WORLD TRADE WT/TPR/M/13
3July1996
ORGANIZATION(96-2532)
Trade Policy Review Body
28-29 May1996
TRADE POLICY REVIEW
SWITZERLAND
MINUTES OFMEETING
Chairperson: H.E. MsAnne Anderson (Ireland)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 2
II. OPENING STATEMENT BYTHE REPRESENTATIVE OFSWITZERLAND 3
III. STATEMENT BYTHE FIRST DISCUSSANT 6
IV. STATEMENT BYTHE SECOND DISCUSSANT 7
V. STATEMENTS BYMEMBERS 8
VI. REPLIES BYTHE REPRESENTATIVE OFSWITZERLAND
AND ADDITIONAL COMMENTS 13
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 21WT/TPR/M/13
Page 2Trade Policy Review
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. Thesecond Trade Policy Review ofSwitzerland washeldon28and29May1996. The
Chairperson welcomed thedelegation ofSwitzerland, headed byAmbassador Pierre-Louis Girard,
andthediscussants, Ambassador Booth Gardner oftheUnited States andAmbassador K.Kesavapany
ofSingapore. Asusual, both discussants would speak intheir personal capacities andnotas
representatives oftheircountries. Inaccordance withtheestablished procedures, thediscussants had
made available, inadvance, outlines ofthemain issues theyintended toraise.
2. TheChairperson recalled thepurpose oftheTrade Policy Reviews andthemain elements of
theprocedures forthismeeting. Thereport bytheGovernment ofSwitzerland wascontained in
document WT/TPR/G/13 andthatoftheWTO Secretariat indocument WT/TPR/S/13; themainissues
toberaised bythediscussants werecontained indocument WT/TPR/W/17. Copies ofwritten questions
submitted bythree delegations (Australia, Canada andtheCzech Republic) hadbeentransmitted to
thedelegation ofSwitzerland. Iffullreplies could notbeprovided during themeeting, supplementary
written replies should beprovided later.
3. Recalling thatintergovernmental organizations could attend meetings oftheGeneral Council
through decisions taken onthebasisofadhocarrangements, theChairperson proposed thattheTrade
Policy Review Body invite theFAO, EFTA, IMF, OECD, UNCTAD andtheWorld Bank, which
hadrequested observer status, toitsnextmeeting. Itwassoagreed.Switzerland WT/TPR/M/13
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II. OPENING STATEMENT BYTHE REPRESENTATIVE OFSWITZERLAND
4. Therepresentative ofSwitzerland welcomed theopportunity topresent theimportant reforms
thathadtaken place inSwiss trade policy since the1991 Review. These reforms hadbeenmade in
response tobothchanges intheinternational environment andnewdomestic policy challenges, and
werebased ontheprinciple ofanopenmultilateral trading system asstipulated intheWTO Agreements.
WiththeentryintoforceoftheWTO, thisReview alsocovered thecrucial areasofservices, investment
andintellectual property, thusproviding amore complete picture ofSwitzerland 'seconomic policies.
5. After nearly three years ofrecession, followed byatemporary expansion during 1993-1995,
theSwiss economy hadvirtually reached astandstill inmid-1995, withnosignofimprovement. Real
household income hadfallen in1995, following arebound ininflation duetotheintroduction of
value-added tax.Unemployment, atarateof4.2percent,wasunusually high. Public consumption
hadbeenstagnant, reflecting efforts toredress thebudget.
6. Asaresult ofweak aggregate demand, theSwiss tradebalance hadbeeninsurplus since 1993.
Despite a15percentappreciation oftherealeffective exchange ratebetween 1992and1995, thevolume
ofmerchandise exports hadexpanded byover4percentin1994and1995. However, import growth
hadbeenconsiderably stronger. Falling revenues inthetourism industry hadfurther contributed to
ashrinking current account surplus.
7. Reflecting theliberal nature ofSwiss economic policies, theStateintervened onlyinaresidual
way. Industrial subsidies asdefined intheWTO Agreement onSubsidies andCountervailing Measures
hadamounted to0.05percentofGDP in1993. Border protection forindustrial goods wasvirtually
absent, aswitnessed bylowtariffs andtheabsence ofquantitative restrictions, anti-dumping or
countervailing actions.
8. Thispolicy hadresulted inahighlevelofintegration intheworld economy, withexports and
imports ofgoods andservices amounting to43and36percentofGDP, respectively. Switzerland
wastheworld 's13thlargest exporter and24thlargest importer ofservices, andtheeighth largest foreign
investor. Thehighshare oftradewiththeEuropean Union -some 60percentofmerchandise exports
and80percentofimports -masked thefactthatsignificant imports from third countries transited
through theEU,insome cases undergoing transformation.
9. Despite itsenormous flexibility tointernational trends, henoted thatnotallsectors oftheSwiss
economy wereequally open. Theprevious TPRreport hadunderlined certain cartel-induced market
failures andhighlighted thedetrimental effects ofSwiss agricultural policy oninternational trade and
internal prices. However, theSwiss authorities hadacknowledged theneedforreform toimprove
competitiveness andmaintain thecountry 'sattraction asalocation forinvestment andjobcreation.
With thisinview, theSwiss economy hadundergone avariety ofreforms. Implementation ofthe
WTO Agreements hadledto16legislative amendments andonenewlawongovernment procurement.
Further reforms subsequent totheSwiss people 'srejection oftheAgreement ontheEuropean Economic
Area relied inparticular onmeasures tostrengthen competition andincluded newormodified laws
oncartels, theinternal market andtechnical barriers totrade.
10. Therevised LawonCartels would bring about important changes inSwiss competition policy.
Newprovisions focused inparticular ontheprevention ofabusive behaviour, based onthepremise
thatcertain restrictive practices -suchasprice orquantity fixing, ormarket segmentation -wereas
suchharmful andillegal. Under thenewLawontheInternal Market, Swiss residents andSwiss-basedWT/TPR/M/13
Page 4Trade Policy Review
companies could offergoods, services andtheirlabour inanycanton orcommune; thiswould also
benefit foreign suppliers.
11. TheLawonTechnical Barriers toTrade provided fortheelimination oftechnical restrictions
thathadimpeded imports ofmany goods. Forexample, itwasnowpossible forprivate persons to
import carsdirectly intoSwitzerland. However, asnoted intheSecretariat 'sreport, thepositive effects
ofthislawcould bethwarted bythepractices ofcertain exporters. These practices, while regrettable,
wereoutside thescope ofSwiss jurisdiction andshowed thatautonomous efforts inthisfieldrequired,
iftheywere tobearfruit, parallel initiatives attheinternational level.
12. Byallowing forthededuction oftaxes oninputs, therecent introduction ofvalue-added tax
hadreduced costsforexporting firms andwould thusimprove theircompetitiveness. Similar effects
should result from thenewLawonPublic Procurement which implemented provisions oftheWTO
Agreement onGovernment Procurement. Thecantons hadadjusted theirlegislation onanautonomous
basis, reflecting thefactthatcantonal purchases were financed exclusively bycantonal taxes.
13. Toillustrate thescope andcoverage ofagricultural reforms, therepresentative noted thatmore
thanonethirdofSwitzerland 'sfoodrequirements werecovered byimports. Imports andexports of
foodamounted toSwF7billion andSwF3billion, respectively. Swiss agricultural policy hadas
itsmain objectives themaintenance ofadecentralized population structure inruralareas, protection
oftheenvironment andlandscape, andensuring anappropriate foodsupply. Forthese reasons,
Switzerland hadatthetimeofitsaccession totheGATT negotiated anexemption toArticle XIinorder
tomaintain quantitative restrictions. Contrary toindications intheSecretariat report, thiswasnot
awaiver asSwitzerland hadaccepted additional concessions inreturn.
