The Sino-Swiss free trade agreement saved companies in both countries some CHF100 million ($103 million) in customs duties last year. But a detailed study has found that many firms remain unconvinced about the FTA’s benefits.
A conference in St Gallen on Wednesday revealed that, four years into the life of the FTA, less than half of firms that could qualify for reduced trade tariffs under the deal actually make use of this provision.
A 2010 feasibility study conducted by the Swiss authorities into the then proposed FTA suggested that Swiss industry could gain annual savings of around CHF290 million ($297 million) from the lifting of trade barriers.
Part of the reason that these numbers have not yet been reached is that the gradual lifting of Chinese tariffs will not be complete until 2023. But some firms are also holding back because they do not understand the complexities of the agreement or have problems with the amount of paperwork involved, said speakers at the conference.
Other firms estimate that the cost of reorganizing their logistical and supply networks to meet the FTA’s requirements would wipe out the savings they could make.
The study authors - the University of St Gallen along with the Chinese University of International Business and Economics and Nanjing University - said their report is a unique collaboration that delves deep into the mechanics of the FTA with access to detailed data in both countries.
By simulating what trading conditions would look like without an FTA, the study concludes that Chinese firms have prospered to the tune of $7 billion (CHF6.79 billion) over the four years the deal has been in existence. Swiss firms have gained just under $6 billion (CHF5.82 billion) in accumulated benefits, the study estimates.
Geng Wenbing, China’s ambassador to Switzerland, said the 44% FTA utilisation rate by companies was not a cause for concern this early into the agreement’s life.
“China has FTAs with other countries that have a higher utilisation rate, but only four years have so far passed since the Swiss agreement was signed,” he told swissinfo.ch. “It has been carried out very successfully and smoothly, which testifies to the success of the FTA.”
Large companies with a strong presence in the respective countries should concentrate on local production rather than exporting goods across borders, he pointed out. However, he urged the Swiss government to increase efforts to educate companies about the benefits of the trade deal.
“Free trade agreements like this are increasingly important when there is a growing trend of protectionism in the world,” he said. China and the United States are currently embroiled in an escalating trade dispute that threatens to boil over.
Markus Schlagenhof, head of the World Trade Division at the State Secretariat for Economic Affairs, also felt the findings of the study represented a glass half full rather than half empty. “These findings clearly highlight the importance of FTAs in promoting trade,” he said. “Every second job created in Switzerland depends directly on the ability of our companies to trade abroad.”