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Switzerland Summary

Introduction

Switzerland is an active member of the World Trade Organization (WTO) and the European Free Trade Association (EFTA), whose other members include Norway, Iceland and Lichtenstein.  The Swiss economy is ranked on par with that of most other European countries and the US. It is one of the top European propagators of liberalization of the service and high-tech sectors of the economy, as well as well known advocate of taking non-trade factors into account when considering economic liberalization processes. For these reasons it, along with the EU, Japan and Norway, does not support rapid liberalization of the agricultural sector.

Switzerland and the EU

Though the Swiss voted against joining the EEA (European Economic Area) and the EU in 1992, they recognize the need for closer ties with the EU. They therefore negotiated seven bilateral agreements that went into force in June 2002. On first estimates, "Switzerland will gain 8 bln sfr annually, or 2 pct of GDP" [1]. They resulted in a better access to the labor, goods and services markets of the EU, yet without the regulations that have impaired the growth rates of countries within the EU.

Soon afterwards negotiations have started on a new set of agreements, which are to cover 10 new topics. Seven of these are concerns common to both parties, the most important being financial services, the pension system and environment. In addition, The EU is concerned about taxation of savings in Swiss banks and custom fraud, whereas the Swiss government seeks closer co-operation in the fields of justice, police, asylum and migration [2].

Trade and Manufacturing

In 2000, Switzerland’s average tariff rate was below 1 per cent [3]. This rate is lower then that of the EU and US (both 1.8 per cent), Norway (1.1 per cent) and Japan (2 per cent), and is one of the lowest in Europe. This rate is buoyed by high agricultural tariffs, which reflects Switzerland’s policy of protecting its agricultural markets, based on their significant non-trade value to the society.

For these reasons, Switzerland has been pushing WTO to address the issue of industrial tariffs, not originally included in the Doha mandate. It is also a strong supporter of regional and bilateral trade agreements, which it believes to be crucial there, where no multilateral agreements framework exists. The majority of agreements outside of those with the EEA Switzerland established as a member of the EFTA, such as the most recent agreement with Algeria, as well as the planned agreements with Egypt and Turkey.

Foreign Investment

Switzerland, a considerable importer of capital, would benefit greatly from liberalization of WTO requirements that must be satisfied by foreign investors. Along with other countries exporters of capital – South Korea, Japan and Hong Kong – Switzerland put forward a project, which would have foreign direct investors being treated the same as local investors, limiting performance requirements such as creating a certain number of jobs, developing exports and co-operating with domestic companies. This idea is not supported by the US.

Trade-Related Intellectual Property Rights

The Swiss government recognizes the importance of Intellectual Property Rights (IPRs) in promoting higher efforts at research, innovation and development. For this reason its spending on respecting the IPRs is well above that required by the TRIPS Agreement. Swiss pharmaceutical, chemical and biotechnological companies’ production very often relies on patents, thus Switzerland’s position has been that of limited liberalization of this sector. Late in January 2003, Switzerland, along with the US and Germany, came under fire at the World Social Forum for blocking negotiations over allowing least developed countries (LDCs) access to cheaper medicines. It is seen as acting in the interest of its large pharmaceutical companies, including 3M, Bayer and Glaxo Welcome.

Agriculture, Environment and Labor rights

Switzerland claims that it is ready to negotiate on agriculture, with the long-term goal to establish a fair and market-oriented agricultural trading system. However, like its European neighbors, the Swiss government insists that non-economic factors such as food security, environment, and domestic rural populations remain legitimate considerations. It is the highest ranked OECD country for government support for agriculture, with aid being provided to 73 per cent farmers in 1999, well above the 40 per cent average for all OECD countries.

While Switzerland is willing to negotiate with agricultural exporters who favor the rapid liberalization of agriculture, it will maintain import quotas, high tariffs and import licenses on agricultural products until new legislations in the WTO allow it to address the non-trade issues differently. In November 2002, Switzerland, Norway and Canada, convinced the G77 group of developing countries and the EU to support their objection to a WTO proposal that would give precedence to trade over the environment.

Switzerland is a strong supporter of the inclusion of labor rights into WTO’s legislations. It actively supports the International Labor Organization (ILO) in its efforts to asses the social dimension of globalization as well as the appeal to all states to respect fundamental rights at work. Recently, Switzerland introduced domestically three ILO conventions, which deal with collective bargaining rules, the minimum working age and child labor.

The future

In the near future, negotiations will continue between and the EU in order to establish a new set of Bilateral Agreements [2], with the aim to establish closer cooperation between the two, especially on the matters of increased market access.

[1] AFX News Limited, AFX European Focus - November 26, 2001 Monday

[2] 2003 Index of Economic Freedom, conducted by the Wall Street Journal and The Heritage Foundation - http://cf.heritage.org/index/country.cfm?ID=139.0

[3] Switzerland - EU bilateral agreements I and II, from the official internet website of the Swiss EDA/EVD Integration Office http://www.europa.admin.ch/nbv/info_mat/dossiers/e/folien.pdf


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