Free Trade Agreements

In addition to the EFTA Convention and the Free Trade Agreement with the European Union (EU) of 1972, Switzerland currently has a network of 30 free trade agreements (FTAs) with 40 partners. Switzerland normally concludes its FTAs together with its partners Norway, Iceland and Liechtenstein, in the framework of the European Free Trade Association (EFTA). Nevertheless, Switzerland has the possibility to enter into FTAs outside the EFTA framework as well, as it has been the case of Japan and China.

The aim of Switzerland's free trade policy is the improvement of the framework conditions for economic relations with relevant economic partners. The objective is to provide Swiss companies with an unobstructed, stable and non-discriminatory market access in these countries compared to their main competitors. Foreign trade policy measures aiming at further opening export markets are of great importance and in accordance with the stabilization policy pursued by the Federal Council.

In addition, the EFTA States have also entered into Declarations on Cooperation with a number of partners. Declarations on Cooperation provide a platform for an institutionalised dialogue on possibilities for deepening economic relations. This may later on lead to negotiations on a FTA.

Aims and Strategy

Switzerland is closely integrated into the world economy. Its economic structure is characterized by its pronounced outward orientation. Switzerland's prosperity therefore depends, to a large extent, on international trade in goods and services as well as on cross-border investment activities. Consequently, the constant improvement of access to foreign markets represents a core objective of Swiss foreign economic policy. The best way to achieve this objective is the multilateral approach within the framework of the World Trade Organisation (WTO). At the same time, a constantly growing number of countries are entering into bilateral or plurilateral, regional or supra-regional FTAs, as a way to complement the ongoing multilateral trade liberalisation. By entering into FTAs, Switzerland aims to provide its companies with a level of access to international markets that is at least equivalent to the market access conditions enjoyed by its most important foreign competitors (such as the EU, the USA and Japan), which are also continually extending their networks of FTAs. Free trade agreements are therefore an important instrument in maintaining and strengthening Switzerland's competitiveness as a business location.

According to the foreign economic strategy of the Federal Council, the selection of prospective free trade partners is based on four main criteria:

  1. The current and potential economic importance of a partner;
  2. The extent of existing or potential discrimination that may result from the conclusion of FTAs between the prospective partner and important competitors of Switzerland;
  3. The willingness of the partner to enter into negotiations, and the corresponding prospects for success;
  4. Other considerations such as inter alia the expected contribution of a FTA towards the economic stabilization and development of a partner or in general the compatibility with Swiss foreign policy objectives.

Development of the Free Trade Agreements Network

To a large extent, Switzerland's network of FTAs consists of agreements concluded jointly by the EFTA member states.

Grafik_FHA_EN

EFTA's first two FTAs with Turkey and Israel were followed in the early to mid-1990s by a series of FTAs with Central and Eastern European countries. The EFTA states concluded these agreements, in parallel with similar EU agreements, not only to improve mutual market access, but also to support economic reforms in the central and eastern European transition countries. Eight of these agreements were terminated on 1 May 2004, two on 1 January 2007 and one on 1 July 2013, as a result of the accession of these partners to the EU.[1] Free trade relations between Switzerland and the new EU member States remain in place, but are now based on the 1972 FTA between Switzerland and the EU. EFTA free trade agreements currently exist with Macedonia, Albania, Serbia, Ukraine, Montenegro, Bosnia-Herzegovina and Georgia.

Since the mid-1990s, EFTA’s network of FTAs has been extended into the Mediterranean region. EFTA's aim is to lay the foundations for participation in the Euro-Mediterranean free trade area. As part of these efforts, Switzerland is actively involved in work towards modernising the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (PEM Convention). By concluding FTAs, the EFTA States contribute to the promotion of economic cooperation in the Euro-Mediterranean area. EFTA has so far concluded FTAs with eight Mediterranean partners: Turkey, Israel, Morocco, the Palestinian Authority, Jordan, Lebanon, Tunisia and Egypt. A modernised and expanded agreement with Turkey was signed on 25 June 2018.

Given the growing worldwide tendency to conclude regional and indeed supra-regional FTAs, the EFTA states have since the end of the 1990s begun to orientate their free trade policy towards overseas partners. So far, FTAs are in force with Mexico, Singapore, Chile, the Republic of Korea, the SACU states (Southern African Customs Union: Botswana, Namibia, Lesotho, South Africa and Eswatini), Canada, Colombia, the Gulf Cooperation Council (GCC: Saudi Arabia, Bahrain, United Arab Emirates, Qatar, Kuwait and Oman), Peru, Hong Kong and the Central America states (Panama and Costa Rica; Guatemala[2]) and the Philippines. Negotiations are currently ongoing with India, other Central America States, Thailand, Indonesia, Vietnam and Malaysia. A free trade agreement was signed with Ecuador on 25 June 2018, and with Indonesia on 16 December 2018. Negotiations are currently ongoing with India, Vietnam, Malaysia and the Mercosur states (Argentina, Brazil Paraguay and Uruguay).