14. Nevertheless, reform pressures hadgrown since thelate1980s. Tensions between individual
farmpolicy objectives aswellasthegeneral objective ofincreased trade liberalization hadinspired
aprocess ofpolicy reassessment. Ithadsubsequently led,in1993, totheintroduction ofnon-
product-related direct payments, aswellastheconditioning offinancial assistance ontheuseof
ecologically benign production techniques. Inaddition, substantial price decreases hadtaken place,
reaching 20percentformilk, meat, oilseeds andsugar beet, and10percentforcereals.
15. Asaresult oftheWTO Agreement onAgriculture, allborder restrictions hadbeentariffied,
export subsidies hadbeenreduced, anddomestic support thatwassubject toreduction commitments
hadalready beencutbyclose to20percent. Further reforms putupforpublic consultation in1995
aimed toimprove thecompetitiveness ofSwiss agriculture, reduce government intervention andpromote
more environmentally friendly activities.
16. TheGovernment wasalsoworking towards market opening inanumber ofinfrastructural areas.
Alltelecommunication services andnetwork operations would beopened tocompetition by
1January 1998. Thepostal andtelecommunications operators would beseparated, withthelatterbeing
converted intoapartially privatized jointstock company. ThenewLawonCompetition would also
apply tothissector.
17. While theeffects ofthereforms would taketimetomaterialize, particularly withrespect to
prices, theyshould eventually strengthen theeconomy 'scompetitiveness andresult inamore open
domestic market environment. Internal reforms hadtobeaccompanied byanappropriate framework
ofexternalrelations.Switzerlandthussoughttopromotemarketopeningthroughthemultilateralsystem
andtoreinforce itslinks withtrading partners, notably theEuropean Union.Switzerland WT/TPR/M/13
Page 5
18. Therepresentative ofSwitzerland commented ontheneedtofurther exploit theWTO 'spotential
inorder toadapt thetrading system tocurrent realities. Work inthisrespect should focus onnew
sectoral initiatives toreduce border restrictions; further liberalization ofservices through improvements
inMembers 'specific commitments andwider application ofthenational treatment principle. The
framework ofmultilateral investment rules should bereinforced torespond totherequirements ofa
globalized economy; andthere wasaneedforin-depth research intheareaofrestrictive business
practices thatcould impair market opening andefficient resource allocation. Switzerland would support
thewidening oftheAgreement onGovernment Procurement toinclude moreparticipants andactivities.
Intheareaofthetrade andtheenvironment, Switzerland 'sobjective wastoensure greater coherence
between international environmental agreements andWTO rules, andtoprevent governments from
using environmental measures forprotectionist purposes.
19. Since the1991TPR, Switzerland hadconcluded free-trade agreements withcentral andeastern
European countries, Turkey andIsrael. Thetwolatter agreements complemented the1972Free-Trade
Agreement withtheECandtheStockholm Convention (EFTA). Agreements withEgypt, Morocco
andTunisia wereunder negotiation. Following theSwiss people 'srejection oftheAgreement onthe
European Economic Area, Switzerland wasnowseeking todevelop itsbilateral relations withtheEU.
Ongoing negotiations covered themovement ofpersons; research; market access foragricultural
products; technical barriers totrade; government procurement; andground andairtransport.
20. Switzerland'sdevelopmentco-operationpolicyfocusedonimprovingmarketaccessfordeveloping
countries. Arevision ofSwitzerland 'ssystem ofpreferential tariffs wasintended tomitigate theerosion
ofpreferences following theUruguay Round andfurther improve thespecial benefits forthe
least-developed countries. Switzerland envisaged adopting graduation criteria which hadbeendefined
intheOECD context. Thechanges were expected totakeplace inMarch 1997.WT/TPR/M/13
Page 6Trade Policy Review
III. STATEMENT BYTHE FIRST DISCUSSANT
21. Thefirstdiscussant (Ambassador Booth Gardner) appreciated theopportunity toreview one
oftheworld 'sstrongest, mostopenandcompetitive economies. Switzerland played amajor rôlein
theWTO, serving asanexample ofwhat canbeachieved byembracing open markets. However,
atacloser look, various sectoral régimes appeared inefficient, expensive andopaque. Swiss agriculture
wasproductive butverycostly, andconsumers inSwitzerland faced highprices.
22. Toooften, manufacturing andservices sectors werefunctioning asexclusive clubs. Cartels
andhighly integrated vertical concerns represented adaunting obstacle forforeign suppliers. Traditional
relationsofretailcartelswithEuropeancompanieslimitedaccessfornon-Europeanexporters.However,
theSwissauthoritieswereawareofthesechallengesandweaknessesandhadtakenanumberofambitious
initiatives inrecent years, including thenegotiations ontheEuropean Economic Area (EEA) and
contributionstotheUruguayRound.Hewondered,however,whetherthe1993revitalizationprogramme
andtheaccompanying setoflegislative reforms would besufficient tofightprivate trade restrictions
anddefacto cartellization.
23. Noting that80percentofSwitzerland 'strade waswiththeEuropean Union, thediscussant
raised thequestion whether bilateral negotiations wereanadequate alternative tojoining theEEAor
theEU. Hewasconcerned thatasuccessful outcome could restrict access forSwitzerland 's
non-European trading partners. However, newbarriers would notbelegitimized byGATT
Article XXIV(6) asthenegotiations could notbeviewed asanextension oftheFree-Trade Agreement
withtheEU.
24. Thediscussantraisedvariousquestionsconcerningthestateofcompetitioninindividualmarkets.
How successful would therevitalization programme beinaddressing monopolies inagricultural
marketing, telecommunications andelectricity? DidtheGovernment intend toactvigorously on
restrictive practices andhowstrong would itsenforcement powers be?What steps wereintended to
opencantonal monopolies forfireandnatural damage insurance, andtheinsurance industry ingeneral?
What wastheGovernment 'spolicy towards thehighly regulated -andexpensive -aviation sector?
Whyhadimport prices notdeclined significantly despite theSwiss franc'sappreciation inrecent years?
Wasthisasignofinsufficient competition? Noting theadverse impact ofhighlevels offarmprotection
onconsumer welfare, heasked whether Switzerland planned toopenagriculture beyond itsUruguay
Round commitments. Whywastheproduction ofpotatoes, cereals, sugar anddairy products promoted
under thenewreform programme foragriculture?
25. Acknowledging current efforts towards genuine reform, hewondered whether these would
suffice toprevent Switzerland 's-stillveryhigh-standard ofliving from gradual erosion.Switzerland WT/TPR/M/13
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IV. STATEMENT BYTHE SECOND DISCUSSANT
26. Theseconddiscussant(AmbassadorK.Kesavapany)highlightedtwopolicychallengescurrently
facing theSwiss authorities: adjustments inthetrade régime following theUruguay Round andthe
strengthening ofbilateral relations with theEUafter thenegative referendum ontheEEA in
December 1992. Inaddition, Switzerland hadtocopewithaneconomic slowdown andarelatively
highlevelofunemployment byitsownstandards. Nevertheless, theeconomic fundamentals remained
strong, withlowinflation andhealthy export growth.
27. TheSwiss economy wassuffering fromanumber ofstructural problems andconstraints. The
highdegree ofcartellization prevalent intheSwiss economy wasoutmoded, aswasthecountry 's
excessive reliance onmunicipal andcantonal independence. Hequoted arecent report, issued bya
large Swiss bank, which emphasized theneedtoreduce domestic prices andcosts tointernationally
competitive levels andreconsider policies intheareas ofcartels, agricultural protection, import
monopolies andforeign labour. Thereport highlighted myriad regulations inSwitzerland which affected
theconstruction andproperty markets, andcriticized Switzerland 'staxrégime asrelatively unattractive
forholding companies. Thereport alsosuggested thatimport liberalization might helptocounteract
theupward pressure onthefranc.
