Switzerland: 6 reasons for globalization

Switzerland regularly receives the highest score on the Globalization Index. The reasons for this are its vibrant trade and financial center, the presence of numerous international organizations and the small size of the country.

Switzerland once again took the top spot as the most globalized country with an overall score of 91/100 (100 corresponds to "full" globalization), followed by Belgium and the Netherlands with scores of 90/100 each. These three countries have consistently ranked at the top over the past decade.

So how can a landlocked country with less than 500 000 inhabitants be the most globalized?

Is it possible to measure the level of globalization?

There are different definitions of globalization, and therefore different ways of measuring it. Some indicators seek to quantify the extent to which countries are integrated into world flows, while others focus on several economic and financial criteria.

The index compiled by the research center ETH Zurich is one of the most widely cited, as it allows international comparisons and observes changes since 1970.

It combines about forty variables that take into account not only the economic dimension of globalization (in particular trade and financial flows), but also the social (migration, tourism, cultural influence, etc.) and political (the number of international organizations or embassies, for example).

Globalization is a process of increasing connections and interdependence between countries," says KOF expert Tim Reinicke. It's not just about economics, so it's important to take a broader view. In the final result, all three dimensions have the same weight.

For each of these dimensions, the index distinguishes between the degree of effective globalization ("de facto") and more or less favorable framework conditions ("de jure") (e.g., customs duties, visa rules or membership in international treaties).

Like any other index, it also has its limitations. The choice of variables depends largely on the available data. While many statistics can be used to quantify economic globalization, the cultural impact of one country on another is inherently more abstract. On this account, the choice of some indicators is controversial, admits Tim Reinicke. "We include the number of McDonalds restaurants and IKEA stores in the index, which does not meet with unanimous approval," he says.

Switzerland is globalizing in every way

Switzerland is not at the top of the list, but it scores highly on every dimension taken into account in the index: 86.5/100 (8th place) on the economic dimension, 90/100 (2nd place) on the social dimension and 96/100 (8th place) on the political dimension.

Other countries have a more mixed profile, ranking very high in one area but lower in others. For example, Singapore is the most globalized country economically, but 22nd in social globalization and 98th in political globalization. The United States is less globalized economically (66/100) but very globalized politically (92/100).

Switzerland has an active trade with foreign countries

KOF cites the foreign trade of Switzerland, the Netherlands and Belgium as one of the main factors behind their high ranking in economic globalization.

Switzerland's exports are based on high value-added goods: pharmaceuticals and chemicals, watchmaking and mechanical engineering.

The share of Swiss GDP attributable to imports is 60 % and exceeds the average of neighboring countries (31 % in France, 42 % in Germany, 47 % EU average) and the global average (28 %).

Despite a kind of selective protectionism, especially with regard to agricultural products, Switzerland is one of the most open economies, with virtually no taxes on foreign trade.

Switzerland attracts money from all over the world

Another important part of Switzerland's high degree of globalization is the international attractiveness of its financial center and the stability of its currency, which, according to KOF, explains why a large amount of foreign money is spent or invested in Switzerland.

"Switzerland plays an important role in the global financial sector," says Tim Reinicke. "It is one of the main trading platforms for commodities and a lot of money flows through it. On the regulatory front, Switzerland is party to 150 international investment agreements, one of the highest numbers in the world.

People are very mobile

Economic considerations aside, Switzerland ranks highly on most of the indicators used by KOF to assess the degree of globalization of its population.

For example, it is the developed country with the highest proportion of migrant population after Luxembourg. A quarter of Switzerland's population is foreign-born and almost 30% were born abroad.

Despite being far behind France, the world's leading tourist destination, Switzerland attracts tourists and is also one of the OECD countries with the highest rate of internationally mobile students (almost 20%).

Switzerland is at the center of global governance

But it is in terms of political globalization that Switzerland ranks first. More than 130 embassies and consulates represent the Confederation worldwide, making it the 17th country in the world in terms of the absolute number of diplomatic missions abroad (China tops the list with 265 posts).

In contrast, the small country of only 9 million people is home to more than 70 foreign diplomatic missions, as well as the highest number of permanent missions (almost 80) to international organizations.

Switzerland is itself a member of several international organizations such as the United Nations (UN), the Council of Europe and the Organization for Security and Cooperation in Europe (OSCE), and hosts about forty of them, mostly in Geneva, which is also one of the main centers of international cooperation. Belgium, ranked second in the ranking, is home to the European institutions in its capital, Brussels.

It is a small country

Most of the most globalized economies are small and inherently more dependent on others.

For countries with small domestic markets, often with few natural resources, open economies and connections with other countries are almost a necessity if they want to compete globally.

The United States or Russia, for example, can be self-sufficient in their own production and don't need ties with other countries," explains Tim Reinicke. They are also not dependent on the global political system, as they are "their own system".

The small size of a country also influences the globalization of people: for example, short distances to neighboring countries and fewer national attractions promote cross-border tourism. It can also be assumed that, in terms of opportunities, the temptation to cross borders is higher if you live in a small country.

These factors make Switzerland an important player in the global economy and politics.