A bilateral Free Trade and Economic Partnership Agreement between Switzerland and Japan has been in force since September 2009. Switzerland was the first European country to have concluded such an agreement with Japan. In addition, a free trade agreement between Switzerland and China entered into force on 1 July 2014. China is the world's second largest economy after the USA and is Switzerland's third most important trade partner after the EU and the USA.

Furthermore, Switzerland and the other EFTA states continue to develop an active dialogue with other potential partners such as Moldova and Pakistan, in order to facilitate possible future free trade negotiations.

An overview of Switzerland's current network of free trade agreements, as well as ongoing negotiations or negotiations in preparation is available under the heading ‘Free trade agreements’ (List of Switzerland’s Free Trade Agreements).

 

[1] These are the agreements with Estonia, Latvia, Lithuania, Poland, Slovakia, Slovenia and the Czech Republic (EU accession in 2004), Bulgaria and Romania (EU accession in 2007) and Croatia (EU accession in 2013).

 

[2] Guatemala has acceded to the agreement, but it has not yet entered into force for this country)


Content of the EFTA Free Trade Agreements

EFTA FTAs with partners in the Euro-Mediterranean area as well as with Canada and the Southern African Customs Union (SACU) primarily contain provisions on the movement of goods (removal of customs duties and other trade barriers) as well as generally on the protection of intellectual property rights. Such agreements are also called "first generation" agreements. In the field of trade in goods, EFTA FTAs regulate trade in industrial products, fish and processed agricultural products. Trade in basic agricultural products is covered in separate bilateral agricultural agreements, which are concluded between each EFTA State and the respective partners individually, in parallel to the main agreement. The reason for this particular treatment of basic agricultural products is due to the fact that the EFTA States do not have a common agricultural policy.

The EFTA FTAs with Bosnia-Herzegovina, Central America States, Chile, Colombia, GCC, Mexico, Montenegro, Singapore, South Korea, Peru, Ukraine and the bilateral Agreements on Free Trade and Economic Partnership (FTEPA) between Switzerland and Japan and Switzerland and China  are more comprehensive agreements (so-called "second generation" FTAs). In addition to provisions on the movement of goods and intellectual property, these agreements generally also contain substantive obligations regarding inter alia trade in services, investment and public procurement.


Economic consequences of free trade agreements

Switzerland’s free trade agreements outside the EU/EFTA secure access for the Swiss economic operators to important and dynamic markets.

-   These free trade partners outside the EU/EFTA provide a market of approximately 2.2 billion consumers and a gross domestic product (GDP) of around USD 25,000 billion. In 2015, exports of Swiss goods in these partner countries accounted for 23% of Switzerland’s total exports.

-   Free trade agreements support the competitiveness of Switzerland as a business location and promote growth and added value. Similar consequences can also be seen in the partner countries. Between 1990 and 2014, the GDP of the partner countries grew by an average of 3.6% per annum, thus exceeding global GDP growth by around one percentage point.

-   Prosperity does not just result from regulated market access for the export sector. Producers profit from input goods at lower prices, consumers have access to lower priced products and a wider choice of products, and increased competition fosters productivity gains. Furthermore free trade agreements enable Switzerland to secure its place within the global value added chains.

-   From 1988 to 2014, Swiss goods exports increased by an average of 4.1% per annum, whilst exports to free trade partners outside the EU/EFTA rose by an average of 8.5% per annum in the first four years following the entry into force of the respective free trade agreements.

-   In addition to the marked increase in trade flows, free trade agreements enable the Swiss export industry to make significant savings in customs duties. Companies trading with free trade partners outside the EU/EFTA saved for example an estimated CHF 400 million in customs duties in 2014. This includes free trade agreements which came into effect no later than 2013.

Modern free trade agreements facilitate more than just the trade in goods, they also cover other key areas:

-  Today, trade in services accounts for just over a quarter of Switzerland's total trade. The growth of trade in services regularly outperformed the trade in goods in recent years. Data on the export structure of Swiss services to free trade partners shows – as far as this is possible – that license fees, financial, insurance, telecommunication, computer and information services constitute a large share of Swiss exports of services.

-   On average the stock of foreign direct investments in a country increases with the number of free trade agreements or other economic integration agreements that have been  concluded. In international comparison, Switzerland holds a leading position as investor and as recipient of foreign direct investments. The accumulated capital flows by Switzerland in its free trade partner countries outside EU/EFTA steadily increased and totaled in 2014 some 14.5% of the Swiss accumulated capital flows abroad. On the other side, the accumulated capital flows in Switzerland by its free trade partners (without EU/EFTA) represented in 2014 2.1% of the overall stock of capital flows in Switzerland. Furthermore, capital income generated from Swiss direct investments amounted to CHF 82 billion in 2014.

-  The protection of intellectual property promotes Switzerland as a location for innovation through transparent and enforceable regulations and plays an important role for the Swiss export market, which heavily relies on innovation.

-   Provisions regarding public procurement in free trade agreements expand the application of the WTO treaty to non-members and other sectors.


Further information

Specialist staff
Last modification 16.04.2019

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