28. Thediscussant noted theauthorities 'strong interest inquestions ofmarket access forgoods
andservices, investment andcompetition, intellectual property, government procurement, andtrade
andtheenvironment. Switzerland alsointended tocontribute toWTO activities inareas suchas
regionalism;theinteractionbetweentrade,monetaryandfinancialpolicies;andtherelationshipbetween
thetrading system andinternationally recognized labour rights. Agriculture, which should beapriority
areaofattention, hadnotbeenreferred tointhiscontext. Heasked foradditional information onthe
Government 's"Agricultural Policy 2002" project andontheongoing negotiations withtheEU. All
results should beimplemented onanm.f.n. basis.
29. TheSwiss authorities hadenacted anumber oflawstostrengthen theeconomy andhelpit
toadjusttotheconsequencesofglobalization.ThereformsdescribedbytherepresentativeofSwitzerland
would hopefully result infurther opening tocompetition. Switzerland 'sliberalization policies,
complemented byefforts tomaintain traditional standards ofexcellence andquality, would bekeenly
watched byWTO Members.WT/TPR/M/13
Page 8Trade Policy Review
V. STATEMENTS BYMEMBERS
30. Members oftheTPRB noted theSwiss economy 'sstrong integration intheworld economy
andcommendedSwitzerland'srôleintheWTO.Thetraderégimeforindustrywasopenandtransparent,
characterized bylowtariffs andtheabsence ofanyform ofemergency trade protection.
31. Therepresentative oftheCzech Republic emphasized inparticular Switzerland 'ssupport for
themultilateral trading system anditsrecent efforts toenhance competition andremove obstacles to
factor mobility andtrade. Losses incompetitiveness highlighted theneedforstructural reform. The
twowords mostfrequently usedwithreference totheCzech economy, transformation andtransition,
alsoapplied toSwitzerland inaglobalized world economy.
32. HeappreciatedthestepstakentoimplementUruguayRoundrequirementsinagriculture,although
theauthorities hadgenerally sought toexpose Swiss farmers onlytoamodest reduction inprotection.
Therecent expansion oftariff quotas forwhite wine confirmed their intention toexpose national
production tointernational competition. However, thiscontrasted withveryhighout-of-quota duties
forcertain farmproducts, including butter, which impeded market access. Hehoped thatSwitzerland
would takeadditional steps inthese areas.
33. Therepresentative ofCanada noted thedivergence between aliberal trade régime formost
segments ofindustry andservices andahighly controlled andprotected agricultural sector. Afew
particularly competitive sectors provided thebulkofSwitzerland 'sexport revenue. Theimport structure
wasmore diversified and,given thelowlevelofborder protection, imports should playapredominant
rôleinensuring effective domestic competition. However, highprices suggested thatthisrôlewas
notentirely fulfilled andthatthecountry 'simport propensity waslower thanunder competitive
conditions. Hethussawaneedformeasures tode-cartelize theeconomy, reduce thenumber of
regulations, simplify andharmonize norms, andabolish monopolies incertain services sectors.
34. Thefirstcandidate forreform should beagriculture. Itwasworrying thatthetotallevelof
income subsidies forfarmers wasexpected toincrease inthecontext of"Agricultural Policy 2002",
contrasting withaworldwide trend ofdeclining support andcontradicting thephilosophy underlying
theWTO Agreement onAgriculture. Howwasitpossible tojustify anaverage farmtariff ofclose
to100percent? Theincrease infoodtourism alsohighlighted theneedforadjustment. The"prise
encharge" system wasquestionable under theTRIMs Agreement andamplified economic distortions
bycreating anartificial demand forlocalproducts. Thepricing policy forcereals rancounter toany
notion ofcompetition. Theexclusion ofagriculture fromSwitzerland 'spreferential agreements further
increased relative protection afforded tothissector andraised questions with regard toGATT
Article XXIV.
35. Therepresentative ofAustralia stressed thecontrast between anopentraderégime forindustrial
products andhighcontinuing levels ofassistance toagriculture, characterized byanaverage tariff of
over80percent. The"Agricultural 2002Policy" initiative, while aiming towards more competition,
continued topromote certain farmsectors withhighlevels ofsupport. Theuseofthe"prise encharge"
system wasquestionable; ithadnotprevented thefallinagricultural incomes. Switzerland 'slivestock
andmeatsector operated behind impenetrable barriers and,asaresult, covered over90percentof
domestic consumption ofbeef, vealandpork. Swiss beefprices exceeded EUprices byasmuch as
60percent. Thefocus oftariff reductions carried outintheUruguay Round hadbeenonareas with
limited domestic production.Switzerland WT/TPR/M/13
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36. Shenoted asignificant change ineconomic conditions since Switzerland 's1991 TPR and
commended initiatives aimed atremoving regulatory distortions, streamlining government, andreducing
interference inindividual markets. Reforms inintellectual property legislation andcompetition law
wereequallywelcome.However,itwasnecessarytoacceleratethepaceofchange,giventhatconsumers
continued tosuffer fromhighdomestic prices which exceeded theEUaverage byalmost 50percent.
37. Therepresentative ofNewZealand noted hiscountry 'slong-standing interest intheSwiss
agricultural régime; sheep meat represented 40percentofNewZealand 'sexports toSwitzerland.
Heshared theconcerns expressed about significant distortions inSwitzerland 'sfarmpolicy régime.
Four fifths offarmincomes resulted from policy intervention, thehighest ratiointheOECD area.
Switzerlandwas,nevertheless,theworld'sfourthlargestexporterofcheese,relyingonsubsidiesprovided
byasemi-public bodywhose losses werecovered bytheConfederation. Heasked whytheSwiss Cheese
Union hadnotbeennotified asaState-trading enterprise, andwondered whether theUnions 'soperations
mettherequirements ofArticle XVII. Extremely hightariffs onproducts suchasbutter which kept
imports tonegligible levels highlighted theneedforfurther policy reform. Duetoexport subsidies,
theSwiss consumers could buySwiss cheese 25percentcheaper across theborder inFrance. He
feltthatthe"prise encharge" system initscurrent form might fallwithin thescope oftheTRIMs
Agreement; itcould beconsidered toviolate Article IIIoftheGATT andArticle 2oftheTRIMs
Agreement. Thesystem limited therange ofpossible commercial partners toprocessors andhadalready
beenconsidered GATT-inconsistent inregular reviews ofSwitzerland 'sProtocol ofAccession under
GATT 1947. Switzerland hadnowlostthecover which theterms ofthatprotocol hadprovided. The
tariff quota arrangements forwinealsodemonstrated theneedforliberalisation; thatforwhite wine
hadbeenfilled inoneandahalfdaysatthebeginning of1996, preventing alarge number offoreign
suppliers fromparticipating; hethuswelcomed thedecision tohalve theout-of-quota tariff forwhite
wine.
38. TheSwiss Cartel Commission hadlimited capacity toconduct effective competition policy,
notably inservices sectors. Thiswasreflected inalarge number ofexclusivity arrangements. The
newCompetition Lawappeared tobelessstringent thanrelevant EUlegislation. Heurged theSwiss
authorities topersist withtheirreform efforts.
39. Therepresentative oftheEuropean Union stressed theclose relationship between theEUand
Switzerland, regretting thatSwitzerland hadnotjoined theEuropean Economic Area. Switzerland
demonstrated thateconomic integration waspossible notonlywithneighbouring partners, butwith
countries throughout theworld. Heappreciated theongoing process oflegislative reform, including
thefaithful implementation ofUruguay Round commitments. Switzerland 'sforward looking concept
fortheSingapore Ministerial Meeting wasclose toEUpriorities, notably intheareas ofinvestment
andcompetition.
40. Hefeltthatitmight bepremature tojudge recent domestic reforms astheyhadnotyetborne
fruit. Switzerland wascurrently atacrossroads; itsnextTPRwould therefore beofparticular interest.
Heasked whether theannounced liberalization oftelecommunications would ensure non-discriminatory
market access and,referring toairtransport, whether Switzerland would fullyliberalize ground handling
services.
41. Therepresentative oftheSlovak Republic noted thatSwitzerland hadnever hadrecourse to
quantitative restrictions, safeguards, anti-dumping orcountervailing actions onindustrial imports.
