements (2018), Annual Economic Report, June. Berthou, Antoine, Caroline Jardet, Daniele Siena and Urszula Szczerbowicz (2018), Quantifying the losses from a global trade war, Eco Notepad, Banque de France blog, 19 July.

The WTO system of rules is by no means perfect, and its weaknesses must be addressed if international trade is to be generally seen as being ‘fair’ once again. That said, protectionism is definitely not the right way to make trade fairer. Rather, the debate surrounding this issue should be taken as motivation to be all the more resolute in eradicating the shortcomings of the existing system. These become evident particularly when it comes to tackling marketdistorting subsidies and hidden market access barriers in many countries. Furthermore, there is also room for improvement with regard to dispute resolution and the monitoring and transparency of WTO members’ trade measures. Finally, it would also make sense to modernise the WTO by placing a stronger focus on the services sector and online trade. Page 7/9  Conclusion Ladies and Gentlemen, dealing with economic openness is not always easy – and like others, Switzerland repeatedly faces new challenges in this regard. However, our country has learned to deal with them. The necessary flexibility has been and remains entirely conducive to Switzerland’s competitiveness. It is almost certainly no coincidence that the most productive sectors in the Swiss economy are those with particularly strong exposure to international competition. The commitment to open markets and the willingness to continually adapt to structural change are pivotal when it comes to securing a country’s competitiveness over the long term. Protectionism can only serve to delay structural change in a country, it cannot stop it. It is detrimental to competitiveness and ultimately to prosperity as well.