BIS Review 15/2007  19  force of market mechanisms. Taxes that require the polluter to pay and tradable emission quotas are important instruments. When the costs of reduced emission are to be distributed, it will be tempting for countries to act as free riders. Restrictions and taxes that only apply to one country or to a small group of countries do not solve the problem. There are important lessons to be drawn from international trade cooperation in the post-war period, which was also marked by strong conflicts of interest but still made headway through the period. It is still uncertain how serious the impact of gas emissions will be. But once the impact comes into full evidence, it may be too late to take corrective action. There is also the risk that the concentration of greenhouse gases in the atmosphere reaches such a high level that it exceeds critical values that cannot be reversed. The right approach is therefore to guard against events that may have serious consequences even if there is a small probability of the event occurring. Most of us already pay a certain amount every year to guard against the consequences of events we will hopefully never experience. The cost of curbing global warming can be looked upon as such an insurance premium. Higher transport taxes and increased electricity and energy prices are a small price to pay. 6  Conclusion  I opened by quoting from Rolf Jacobsen.
Deregulation has followed as an inevitable consequence of competitive pressures. Particularly in the Anglo-Saxon countries, labour and product market reforms enhanced this structural shift towards a global competitive trading and financial system. This increased flexibility in factor and goods movements coupled with large scale technological innovations led to a boost in productivity which is the ultimate underlying force of potential trend growth. Though the long-term effects of these structural adjustments on the real economy are complex, there is no doubt they have unleashed a powerful dampening effect on prices in many sectors of the economy. Most of you who are present here today are actively engaged in running companies in a global competitive environment. You need no sophisticated economic analysis to tell you that when exposed to fierce global competition, monopoly rents and pricing power decline and prices therefore come under downward pressure. 4. Switzerland: one Country – two Economies  As a small open economy, Switzerland is greatly affected by global cyclical let alone global structural developments. Unfortunately, over the last twenty years, our economy only partly subjected itself to the global market place. It has therefore developed along diverging paths. Our export sector has been fully exposed to the competitive forces of global economic and financial integration. Many of you represent this sector. To remain competitive in the global market place, you have had to innovate your production processes in a continuous attempt to increase your productivity.