Likeotherdelegations, heappreciated therevitalization programme which, however, hadnotfacilitated
access toSwiss landandlabour markets. Certain investment restrictions andexclusive agreements
under intellectual property legislation hadalsopersisted. Hecalled forsignificant improvements in
agricultural tariff quotas andemphasized therôleoftrade liberalization inovercoming economic
stagnation.WT/TPR/M/13
Page 10Trade Policy Review
42. Therepresentative ofthePhilippines, speaking onbehalf oftheASEAN countries, welcomed
recent economic reforms which should facilitate theentry ofnewproducers andtraders. Theprocess
ofstandards harmonization withtheEUshould takeintoaccount theprovisions oftheWTO Agreement
onTechnical Barriers toTrade. Import charges oncoffee, cocoa andrice,usedtofinance minimum
stocks, appeared toserve protectionist purposes. Tariff escalation affected imports oftextiles, clothing,
basic chemicals andrubber products. HefeltthatSwitzerland 'strade andeconomic policies were
over-concentrated onEuropean counties andtended toignore attractive commercial opportunities
elsewhere.
43. Therepresentative ofRomania joined others incommending Switzerland foritsparticipation
intheWTO, theabsence ofemergency tradeprotection, andforrecent domestic reforms. Heenquired
about theimport régime formeatandpoultry, anditscompatibility withWTO rules. Switzerland 's
technical assistance activities, including support fortrade policy courses, were laudable.
44. Therepresentative ofChile considered thatspecific duties increased tariff protection against
low-cost imports which werefrequently supplied bydeveloping countries. Thismight havedistorted
theregional pattern ofSwitzerland 'simports tothebenefit ofdeveloped countries. Acaseinpoint
wasagriculture, where healsocalled foramore liberal andenvironmentally benign approach. While
newcompetitionandstandardizationpoliciesshouldhelptoreduceprotectivebarriers,certainweaknesses
remained. There wasnogeneral prohibition ofcartel activities and,forpublic interest reasons, certain
State-tradingenterpriseswerepartlyexemptfromcompetitionrules.Switzerlandmaintainedrestrictions
onforeign investment which nolonger existed inmany developing countries.
45. Whileacknowledgingaliberalizationtrendinservicessectors,hepointedtocontinuedrestrictions
onpurchases ofrealestate, nationality requirements forsenior executives, restrictions onthemovement
oflabour, andvarious exclusivity agreements. Switzerland 'soffer inthenegotiations onbasic
telecommunications didnotreflect itsdomestic plans forderegulation in1998. Infinancial services,
only11percentoftheSwiss-based enterprises were under foreign controls. Hecalled forthe
liberalization ofcross-border supply ofinsurance services asameans toincrease competition inthe
sector.
46. TherepresentativeofArgentinaconsideredthatforimportantagriculturalproducts,Switzerland's
tariffreductions hadbeenextremely modest. Theminimum WTO reduction rateof15percentapplied
tomeat, apples, pears, durum wheat, barley, andsoybeans, contrasting withhightariffcutsonproducts
which already enjoyed minimum protection. Themain access advantage consisted oftheopening of
28tariff quotas. Healsoexpressed concern about the"prise encharge" system, taking noteof
Switzerland 'sassurances inother forathatthesystem would notimply anyadditional restrictions and
thatthetariffquotas would beentirely filled. Hewondered whySwitzerland hadnottariffied itsimport
charges onpoultry; charges levied forthemaintenance ofsecurity stocks should havebeenscheduled
under "other duties andcharges".
47. Heshared theviewthatcartels andexcessive regulations inindustry prevented Switzerland 's
liberal border régime from translating intocompetitive prices. Given thecountry 'sabundant capital
base, itcould afford torelyfarmore strongly ontheconcept ofcompetition andefficiency thanon
security andstability. Recent reforms were astepinthisdirection, butshould beaccompanied by
theabolition ofallexclusivity arrangements affecting production andtrade. TheState waspresent
inanumber ofservices activities, aswitnessed bytheexistence ofonesingle national broadcasting
enterprise. Heasked howtheconcept ofeffective competition would apply inpractice, andwhether
internal liberalization policies would eventually address current access limitations toSwiss capital, land
andlabour markets. Itwasapositive signthat,incertain services, Switzerland nowallowed entrySwitzerland WT/TPR/M/13
Page 11
ofspecialists ofaforeign enterprise without commercial presence, ifthecompany hadconcluded a
service contract withaclient inSwitzerland.
48. Therepresentative oftheUnited States joined other delegations inexpressing concern about
thelackofcompetition inSwiss agriculture andasked forfurther details about the"Agricultural
Policy 2002" initiative. Heenquired whether Switzerland hadmodified orexpanded thepreferences
extended totheEUinagriculture andwhether thishadbeennotified totheWTO. Hecriticized the
continued operation, until1999, ofdiscriminatory excise taxesonalcoholic beverages andsought details
onSwitzerland 'sefforts toadopt international standards; anysteps tofacilitate thegranting ofvisas
andwork permits toforeigners; intentions toeaserestrictions onthepurchase ofrealestate;
deregulation insectors subject tostatetrading orexclusive rights; theseparation oftheregulatory
andoperational functions oftheSwiss PTT; theallocation ofrevenue collected asremuneration from
widespread useofcopyrights toforeign andrelated rightholders; current preparations toimplement
andenforce thenewCompetition Law; thepenalties andsanctions provided forunder theLaw; and
thepossibility fortheCompetition Commission toactagainst certain abusive practices inmerger cases.
Inthelatter context, healsoenquired whether monetary sanctions hadactually beenimposed bythe
Commission inrecent cartel cases andwhether theoverview oftheCommission 'sactivities given in
theSecretariat 'sTPRreport wascomplete.
49. Henoted highlevels ofgovernment intervention inareas suchastelecommunications, parcel
services, public transport andcertain insurance services, andshared concerns about thepotentially
adverse effects ofSwitzerland 'spreferential relation withtheEUonextra-European partners. Inthis
context, hadthere been anymodifications tothe1972 free-trade agreement withtheEuropean
Communities? Inthisview, GATT Article XXIV(6) would notlegitimize theextension toSwitzerland
ofmore restrictive EUpolicies innon-tariff areas. HefeltthatSwitzerland hadnotyetfulfilled all
WTO notification requirements, including those under theAgreements onImport Licensing, Technical
Barriers toTrade andCustoms Valuation. Since compliance withnotification requirements hadbecome
aconcern intheWTO, hefeltthatnotifications should besystematically recorded inTPRreviews.
50. Therepresentative ofIndia complimented Switzerland foritsexemplary management of
economically important sectors, notably intheservices area. However, hewasconcerned about the
lowlevelofdomestic competition; thetwomajor retailchains tended todiscourage newmarket entries.
Noting thatSwitzerland 'straderelations weregeographically concentrated onEurope, heencouraged
theauthorities toextend thecoverage oftheGSPscheme toproducts suchaswalnuts, cigars andraw
coffee andtoimprove access fortextiles andclothing items.
51. Likeother delegations, therepresentative ofHungary wondered whyimport prices hadnot
declined inlinewiththeSwiss franc'sappreciation. Hecalled foranambitious programme oftariff
reduction inagriculture, andastreamlining ofmonopolies inagricultural marketing. Theinitiative
topre-announce seasonal tariffs andtariffquotas wasapositive step. Heconsidered thatSwitzerland 's
bilateral andmultilateral trade policy approaches were mutually supportive.
52. Therepresentative oftheRepublic ofKorea noted that80percentofSwitzerland 'stechnical
regulations wereEuro-compatible andenquired about plans toharmonize theremaining 20percent,
notably inareassuchaselectro-magnetic andtelecommunications equipment. Heasked formoredetails
ontherequirement thatonlySwiss citizens could actaschiefrepresentatives ofjointventures andbranch
offices, andwondered about theunderlying rationale.
