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EU grants Switzerland breathing space

The Swiss textile industry can breathe a sigh of relief - for now Keystone

Switzerland won some breathing space on Tuesday after the European Union agreed to delay the introduction of a tax on re-exports from Switzerland for a period of three months.

This content was published on February 24, 2004 - 19:49

The announcement came after Swiss officials met their EU counterparts to discuss the tax, which was due to come into force next Monday.

Last week Switzerland - which is not a member of the EU - called on Brussels to freeze plans to levy the tax, arguing it went against a long-standing free trade agreement.

But the EU claimed it was simply clarifying existing regulations.

Luzius Wasescha, a senior official at the Swiss economics ministry, said the three-month reprieve was an important first step towards resolving the stand-off.

“Today is a victory for the free trade area within Europe and this is certainly of paramount importance for the EU and for Switzerland,” Wasescha told swissinfo.

Wasescha was speaking at a news conference following a meeting between the two sides in Basel on Tuesday during which the legal and economic repercussions of the tax were discussed.

A follow-up meeting between Swiss and EU officials is scheduled to take place in March.

Reacting to the news, the economics minister, Joseph Deiss, said that the tax was unacceptable.

He added that he would be telephoning EU commissioner Frits Bolkestein on Wednesday to seek confirmation of the delay and discuss how negotiations should proceed.

Row

A row over the tax on re-exports from Switzerland broke out last week after the EU’s surprise decision to levy the tax – a decision which it did not officially communicate to Bern.

Under a trade agreement dating back to 1972, products and material imported to Switzerland and subsequently exported back to the EU have not been subject to customs charges.

But the EU argues that the accord does not apply to re-exports, hence the decision to impose the tax.

Switzerland has expressed concern that the tax would hit Swiss companies hard – particularly the textile, chemical and pharmaceutical industries - which rely on raw materials from EU member states.

Wasescha said the tax could cost the chemical industry up to SFr2 billion ($1.62 billion) per year.

Pressure

Swiss commentators had speculated that Brussels was trying to increase the pressure on Switzerland to sign up to an agreement to hand over income from EU residents’ savings in Swiss banks.

This is currently blocking negotiations between the two sides on a second round of bilateral accords.

But Wasescha told swissinfo he did not believe this was the case.

“There are so many areas in which there is a very strong and daily established cooperation between Switzerland and the EU,” he said.

“So one aspect of this relationship - that is in a building phase - has nothing to do with this daily exchange of goods between the EU and Switzerland and vice versa which has existed since 1973,” he added.

However, Wasescha warned that discussions between Bern and Brussels over the coming weeks and months would not be easy.

“It’ll be hard work for us in the coming weeks to convince the commission of the mutual interest in not having a new obstacle in an old form of tariffs,” he said.

swissinfo, Isobel Leybold and Urs Geiser

In brief

The new tax would have been aimed at products exported from Switzerland to the European Union which were made using raw materials imported from EU member states.

The chemical, textile and pharmaceutical industries would have been most affected by the tax.

Relations between Bern and Brussels are already strained over tax issues.

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