Philipp M Hildebrand: Monetary policy challenges – Swiss exports in a globalised world Speech by Mr Philipp M Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the Swiss Mission to the European Union, Brussels, 23 November 2010. *  *  *  I would like to thank Caroline Schmidt and Rita Kobel Rohr for their valuable support in drafting this speech. 1. Introduction  I am pleased and honored to speak to you today at the Swiss Mission to the EU. Thank you for the invitation and the warm welcome. In the past few decades, globalisation has had a deep impact on the world economy. Whether the world has indeed become “flat”, as Tom Friedman put it, remains to be seen. Certainly, the notion of a “global village”, in which all aspects of life are ever more interconnected, is an apt description of our world today. One of the areas most affected by globalisation is the world economy, which has become highly integrated. This is due not only to technological innovation, but also to the fact that countries have deliberately opened up their economies; a phenomenon witnessed around the globe in recent decades. The results – greater trade and financial flows – have brought many countries enormous prosperity. This applies to the EU and it certainly applies to Switzerland with its small home market. However, the most recent financial and economic crisis has clearly demonstrated that the growing integration of the world economy also entails a number of risks.
But even for exports of processed metal goods and machinery does Switzerland have higher export unit values than, for instance, the EU. 15  Looking at developments over the last 20 years, it is primarily the prices of watch exports that have risen considerably. 16  Ireland also exports a lot of chemical and pharmaceutical products. Besides, the unit values of its exports of electronic products are also very high. 6  BIS Review 157/2010  Chart 3  Source: Eurostat. Overall, the results from a unit value analysis support the assessment that Switzerland is specialised in the production of high quality products. This is in line with previous studies. These show that Swiss export products largely compete on quality, rather than on price. 17 Given the level of know-how in Switzerland, this ought to be the case in the future as well, assuming that Swiss products can continue to fulfil the ever-growing demands on quality. To what extent could this have had a positive influence on the way in which exports developed in the most recent crisis? For the short term, at least, it can be assumed that higher quality products are more difficult to substitute than relatively homogenous goods. This applies not only to pharmaceuticals, but also to highly specialised products such as precision instruments. And this was indeed the case during the most recent crisis – Swiss exports of precision instruments receded only slightly, and have since risen to such an extent that they now already exceed their pre-crisis level.