53. Therepresentative ofJapan considered thattheimpending changes incompetition policy could
promote salesofforeign products aswellasinward investment inSwitzerland. Inthiscontext, healsoWT/TPR/M/13
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encouraged theauthorities toabolish restrictions onlabour mobility suchasresidence requirements
forsenior executives, timelimits ofthreemonths forthestayofforeign executives, andlengthy cantonal
procedureshinderingrecruitmentofforeignstaff.Theseobstaclesalsoaffectedgovernmentprocurement
ofsuchservices asadvertising, consulting andfinance, anddiscouraged foreign construction companies
from competing inSwitzerland.
54. Cantonal regulations forreasons ofhuman, animal orplanthealth might constitute unnecessary
obstacles totrade. Hequestioned thecompatibility withtheTRIMs Agreement ofpreferences forlocal
andEuropean suppliers ofaudio-visual services, andsought further details ontheassessment offiscal
duties onimported asagainst domestic carsandcarparts. Healsoexpressed interest inthepossibility,
currently envisaged bySwitzerland, ofconcluding reciprocal agreements toguarantee international
exhaustion ofintellectual property rights. Would suchprovisions automatically beextended onan
m.f.n. basis?
55. Therepresentative ofEgypt noted theimportant rôleoftechnical co-operation inSwitzerland 's
external relations withdeveloping countries. Heasked formore information ontheenvisaged changes
totheSwiss GSPscheme andontheadministration oftariff quotas onfruit, vegetables andflowers.
56. Therepresentative ofNorway commented thattheperceived conflict between Switzerland 's
industrial andagricultural tradepolicies reflected apolitical decision which hadbeentaken inthelight
ofEuropean history. Hewasconfident that,overtime, Switzerland would successfully adjust itsfarm
policies.
57. Therepresentative ofPoland enquired about: thecauses underlying significant regional
unemployment differentials inSwitzerland; future changes oftherealeffective exchange rateinthe
context ofEuropean monetary unification; andthereasons fortherecent fallinSwitzerland 'strade
surplus. Given thattwothirds ofSwitzerland 'scurrent account surplus wasattributable tonon-factor
services, hesought further information onthemain components ofthissegment.Switzerland WT/TPR/M/13
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VI. REPLIES BYTHE REPRESENTATIVE OFSWITZERLAND AND ADDITIONAL
COMMENTS
58. TheChairperson invited therepresentative ofSwitzerland tofocus hisresponse onfivemain
themes: (i)theeconomic fundamentals andstructural reforms under way; (ii)theagricultural sector;
(iii)competition policy; (iv)regional andpreferential arrangements; and(v)other sectoral issues,
including services.
(i) Theeconomic fundamentals andstructural reforms under way
59. Therepresentative ofSwitzerland expected thatSwiss GDPwould grow at0.3percentin1996,
clearly contrasting withthestrong expansion ofthe1980s andconfirming thateconomic adjustment
entailedcosts.Thesectorswhichhadbeendescribedasprotectedwerenotescapingadjustment;ongoing
reforms inagriculture, health, transport andpublic administration weighed onthepaceofoverall
economic expansion.
60. Thecurrent account surplus wasproof thatSwitzerland hadmaintained itscompetitiveness;
thesurplus relied mainly ontourism, banking services, international trade andtransport. Thelarge
number ofemployees inSwiss companies operating abroad confirmed thatSwitzerland wasnotatall
concentratingitsactivitiesonneighbouringcountries.BothexportstoandinvestmentsinAsiancountries
weregrowing dynamically. Inaddition, there wasatrend totakeadvantage offavourable production
costs inthetransition economies ofcentral andeastern Europe. Inthese circumstances, itwasnot
surprising thatincome developments intheaffected domestic sectors hadnotcontributed torekindling
internal demand.
61. Thestrength oftheSwiss franc mainly reflected external factors, suchastheprospect of
European Monetary Union. TheItalian-speaking region ofSwitzerland hadparticularly suffered from
thelira'sdepreciation, partly explaining current growth disparities between thecantons. Hedidnot
expect greater currency instability onceEMU wasfullyoperational, given itsfocus onpricestability.
Switzerland wascurrently meeting theMaastricht criteria.
62. FollowingtheintroductionofVAT,householdshadbornthebruntofadjustmentwhileinvestment
wasexpandingrapidly.Thisexpansionwasagoodsigninprinciple,althoughitwasclearthatcompanies
were rationalizing theiroperations. Employment insecurity could thusaffect private consumption.
Hewasconfident, however, thatSwitzerland 'scurrent short-term interest ratesof2percent,coupled
withmonetary expansion exceeding 10percent,would provide thebasisforeconomic recovery in1997.
63. Thevolume ofimports hadincreased dynamically in1994, atovertwice therateforrealexport
growth. Theoverall effect onthetrade balance hadbeenmitigated bytheSwiss franc'sappreciation.
Inhisview, highdomestic prices mainly reflected theprices fornon-traded goods, withthelevelof
rentsparticularly highrelative totheEUaverage. Assalesmargins frequently represented upto50per
centofconsumer prices, thecostsofnon-traded inputs hadastrong impact onpricelevels. Heagreed,
however, thatfallsinimport prices should translate more rapidly intolower consumer prices once
thestructural reforms were fullyimplemented.
64. Thereforms weresettocontinue aftertheintroduction ofthenewlawsoncompetition, the
internal market, andtechnical barriers totrade. Theabolition ofmonopolies, guaranteed margins and
otherforms ofStateintervention inagriculture should directly benefit consumers. Liberalization should
alsoleadtoprice reductions inthetelecommunications sector. Continued deregulation would help
toreduce theadministrative burden faced bysmall andmedium-size enterprises.WT/TPR/M/13
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65. While itwastruethat80percentofSwitzerland 'stechnical regulations wereEuro-compatible,
theyalsotookintoaccount existing international norms. Theconformity ofevery newtechnical
regulation withtheWTO Agreement onTechnical Barriers toTrade wassystematically examined.
Theguiding principle, anchored inthenewSwiss law,required thataregulation notbemore
trade-restrictive thanwasrequired tomeet itsunderlying health, environmental, security orother
objectives. Remaining regulations concerned areaswhere harmonization waseither under wayorwhere
nointernational orEUregulations existed.
66. Switzerland hadtraditionally levied specific duties anddidnotintend tochange thesystem.
Theadvalorem incidence ofspecific duties onindustrial goods hadalsobeenbound intheUruguay
Round Schedule inorder toprovide moretransparency andpredictability. Given thelowlevelofduties,
thetariffsystem didnotrepresent animportant obstacle totrade, evenforbulky andinexpensive goods.
Tariff escalation occurred atverylowtarifflevels, which would befurther reduced during theUruguay
Round implementation process.
67. Switzerland'sGSPsystemprovidedduty-freeentryforallindustrialproductsfromleast-developed
countries (LDCs). More advanced developing countries enjoyed similar treatment withtheexception
oftextiles, where m.f.n. tariffs werereduced by50percent. Inaddition, about halfofSwitzerland 's
tarifflinesforagricultural products, atfour-digit level, carried preferential rates(duty-free forLDCs).
Theannounced reform oftheGSPsystem should result induty-free in-quota access formostagricultural
products exported byLDCs. Improved access would beprovided formelons, pineapples, figsand
rawcanesugar, andefforts would bemade toreduce tariff escalation forfoodproducts exported by
other developing countries.
68. Thesecond discussant called attention tocantonal regulations thatcontinued toaffect internal
market integration and,thus, costefficiency inthehealth andeducation sectors. Therepresentative
oftheUnited States asked whether anystudies hadbeenmade ontheeffects thatincreased transparency
inthebanking sector would haveonexchange rates. Therepresentative ofNorway enquired whether
theexpectation ofarecovery in1997wasbased oncyclical factors orrather ontheresults ofstructural
adjustments currently under way.
