Explaining trade policy responses to Covid-19: Case of Switzerland

Abstract

While the shock of Covid-19 has generated draconian containment policies in virtually all countries to limit the spread of the pandemic, it also brought a plethora of trade and investment policy responses that were broadly aimed at limiting cross-border commercial ties. This essay shed lights on the drivers of trade policy responses of European Free Trade Area (EFTA) members in the wake of Covid-19. I propose that while EFTA Members’ behavior by and large followed that of the European Union and its member states, Switzerland instead resorted to trade liberalizing policies. Switzerland’s reliance on imports led to supply difficulties, which was unusually affected by tourism shopping. The mobility limitations that restricted Swiss residents’ ability to buy products across the border translated into a disproportionately higher demand in the face of relatively low supply. In turn, Swiss producers requested trade barriers to be lowered and the government responded to their request. This episode highlights the importance of linkages between mobility and trade policy – showcasing how restrictions along borders can have unintended effects that ultimately shape trade policy.