'If it says Swiss on it, it should have Swiss inside it'
Brand value is in the eye of the beholder. But when that brand is a nation, the process can be extremely complex, as Switzerland’s government, parliament and federal institutions have come to realize ever since they started working on the "Swissness" project five years ago, writes contributor Marton Radkai.
The issue facing Swiss lawmakers, and a host of experts, is the value of the labels “Swiss made” or “Made in Switzerland”, as well as the emblematic images that go with them, like the Swiss flag, or a view of the Matterhorn with its unmistakable profile. These appear on a wide range of products, from chocolate bars and hiking gear to precision machines and even medications.
For decades, these words and images have denoted real or perceived quality, reliability, ingenuity and trustworthiness around the globe, and they have been protected by law. A watch that claims to be “Swiss made”, for instance, has to have 51 percent of the value of its movement created in Switzerland, and assembly and quality control must also be performed in the country.
In 2006, the Federal Council proposed the revitalization and strengthening of the regulations governing how much Swiss had to be in "Swiss made", and so Bern went to work defining the criteria for carrying the label.
The idea behind the draft law is to protect the value of the Swiss denomination in the face of global competitiveness, says Felix Addor, Deputy Director of the Swiss Federal Institute of Intellectual Property.
“International marketing studies show that Switzerland as a designation for a product or service enjoys an exceptional reputation at home and abroad, leading to an added value of up to 20 percent.”
For the watch, jewellery, chocolate and engineering industries together, the added value in real revenue is around 6 billion francs ($6.4 billion) per year.
Over the years, the existing law had become too vague. Companies in Switzerland and abroad began exploiting loopholes for commercial purposes.
Between 2000 and 2010, the number of brands using the Swiss label in one form or another increased fourfold. This led to a decline in consumer confidence and a general weakening of the brand or co-brand’s value – not a very good outlook for a nation that earns about half its GDP from exports.
Some provisions of the draft law are cut and dried. No one disputes that products from within the country’s borders, like fish, venison, plants, and so on, are Swiss. And "Swiss" service providers in the future will have to work within the country’s borders.
When it comes to processed natural products, however, like cheese, biscuits, ice cream, and the country's most famous export, chocolate, Swissness suddenly becomes a tangled legal web. Basically, the proposed criteria require that 80 percent of the weight of the raw materials that make up a product must come from Switzerland, and the step that gives a product its unique characteristics must take place in Switzerland, like processing milk into cheese.
But for Addor, there are some devilish details: "Natural products like cocoa that are not found in Switzerland or are temporarily unavailable due to crop failure are excluded," he said.
"Purely economic reasons (for example, cheaper raw materials abroad) do not, however, justify an exception."
Consumer groups and agricultural associations, strict patriots when it comes to comestibles, are happy with the tightening of regulations. Mathieu Fleury, General Secretary of the Consumer Association of French-speaking Switzerland, puts it succinctly: "If it says Swiss on it, it should have Swiss inside it."
But the sub-committee mandated with a preliminary examination of the bill before it goes to parliament, feels that other factors needed to be considered, such as the origin of the idea.
Experts are also discussing whether the relevant criteria for processed natural products should be the weight of the raw materials or manufacturing costs.
Meanwhile, the Federation of Swiss Food Industries (FIAL) has weighed in with talk of “killer criteria” that would force quintessentially Swiss products to become non-Swiss.
They have proposed a separate 60 percent clause for heavily processed foods – such as sauces, candy, soups – and "an indication of source for less processed raw foods, reflecting the location where 80 percent of the raw materials come from."
Industrial goods are not nearly as controversial. Sixty percent of manufacturing costs including R&D will have to be spent inside Switzerland.
For Jean-Daniel Pasche, President of the Federation of the Swiss Watch Industry, the eventual enactment of the law represents a dream scenario for most of his constituents:
“The Swiss government accepted our own draft to have a minimal value of 60 percent for electronic watches. This was absolutely necessary to maintain the credibility of the label.”
Not all watchmakers see it that way, notably those in the lower price segment producing quartz timepieces.
They warn that stricter regulations could have a negative effect.
“In order to increase the Swiss percentage of manufacturing costs, manufacturers will have to resort to cheaper and, hence, lower quality materials from abroad in order to maintain the higher Swiss percentage," according to a statement from lobby group IG Swiss Made.
The decline in quality, the group suggests, could lead to the loss of thousands of jobs. Ronnie Bernheim, co-CEO of the watchmaking Mondaine Group, sees Swissness more as a promise than a physical manifestation.
“It’s the obligation that all Swiss-made watches should be waterproof and reparable throughout the world for at least ten years,” he says.
“This is a real added value for the consumer rather than a complicated regulatory and exclusionary law.”
Felix Addor, for his part, believes that ultimately business sense will prevail.
"Those who are interested in profiting from the added value of the brand Switzerland and the Swiss cross will simply change their production processes to comply with the regulations."
An understandable and transparent law will also support enforcement, he points out. The question is, though, will the Swiss parliament use its trademark ingenuity to come up with a loophole-free regulation. Only time will tell, with the bill expected to reach parliament in 2012.