69. Therepresentative ofSwitzerland agreed thattherewerespecific economic constraints which
resulted fromSwitzerland 'sunique political system. These constraints reduced theflexibility toadjust.
ThenewLawontheInternal Market wasaimed atincreasing professional mobility, notably through
themutual recognition ofprofessional certificates. However, asfaraspublic services werefinanced
bycantonal taxes, thecentral Government 'sinfluence toreduce costswaslimited. TheSwiss banking
sector wasalready transparent, andfurther moves towards transparency should notbeattheexpense
ofdepositors. Banking secrecy wasnotstricter inSwitzerland thaninmostindustrial countries; capital
inflows mainly reflected Switzerland 'sreputation formonetary prudence. Theexpectation ofarecovery
in1997 relied mainly onprospects ofstronger growth inmain export markets.
(ii) Agriculture
70. Withashare of2percentofGDP, agriculture represented arelatively minor partoftheSwiss
economy. Theself-sufficiency ratio, at65percent,wasoneofthelowest ofindustrialized countries;
farm expenditure represented 9percentoftheFederal Budget. Reforms under "Agricultural
Policy 2002" aimed atrestoring market mechanisms wellbeyond thecommitments made intheUruguay
Round. Oneofthemainobjectives wastodecouple price andincome policy; ecologically motivated
direct payments were expected toincrease most strongly. Thereforms were expected toresult in
consumer savings ofSwF1.4billion. Between 1995and2002, public expenditure onpriceandmarketSwitzerland WT/TPR/M/13
Page 15
support would decrease bySwF500million. Hereminded delegations ofthenon-trade objectives
ofSwissfarmpolicy,includingthemaintenanceofadecentralizedpopulationstructureandtheprotection
ofthelandscape.
71. Tariffication hadrepresented afundamental policy change. Therelevant tariff quotas were
being filled, withimports exceeding thequota volumes inmany cases. Commitments toreduce internal
support overtheperiod to2000 hadnearly beenmet. Export subsidy ceilings hadnotbeenreached
in1995 formost products, inparticular dairy.
72. The"prise encharge" system wasonemethod ofallocating imports under thetariff quotas
thathadbeenagreed uponintheUruguay Round, anddidnotviolate anyofSwitzerland 'sobligations
under theWTO. Thesystem didnotoperate asanadditional trade barrier, andhadnoinfluence on
prices, quality orthechoice oforigin. Tariff quotas inSwitzerland could notbeallocated todomestic
producers benefitting from"prise encharge". They wereallotted toprocessors onlyforproducts that
required further transformation, suchasdurum wheat, bread-flour, secondary cereals forhuman
consumption,somemeatandfrozenvegetables.Theratioofdomesticpurchasestoimportswasmodified
according tothemarket absorption capacity, butnever operated inawaytoprevent thequotas from
being filled. There were nointentions toabolish the"prise encharge" system.
73. Imports ofpoultry werecovered bythe"prise encharge" system. Firms notwishing topurchase
domestic production could instead conclude aprivate contract andpayacontribution tothedomestic
poultry production support fund. These contributions hadnotbeen tariffied, butincluded inthe
Aggregate Measure ofSupport. Auctions were usedtoallocate tariff quotas formeatandpipfruit;
theywereatransparent, efficient andequitable wayfortheGovernment tocapture importers 'rents.
Likethe"prise encharge" system, auctions could notassuchbeconsidered atrade measure.
74. Theadministration oftariff quotas forseasonal products wasefficient, and145percentof
thequota forcutflowers hadbeenfilled in1995. Many products were subject toamixed system
involvingseveralmethodsofquotaallocation.Importsofanimalfeedweresubjecttoautomaticlicensing
andminimum stock requirements. Fodder prices hadbeenreduced progressively, ashadbeenthe
casefortheapplied import duties which werebelow bound rates. Imports ofbread-flour wereunlimited
under the"prise encharge" system. Adifferent quota allocation method forwine wasunder
consideration inParliament.
75. "Agricultural Policy 2002" would bethesubject ofacommunication toParliament inmid-1996,
andwasexpected toenterintoforceon1January 1998. Itprovided continued support fortheproduction
ofsugar andcereals; however, therewasamarked decline ingovernment intervention. Government-set
production ceilings forbeetsugar would beabolished andprices andquantities would bedetermined
between sugar producers andprocessors. WTO commitments regarding internal support andmarket
access would berespected. Sugar would besoldbythetwodomestic sugar processors under market
conditions, determined byworld prices andborder duties. "Agricultural Policy 2002" alsoenvisaged
areunification ofthemarkets forbread andfodder cereals. Thecontinuation ofcereal, potato and
sugar production, although inefficient byworld standards, wasintended tomaintain acertain level
ofself-sufficiency. While thesame considerations applied tooilseeds, these would besupported
exclusively bynon-product-related direct payments.
76. TheSwiss Cheese Union administered export subsidies forcertain cheeses only(Emmental,
Gruyère, Sbrinz). Asthese cheeses could alsobeexported freely without subsidies andother cheese
exports benefitting fromsubsidies werehandled byprivate companies, therelated activities could notWT/TPR/M/13
Page 16Trade Policy Review
beconsidered aState-trading activity asdefined inArticle XVII ofGATT 1994. TheSwiss Cheese
Union wasscheduled forabolition.
77. Sanitary andphytosanitary regulations didnotdiscriminate between imported anddomestic
products. Switzerland participated inthework ofmost international bodies, including Codex
Alimentarius. Agreements withneighbouring countries covered areas suchasepizootics andplant
protection; anagreement withtheEUwasdesigned tofacilitate border procedures.
78. MinimumstocksweremaintainedunderGATTArticleXXIfornationalsecurityconsiderations.
Thestocks werefinanced byimporters 'associations acting onbehalf oftheGovernment. Switzerland
hadtariffied thelevies onimported goods thatwerealsoproduced domestically (sugar, oilsandfats,
andfodder). Incontrast, levies tofinance compulsory stocks ofriceandtropical beverages hadnot
beentariffied orbound, asthere wasnodomestic production.
79. Thereduced VAT rateonagricultural inputs didnotdistort competition because thesame rate
applied toallfarmproducts. Taxes onalcoholic beverages, which potentially discriminated between
imported anddomestic products, would beharmonized. BUTYRA, thebutter monopoly forin-quota
imports, wasearmarked forabolition aspartofthe"Agricultural Policy 2002" project. Swiss farmers
were fullyaware ofthefoodtourism problem; theGovernment hoped thattheagricultural reforms
would halve theprice differential between Swiss andneighbouring markets.
80. Thesecond discussant, himself acitizen ofanetfoodimporting country, considered itimportant
toobtain thebestandcheapest supplies forthepopulation. Heappreciated theinformation provided
onthe"Agricultural Policy 2002" project; theenvisaged reforms might taketimetomaterialize.
81. Therepresentative ofNewZealand reiterated hisconcerns about thelegalstatus ofthe"prise
encharge" mechanism under theUruguay Round Agreements. Themechanism, which hadallthe
characteristics ofaTrade-Related Investment Measure, hadbeentariffied intheRound and,therefore,
should notremain inplace. Inpractice, itseverely circumscribed theability ofexporters tochoose
theircustomers. Healsoquestioned whether thefactthattheSwiss Cheese Union 'sactivities were
limited tothreevarieties wassufficient fornotconsidering itasaState-trading entity, given theUnion 's
rights andprivileges andtheexistence ofanobligatory delivery scheme. TheGovernment 'sintention
todisband theUnion wastherefore most welcome.
82. Therepresentative ofCanada noted thatSwitzerland 'sfiscal outlays foragriculture would
significantly expand overthenextfiveorseven years, withapotentially adverse impact onstructural
adjustment intheagricultural sector. Therepresentative oftheUnited States asked about anyrecent
agreements thatprovided preferential access foragricultural products onareciprocal basis.
