Can there be another country whose name is identified with a greater array of products of quality and excellence more than Switzerland (Swiss; Suisse)? For the daily palate, there is Swiss cheese and Swiss chocolate; for the outdoors type, there is the Swiss pocket knife. But surely the crown jewel is the luxury watch business and the designation "Swiss Made", where it is reported that the appellation can nearly double the price of a watch. What follows is for those of you who either are wearing a Swiss watch or wish that you were, which means, more or less, all of us. Be warned-- all is not quiet on the "Swiss Made" front. As reported both by The Economist ("Time is money") here and Reuters ("What Puts the Swiss in a "Swiss Made" Watch?) here, the Swiss parliament is currently considering amendments to the law governing what "Swiss Made" means. Even if you think you know the answer, read on—you may be surprised. 

The debate centers on a change to the current "directive", which provides that a watch must contain at least 50% Swiss manufacture of the value of the watch movement parts to be eligible for the designation. This means that a manufacturer can in principle import all of the ancillary parts of the watch, such as the dials, cases and hands, and still satisfy the requirement, provided that at least 50% of the watch movements are made in Switzerland. As such, says the chairman of the Swiss watch federation, "watches produced almost entirely in China can be sold legally under the "Swiss Made" label." The result is that "[s]ome complain their Swiss watches are not as Swiss as they should be", he added. 

The lower house of the Swiss parliament proposes to raise that minimum amount made in Switzerland to 60%, while the upper house wants the amount to remain the current 50%. What is crucial in both cases is that the proposed percentage will apply not only to the watch movements, but to the overall value of the watch. So what are the economic consequences? It depends upon who you ask. Some say that the change as proposed will enhance the quality of the watch by ensuring that "more" of it is actually made in Switzerland. "Not so fast", says others. Since the determination is to be made on the basis of the overall value of the watch, and given the high cost of almost everything in Switzerland, including the manufacture of watch movements and the like, the result might be that certain Swiss watch manufacturers will be more inclined to import even more low-cost components, making minimum use of Swiss-originating components. Here, the value of the expensive Swiss components will be integrated with cheaper "non-Swiss" components. The paradoxical end-game might be that raising the percentage requirement and making it apply to the overall value of the watch will make the ultimate product even "less Swiss" than before. "More" might actually mean "less". If so, could there be a threat to the prestige of "Swiss Made" as the designation applies to watches. 

Read the rest of this entry

Comment