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Swiss set course to free trade

The Swiss export industry, including the machine sector, has welcomed the opening up of markets Keystone

Parliament is due to discuss a free-trade accord between Switzerland and South Korea – the latest such deal aimed at liberalising economic ties abroad.

This content was published on March 13, 2006 - 12:48

The main beneficiaries of these accords are exporters and consumers. Farmers, however, may have to fight for survival.

The House of Representative looks set to approve the accord this week while the debate in the Senate will take place at a later date.

Around half of Switzerland's wealth is derived from its exports, such as machines, watches and pharmaceuticals – as well as chocolate and cheese.

The government is therefore keen to open up access to important foreign markets, with emphasis being placed on three major avenues: Europe, participation in multilateral economic organisations and free-trade accords.

With the exception of the slow-moving negotiations with the World Trade Organization (WTO), which are only due to conclude in 2013, free-trade accords seem to be on a high.

So far Switzerland has signed 19 trade deals, mostly as part of the European Free Trade Association (Efta) and is looking into several more.

Widened horizons

"It's not a new idea, the Efta convention has existed since 1960 and we have had a free-trade accord on industrial products with the European Community since 1972," Christian Etter, head of the Efta division at the State Secretariat for Economic Affairs (seco), told swissinfo.

"It's however true that since the 1990s we have concluded a greater number of accords," he added.

Switzerland is a member of Efta, along with Norway, Iceland and Liechtenstein.

At first free-trade accords were aimed at integrating eastern European and Mediterranean area countries into the European trade system.

In recent years the horizons were widened, with accords subsequently being concluded with Mexico, Singapore, Chile and South Korea.

Negotiations are taking place for Canada, Thailand and Egypt. The future could also see agreements with Russia, Japan, China and India.

"When the European Union, the United States and Japan, - our main competitors -, conclude preferential accords with other countries or groups of countries, we can't just look on, our exporters would be penalised by this," said Etter.

Beyond the WTO

Etter says it is time to think about looking beyond the WTO.
"The WTO is now a universal organisation which includes every type of country," explained Etter. "It is therefore becoming more difficult to find a compromise that makes everyone happy."

Multilateral negotiations aimed at ending trade and customs barriers are expected to last several more years and they face fierce opposition by anti-globalisation campaigners.

Those countries wishing to proceed at a faster pace have mostly opted for the bilateral and regional route.

Most of Switzerland's 19 accords have been negotiated and undertaken as part of Efta.

"It's a question of being pragmatic. As a group, Efta is among the first ten to 12 economies on a world level and it's often in our partners' interest to cover to whole of Europe through two accords – with the EU and Efta," Etter told swissinfo.

"Furthermore, accords between a restricted number of countries allows for the consideration of and the respect of the specific needs of different countries."

Thorny problem

But not all dossiers go as smoothly. Some, such as agriculture, are subject to resistance and fears.

Attempts to conclude a free-trade accord with the US stumbled in January following protests from Swiss farmers who feared they could not survive the onslaught of products from large American companies.

However, the respite for the agricultural sector, which unlike its industrial counterpart, continues to be largely protected from customs duty and quotas, could be brief.

The government has already commissioned a report on whether it should widen the 1972 accord with the EU on agricultural products.

It is conscious of the fact that Swiss food products cost on average 40 per cent more than in the rest of Europe –which in turn lowers consumption and reduces purchasing power.

Hans Burger, the former director of the Federal Agriculture Office, says the project will mean wide-ranging reforms in agriculture.

He predicts that only half of the 64,000 agricultural businesses will manage the change and that cereal and vegetable producers will have to fight for survival.

But the meat and milk farmers may well gain fresh impetus, according to Burger.

swissinfo

Key facts

The first free-trade accords to be concluded allowed for the free circulation of goods and the protection of intellectual property.
Those agreed with Mexico, Singapore, Chile and South Korea also regulate services, public markets and investments.
Swiss customs duties on industrial products are 2-5%.
Trade in agriculture is regulated by quotas and duties are very high.

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In brief

Efta was founded in 1960 as an alternative to the European Economic Community (now the European Union) and has 4 members: Switzerland, Norway, Iceland and Liechtenstein.

Switzerland has concluded 19 free-trade accords – the Efta convention, two bilateral accords (with the EU and the Faroe Islands) and 16 as part of Efta (Bulgaria, Romania, Macedonia, Croatia, Turkey, Israel, the Palestinian Authority, Morocco, Jordan, Tunisia, Lebanon, Mexico, Singapore, Chile, South Korea and the South African Customs Union).

Deals are being negotiated with Thailand, Egypt and Canada and preliminary contacts have been made with the US, Indonesia, Algeria, the Gulf States, Japan and Russia.

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