Volume 67, Issue III The following articles were published in the third issue of the Aussenwirtschaft 2016. EU-Swiss trade integration via input-output linkages Peter H. Egger and Katharina Erhardt Abstract This paper provides a first assessment of Switzerland's international input-output linkages. In doing so, the paper focuses on Switzerland's trade with the European Union which represents the country's most important trading partner. In 2015, more than 50% of Swiss exports were directed to the EU while more than 70% of Swiss imports were sourced from EU countries. Using data on Switzerland's transaction-level imports and data on the sector association of a subset of Swiss firms, we are able to characterize the detailed nature of these imports regarding the sectors they are directed to and the countries they are originating from. Switzerland's Gains from Trade with Europe Christian Hepenstrick Abstract In this paper I look at the size of Switzerland's gains from trade through the lens of a workhorse model of modern trade theory. The model finds that most of Switzerland's gains from trade origin in the EU and that realistic changes in the degree of trade integration with EU countries may have non-trivial - but at the same time not excessively large - effects on Swiss per-capita incomes. The model also suggests that further trade integration with third countries such as China and India tends to increase Swiss welfare, but is unlikely to be able to compensate for possible losses stemming from deteriorating trade relations with European countries. Comment by Reto Foellmi MRIO Linkages and Switzerland's CO2 Profile Octavio Fernández-Amador, Joseph F. Francois and Patrick Tomberger Abstract We examine the importance of linkages between the Swiss economy and other regions (especially Western Europe) for Switzerland’s CO2 profile. Overall, both final production and consumption carbon footprints and intensities are much larger than (about double) the footprint from territorial production, which is the traditional measure used within the framework of the Kyoto Protocol. The carbon footprint of territorial production decreased during 1997–2011, whereas the carbon footprint of consumption remained quite steady and the footprint from final production increased over the same period. All carbon intensities have decreased, however, though the differential between territorial production and final production and consumption has remained the same. These findings highlight the role of emissions embodied in trade flows, particularly with the group of developed members of the European Union, for a small open economy like Switzerland. They also call for the use of consumption-based criteria, together with criteria based on territorial production and final production, to establish and monitor the Swiss carbon footprint. Comment by Marcelo Olarreaga Collateral damage: The harm done to Swiss commercial interests by EU policies since the crisis began Simon Evenett Abstract Since the onset of the global economic crisis on no occasion have the European Commission or European Union member state governments singled out Swiss commercial interests for discriminatory treatment. Even so, 200 official acts taken across the EU since November 2008 have caused collateral damage to Swiss commercial interests, three-quarters of which are still in force. Swiss exports worth more than 17 billion Francs face one or more crisis-era trade distortion. However, inferred trade cost data reveal that Swiss commercial interests have been discriminated against more than other major suppliers to EU markets in only three Member States. Comment by Claudio Wegmueller Die Schweizer Wirtschaft zwischen Hammer und Amboss: Eine Analyse der „Franken-Schocks“ 2010/11 und 2015 Matthias Flückiger, Christian Rutzer and Rolf Weder Abstract In this paper, we examine the impact of the Swiss “Franc Shock” of 2010/11 and 2015 on the Swiss economy. At the macroeconomic level, it is shown that nominal wages – especially in the manufacturing sector – have not decreased as much as expected due to lowered prices and small labor productivity growth. The unemployment rate has increased only by a small amount. Examining Swiss trade, we can confirm a negative effect of the currency appreciation on both quantities and prices of exports. This effect depends on the heterogeneity of products as well as on the destination country. It follows that export-intensive sectors (and companies) that face tough import competition have experienced the most negative effects. However, compared with fluctuations of the GDP of trading partners, the impact of the exchange rate is only secondary. Hence, the future trend in the global business cycle will crucially affect the economic pressure on the Swiss economy.