Swiss arms sector faces export vote as neutrality rules come under pressure

Highlights

Switzerland will hold a referendum on amending export rules to allow arms shipments to 36 Western countries involved in conflicts, excluding Ukraine.
The Swiss arms sector, employing 14,000 people and exporting about $1.15 billion in 2023, faces procurement cuts and job risks if export restrictions persist.
NATO allies have already excluded Swiss firms from contracts due to strict non-re-export requirements, prompting warnings that further restrictions could force companies abroad.

Referendum tests export rules and neutrality

As reported by BusinessWorld Online, the referendum will determine whether Switzerland can move ahead with an amendment allowing arms shipments to 36 Western countries even if they are involved in active conflicts, provided the weapons are not used in those conflicts.

Switzerland follows the 1907 Hague Conventions on neutrality, which prevent it from participating in armed conflicts unless directly threatened or from providing military support to any party. That position, which largely held through the Cold War, has come under greater strain since Russia’s full-scale invasion of Ukraine in 2022 pushed Bern to deepen defense cooperation with European partners and the transatlantic NATO alliance.

The vote was triggered by a coalition of left-wing parties including the Social Democrats and the Greens, while some politicians on the right have also broken with the Swiss People’s Party to oppose the amendment. Fabian Molina of the Social Democrats says the change could allow Swiss war material to be passed to belligerent states in some cases, which he argues would violate neutrality.

The amendment would also remove the requirement for buyers to sign a non-re-export declaration when purchasing Swiss arms. Ukraine is not included in the proposed framework, and the revised rules would not apply to weaponry bought under previous terms or acquired with the intention of being sent immediately to a third party, leaving current barriers on transfers to Ukraine in place.

Industry warns of procurement and jobs fallout

Supporters of the amendment argue the overhaul is needed because the international security environment has become more dangerous and because Switzerland needs a viable domestic defense industrial base. Centre Party lawmaker Reto Nause says the country faces a threat level not seen since World War Two and that self-defense depends in part on preserving production capacity and know-how in key technologies.

Backers also say the non-re-export declaration discourages NATO countries from buying Swiss-made equipment because allies want the ability to share weapons if the alliance comes under attack. Bern has already blocked several countries from sending previously purchased Swiss ammunition and combat vehicles to Ukraine, after which Germany excluded Swiss firms from procurement deals and Denmark and the Netherlands halted orders.

The companies affected include Rheinmetall, which builds anti-drone defense systems in Switzerland, Thales, SIG Sauer and more than 100 other businesses. According to Stockholm International Peace Research Institute data cited in the report, Switzerland ranks as the world’s 17th-largest arms exporter over the past 10 years, while the sector employs 14,000 people and records exports worth about $1.15 billion last year.

Industry representatives say the domestic market is too small to sustain manufacturers if export rules remain tight, and supporters add that another 154,000 jobs are tied to companies producing dual-use goods for military or civilian purposes. Matthias Zoller, general secretary of the Swiss Aeronautics, Security and Defense Association, says the vote is decisive for the future of the Swiss arms industry and warns that companies could shift operations abroad if export restrictions remain excessive.

Opponents counter that loosening the law would reduce Swiss control over where its weapons end up and could increase the risk that they are used in civil wars or by rogue governments. Green Party lawmaker Gerhard Andrey says ceding that control is not a neutral choice, while Social Democrat youth leader Mirjam Hostetmann argues that more weapons will not deliver more peace.

Our earlier article on sovereign resilience in a higher-rate environment explained how prolonged geopolitical tensions and elevated public spending are raising borrowing and refinancing risks for governments. We noted that persistent shocks linked to wars, including the conflicts in Ukraine and the Middle East, can push up energy and food prices, extend inflation pressures, and strain public finances—especially in emerging and frontier markets.

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