83. Therepresentative ofSwitzerland noted thatthere would beample opportunities inother fora
todiscuss themerits anddemerits ofthe"prise encharge" system. There would beanincrease in
financial support foragriculture because costs would beshifted from consumers totaxpayers inthe
context ofanoverall reduction insupport foragriculture.
(iii) Competition policy
84. Therepresentative ofSwitzerland remarked thatthegeneral perception thattheSwiss economy
washighlycartelized,wasinspiredmainlybythehighlevelofdomesticprices.Thesecouldbeattributed
mainly tohighliving standards andapreference forhigh-quality products. However, heconceded
theexistence ofcollusive practices among companies engaged intraditional cartels and,insome cases,Switzerland WT/TPR/M/13
Page 17
exclusive distribution agreements. Such agreements might impede access ofnewentrants. The
competition authorities werefullyaware oftheproblem, buttheexisting legalprovisions against vertical
agreements were relatively weak. Thesituation would change under thenewCompetition Law.
85. Table AIII.2 oftheSecretariat report listed allformal enquiries bytheCartel Commission which
hadtaken place during theperiod under consideration (1991 to1995). Inaddition, theCartel
Commission hadmade 74preliminary investigations. Regarding sanctions, heemphasized that,for
Constitutional reasons, Swiss cartel lawwasbased ontheprinciple ofabuse; itdidnotimpose ablanket
prohibition oncartels. Iffirms hadrefused toaccept arecommendation bytheCartel Commission,
theDepartment ofthePublic Economy could make adecision. Disregard ofthisdecision might draw
sanctions, butthere hadbeennosuchcasetodate.
86. ThenewCompetition Law, partoftheGovernment 'srevitalization programme, wasdueto
enter intoforce on1July1996. Switzerland would thenhavemodern legislation similar tothatof
theEuropean Union. While thenewlawwasalsobased ontheprinciple ofabuse, itwasdefined
inawaythatallowed thecompetition authorities toachieve thesame results aswithprohibitions.
Horizontal price, quantity andterritorial agreements werepresumed tobeillicit. Economic operators
inSwitzerland werefullyaware ofthenewrules, aftertwoyears ofpreparatory work andextensive
public discussions. Thelawseparated thecompetence toinvestigate from thecompetence todecide.
Investigations would beconducted bytheSecretariat oftheCompetition Commission, composed of
about 40professionals, asagainst 10atpresent. TheCompetition Commission, which hadbeen
elected attheendofApril, would takedecisions based onthework oftheSecretariat. TheCommission
hadbeenempowered toimpose fines orother monetary sanctions. However, theprinciple ofabuse
allowed theimposition ofsanctions onlyifthefirms concerned didnotcomply withadecision. Fines
could reach uptoSwF100,000 foranatural person acting foracompany, orthreetimes theprofits
achievedthroughtheabusivepractice,or10percentoftheturnoverinSwitzerlandofthefirmsinvolved.
87. ForthefirsttimeinSwiss competition policy, thelawcontained apreventive merger-control
mechanism; thematerial criteria forinterventions werebased on"effective competition". Thishad
tobeunderstood asanopen, dynamic approach which wasnotlinked toaparticular competition theory.
Ageneral exception clause, setoutinArticle 3:1ofthenewlaw,applied onlywhere itwastheclear
intention ofthelegislator toexclude competition inacertain sector. Thisimplied thatthepublic interests
involved could notbeachieved through market forces and,therefore, aspecific regulatory framework
wasnecessary.
88. Regarding intellectual property rights, henoted thatnobilateral negotiations werecurrently
taking place regarding theregional/international exhaustion ofsuchrights. Inanyevent, Switzerland
would takeintoaccount itsinternational obligations, including under GATT Article XXIV andthe
TRIPS Agreement.
89. Inresponse toadditional questions, therepresentative ofSwitzerland confirmed thatthe
Competition Commission hadthepossibility ofinitiating investigations. Apublic interest clause in
Article 8oftheCompetition Lawallowed foranexceptional authorization based onpreponderant public
interests.
(iv) Regional andpreferential arrangements
90. Switzerland 'strade policy hadbothamultilateral andapreferential dimension, withafocus
onEurope. In1991, theFederal Council hadpursued twomain policy objectives: concluding the
GATT negotiations andjoining theEuropean Economic Area. InMay1992, theFederal Council hadWT/TPR/M/13
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declared EUmembership asastrategic European policy objective. Inorder tominimize theeconomic
costsresulting fromtherejection oftheEEAAgreement, theFederal Council wascurrently negotiating
withtheEUinanumber ofareas:
- participation intheEU'sFourth Framework Programme forResearch, which would allow
forgreater synergies between Swiss andEUresearch efforts;
- improved co-operation intheareaoftechnical regulations tofacilitate mutual market access;
- enhanced market access foranumber offarmproducts through theelimination oftariff and
non-tariff barriers totrade;
- progressive liberalization inprocurement areas notyetcovered bytheWTO Agreement on
Government Procurement, including railways andtelecommunications, andextension ofthe
provisions oftheWTO Agreement topurchases bySwiss municipalities;
- progressive liberalization oflabour markets forEUandSwiss residents, aswellasmutual
recognition ofdiplomas andco-ordination ofsocial security provisions;
- liberalization ofairtransport onareciprocal basis, ensuring EUcarriers access conditions to
theSwiss market comparable tothose accorded tocompanies from certain third countries;
and
- progressive liberalization ofroadtransport onareciprocal basisanddevelopment ofacommon
approach totransport policy, notably fortheAlpine region, thatwould reflect actual costs.
91. Future agreements withtheEUcould takevarious forms, including asecond round ofbilateral
negotiations, accession totheEEA ormembership oftheEU. Ensuring conformity withGATT
Article XXIV, bothinformandsubstance, wasapriority objective inthepresent bilateral negotiations.
Switzerland hadrecently concluded aseries offree-trade orco-operation agreements withtrading
partners; the1972 free-trade agreement withtheEChadnotbeenamended. Switzerland 'sactive
participationintheWTOshoulddemonstrateitswillingnesstostrengthenthemultilateraltradingsystem.
RegionalintegrationschemeswouldnoterodeotherWTOmembers'termsofaccesstotheSwissmarket.
(v) Other sectoral issues, including services
92. Therepresentative ofSwitzerland stressed thathiscountry 'sregulatory régime wasopenand
liberal. Thiswasreflected inoneofthemostcomprehensive schedules ofspecific commitments under
theGATS interms ofsectors aswellasmodes ofdelivery, including inparticular theestablishment
ofacommercial presence inSwitzerland. Thehorizontal limitations contained intheGATS schedule
were ofminor importance:
- Theacquisition ofrealestate waspermitted forpersonal housing needs, professional useand
business activities. Toverify thepurpose ofanacquisition, anauthorization requirement was
inplace which didnotconstitute asubstantive obstacle toestablishing acommercial presence.
Theonlyexcluded activity wasrealestate business assuch.
- Under Swiss company law,specific requirements applied totheresidence and/or nationality
ofboard members orofcompany representatives. These requirements applied horizontally
toallsectors oftheeconomy andhadnotproved animpediment toforeign direct investmentSwitzerland WT/TPR/M/13
Page 19
inSwitzerland.Inparticular,theydidnotinhibitforeigninvestorsfromexercisingmanagement
andcontrol functions over their business operations. Theregulations didnotapply to
cross-border delivery.
- Concerning movements ofnatural persons, inparticular intra-corporate transfers, access for
executives, managers andspecialists wasgranted according toSwitzerland 'sGATS
commitments. Inaddition, Switzerland wasprepared toassume commitments forspecialized
contractual service providers without acommercial presence. Intheevent ofdifficulties at
cantonal level, applicants could refertotherelevant federal authority.
93. Exclusivityarrangementsinservicessectorsweretheexceptionratherthantherule.Inaddition,
reforms wereunder waytoopenhitherto protected areastoprivate competition onanon-discriminatory
basis. Thiswastruefortelecommunications andforavariety ofpostal andrailway transportation
services.
