When companies close their local production facilities, even liberal politicians forget their Sunday school principles. An episode this week from the Council of States on the controversy over industrial policy provides some insight. In Sunday school, noble principles are preached, but on weekdays, people pretend to be “flexible.” This is a common phenomenon in life, and therefore also in politics. So it is no surprise when supposedly environmentally conscious politicians suddenly discover their love for energy-intensive steelworks and supposedly liberal minds suddenly demand industrial subsidies.
The Swiss steel industry has suffered in recent years, attributed to factors such as sharply increased energy prices, subsidies abroad that distort competition, and import restrictions in the EU. The problems at the Gerlafingen steelworks inspired Solothurn politicians to make proposals in the federal parliament for state aid measures. A motion by Solothurn SP Council of States member Franziska Roth calls for emergency measures to save the Gerlafingen steelworks – “if necessary with emergency powers.”
According to Roth, Stahl Gerlafingen is “systemically important for Switzerland”. If it were to close, over 500 jobs would be lost and Switzerland would lose its “only plant that closes the relevant metal cycles, produces structural steel and secures the raw materials domestically”. The motion is co-signed by the other Solothurn resident in the Council of States, the Centre Party representative Pirmin Bischof. The proposal was on the agenda for this week in the Council of States.
Another initiative on the same topic was on the agenda this week: a motion by the Lucerne FDP Council of States member Damian Müller, which also calls for help for the steel industry – “to secure Switzerland as a production location and to preserve the circular economy.” The canton of Lucerne is home to the other steelworks in Switzerland (Steeltec in Emmenbrücke).
The term “systemic relevance” was previously limited to large banks and electricity companies or their power plants. The term meant that a failure would cause extremely high economic costs due to an enormous broad impact. In a paper from May, the State Secretariat for Economic Affairs denied the systemic relevance of Swiss steelworks, since in the event of a failure, other suppliers could be used; there is also global overcapacity in the steel sector. The paper also referred to Switzerland’s lively international trade in both directions. In 2023, Switzerland imported around 350,000 tonnes of steel scrap and exported around 800,000 tonnes.
This week, the Council of States sent the motions mentioned to its responsible committee for examination. However, an intervention by the Vaud FDP Council of States member Pascal Broulis caused a stir. The closure of the last Swiss glass factory by Vetropack in the canton of Vaud, announced in the spring, alarmed local politicians and triggered another motion in the federal parliament. This calls for an “industrial strategy” (read: subsidies). Of course, with special consideration for the glass sector.
In May, the Federal Council concluded, based on an external study commissioned on recent subsidy programs in the EU and the USA, that the damage and benefits of these programs for the Swiss economy more or less cancel each other out. However, the damage may be visible and concrete in the short term in the form of (possible) relocation of production. The benefits of not having Switzerland join the race for subsidies are diffuse and widely distributed and therefore not very visible. Politicians are primarily interested in what is visible in the short term – and they want to be seen doing something to prevent damage. Economists can more easily afford to be politically incorrect at their desks.