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US-Swiss free-trade deal “extremely valuable”

The US is the second most important market for Switzerland Keystone

An independent report says a free-trade accord between Switzerland and the United States would have "extremely valuable benefits" for both countries.

The Swiss government announced its intention earlier this year to begin exploratory talks with Washington on a free-trade agreement.

The Institute for International Economics, a research centre based in Washington, presented the preliminary findings of the report on Tuesday.

It will be published in full in January when Swiss Economics Minister Joseph Deiss, and the US Trade Representative, Rob Portman, will decide whether to engage their respective governments in negotiations for a free-trade accord.

The first conclusions of the report were presented to Jean-Daniel Gerber, head of the Swiss State Secretariat for Economic Affairs (Seco), and a gathering of business people.

The main author of the report, Gary Hufbauer, warned that “even between countries with a level of development like Switzerland and the US, there are many complicated facets in working out a free-trade agreement”.

He also noted that in 2001 his team submitted a report on a project agreement between the US and South Korea and four years later the agreement has not yet become a reality.

The report on the American-Swiss project predicts that Switzerland and the US, as leading proponents of market capitalism, have the wherewithal to conclude an innovative agreement, which would inspire the World Trade Organization.

Exploratory phase

According to the report, the potential benefits for the two countries are extremely valuable. The volume of trade between the two countries could increase by 20 to 100 per cent and the volume of American investment in Switzerland by around 40 per cent.

However, the Institute recognises that the other economic benefits of a free-trade agreement would be “modest”. In fact, the increase in the exchange of services is only estimated to reach around 12 per cent. In particular, the report indicates that an agreement would bring “negligible changes to growth in Switzerland and in the US”.

More encouragingly, “the relative gains for the Gross National Product (GNP) for each partner would be in the order of $1.1 billion per year, which would mean about 0.5 per cent permanent gain for Switzerland’s GNP per year”.

Gerber stressed that he did not yet have the mandate to negotiate and that the dossier was only at an exploratory phase.

The Seco director said he was optimistic about the chances of an agreement. But he said he was not hiding the fact that there were obstacles, the main one being agriculture.

The Americans are critical of the subsidies that protect Swiss farmers. “The US also has issues with cheese and all products which contain sugar as these are two market sectors which are highly protected,” Hufbauer said.

swissinfo, Marie-Christine Bonzom in Washington

The Swiss watch industry as well as the pharma- and chemicals industries would profit most from a free-trade agreement with the US.

But Swiss farmers fear that it could open the domestic market to cheap imports of US cereals, maize or rice, while the US is critical of Swiss agricultural subsidies.

The two countries will decide whether or not to enter into negotiations for a free-trade agreement in early 2006.

In 2004, Swiss exports of goods and services to the US totalled SFr14.2 billion.
The US market accounts for 10% of all Swiss exports, making it the second most important market after Germany (20.6%).
In 2004, imports of US goods and services totalled SFr5.7 billion.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR