Apr 19, 2011

Industrial policy: Swiss watches

The Sydney Morning Herald reports (via Camarone):

Mondaine, the maker of Official Swiss Railways watches, may have to shut a two-year-old factory because its timepieces are not Swiss enough... The future of the $10.6 million plant in Solothurn and its 110 workers would be jeopardised should larger rivals such as Swatch Group succeed in calls for fewer non-Swiss components to be allowed in Swiss-made timepieces...  Since 1971, watchmakers have been allowed to use non-Swiss components for less than 50 per cent of the value of the watch's movement, or motor... To keep its lead as other manufacturers shift to countries such as China in search of cheaper labour, the industry is trying to erect higher barriers to entry, which would make Swiss watches a scarcer luxury.
Barriers to entry give more monopolistic power to current watchmakers, allowing them to sell and export at higher prices and indeed makes them a scarcer luxury. But it doesn't keep watchmaking in Switzerland. What if Mondaine decides to move?  Can Switzerland be forever rich with this anti-business attitude that touches all sectors?

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