94. Monopolies forfireandnatural damage insurance existed onlyin19cantons. Theshare of
exclusive providers intotalpremium income intheseareas amounted tolessthan4percent. Although
theabolition ofthesemonopolies wasalong-term objective oftheFederal Government, itwaspolitically
sensitive ascantonal constitutions would havetobechanged.
95. Cross-border provision ofre-insurance andcertain insurance services inthetransport areawas
already possible. Inaddition, federal legislation allowed forcross-border supply oflifeandnon-life
insurance forlargerisks, provided thatabilateral agreement onthemutual recognition ofsupervision
hadbeenconcluded withthehome country oftheprovider. Sofarnosuchagreement hadbeen
concluded.
96. Airtransport services, inparticular traffic rights, were stillgoverned mainly bybilateral
agreements. Thiswastrueformost, ifnotallWTO Members. During theUruguay Round, major
trading partners hadopposed theinclusion oftraffic rights anddirectly related services, including
ground handling, intothemultilateral framework oftheGATS. Given thesize ofitsterritory,
Switzerland hadnosignificant internal airtransport market. Liberalization ofairtransport services
would thustakeplaceinaninternational framework, bilateral ormultilateral, depending ontheapproach
taken bytrading partners. Switzerland waspresently negotiating withtheEUand-intheframework
ofabilateral exchange oftraffic rights andrelated services -other partners.
97. Telecommunicationswasprobablythemostsignificantsectorcurrentlyundergoingderegulation.
Adraft lawwould soon betransmitted toParliament andwasexpected toenter intoforce on
1January 1998. Switzerland 'sGATS offerofconcessions would bechanged accordingly assoonas
thelawwasapproved. Thenewrégime wasbased onmarket principles. Allsuppliers ofuniversal
telecommunication services andallnetwork operators andusers ofradiocommunication frequencies
hadtobelicensed. However, withtheexception oftechnical limitations, thenumber oflicenses was
notlimited.
98. Universalservicesincludedvoicetransmission,datatransmission(e.g.fax,internet),emergency
callsandasufficient number ofpublic payphones andcertain associated services. Thislistcould be
expanded. Telecom PTTwould provide theuniversal service forthefirstfiveyears, afterwhich an
auction would beheld. Ifuniversal services could notbesupplied ataprofit, subsidies would be
provided. They would besourced from feeslevied onthesupply oflicensed telecommunications
services.WT/TPR/M/13
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99. Thedrafttelecommunicationslawalsocontainedrulesonco-operationbetweensuppliers,notably
withrespect tointerconnection. Special provisions hadbeenmade regarding frequency management,
terminal security andsecrecy. Anindependent Communication 'sCommission would becreated to
prevent interest conflicts between theConfederation 'sregulatory competence anditsrôleasaco-owner
ofTelecom PTT. TheCompetition Commission would beresponsible forgeneral issues relating to
competition. Global One, British Telecom andother foreign private service providers werealready
established inSwitzerland orwereconsidering establishment inviewofboththeexisting andthenew
market environment.
100. Various telecommunications services hadalready beenopened toprivate competition, e.g.data
communication services andvoice telephone services forclosed usergroups onleased lines. Inthese
areas, private operators werefreetooperate intheSwiss market without restrictions onforeign capital
participation.
101. Therepresentative ofChile asked whether thedraft telecommunications lawcontained any
restrictions onforeign equity participation andsought clarification onthepreferences inplace inthe
audiovisual sector. Therepresentative ofArgentina enquired about authorization requirements for
foreign construction companies employing theirownstaffinSwitzerland.
102. Therepresentative ofSwitzerland confirmed thattherewould benorestriction onforeign equity
participation intelecommunication companies andundertook toprovide detailed written replies tothe
other twoquestions.Switzerland WT/TPR/M/13
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VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
103. TheTrade Policy Review Body hasnowcompleted thesecond review ofSwitzerland 'strade
policies andpractices. These remarks, made onmyownresponsibility, summarize themain points
ofthediscussion. They arenotintended tosubstitute forthecollective evaluation andappreciation
ofSwitzerland 'stradepolicies andpractices. Details ofthediscussion willbereflected intheminutes
ofthemeeting.
104. Thediscussion developed under fivemainthemes: (i)theeconomic environment andstructural
reformsunderway;(ii)agriculture;(iii)competitionpolicy;(iv)regionalandpreferentialarrangements;
and(v)other sectoral issues, including services.
(i) Theeconomic environment andstructural reforms underway
105. Members noted thatSwitzerland 'seconomic environment since1991wasoneofslowgrowth,
rising unemployment andlosses incompetitiveness. Despite these unfavourable trends, Switzerland
hadplayed aleading rôleintheUruguay Round andhadembarked onaprocess ofinternal andexternal
trade liberalization andderegulation. Implementation oftheWTO Agreements implied important
legislativereforms,mainlyinagricultureandgovernmentprocurement.The"revitalizationprogramme",
undertaken since 1993, wasaimed atopening internal product andfactor markets, strengthening
competition andharmonizing technical regulations withinternational requirements, inparticular those
maintained bytheEuropean Union. Several members noted thatnotallpartsoftheprogramme had
yetentered intoforce andthatothers would require timetoshow tangible results.
106. Whilecurrencyappreciationtendedtoundermineexportcompetitiveness,inparticularinsectors
suchastourism, declining import prices hadnottranslated intosignificant domestic pricecuts,possibly
reflecting internal rigidities intheSwiss economy. Inthisconnection, members called attention to
restrictions ingovernment procurement, effects ofcartel practices, andcontinuing access problems
resulting from rigidstandards andregulations inmany areas ofgoods andservices.
107. Switzerland 'sliberal trade régime formanufactures contrasted sharply withthehighlevelof
protection extended toagriculture andfoodprocessing. There were noquantitative restrictions on
industrial goods; norhadSwitzerland taken anti-dumping, countervailing, orsafeguard actions.
Although tariffs were lowonaverage, several participants expressed concern about thepersistence
oftariff escalation, particularly onproducts ofinterest todeveloping countries, andthebiasagainst
low-priced imports inherent inSwitzerland 'scontinued reliance onspecific duties. Certain members
recommended thewidening ofSwiss GSPcoverage toinclude more agricultural, textile andclothing
items.
108. Therepresentative ofSwitzerland agreed thattheeconomic situation ofthe1990s wasvery
different from theexpansion ofthe1980s. Bothopen andprotected sectors were subject tostrong
adjustment pressures. Thereforms oftherevitalization programme covered notonlyagriculture, but
alsohealth, transport andpublic administration. Swiss businesses, largeandsmall, werehighly involved
intheinternational economy. Thestrength oftheSwiss franc waspartly areflection oftheweakness
ofothercurrencies,butalsoofSwitzerland'searlieremergencefromrecessionthansomeotherEuropean
countries. Private consumption hadbeen slowed bytherecession, stagnation ofsalaries andthe
introduction ofVAT. Bycontrast, thestrength ofdomestic investment showed theattraction of
Switzerland asaproduction centre.WT/TPR/M/13
Page 22Trade Policy Review
109. Therepresentative ofSwitzerland underlined thatimports hadgrown more rapidly thanexports
inrealterms in1994 and1995, partly asaresult ofcurrency appreciation. Import prices ofmany
goods hadfallen; however, highrentsandsalaries hadtheireffect onthefinalpricelevels. Theeffects
ofcartels andother restrictions should notbeoverstated. Thestructural reforms underway should
leadtogreater competition andgreater flexibility ofprices.
110. Therepresentative noted that80percentofSwiss technical regulations werenowcompatible
withthose oftheEU.Switzerland 'ssystem ofspecific duties wasaccepted andbound intheMarrakesh
Protocol; theadvalorem incidence hadalsobeenbound, guaranteeing transparency. Lowratesapplied
toindustrial goods ensured thattariffs generally played nocrucial rôleinprotection andthatescalation
wasminimal; further reductions would bemade under Uruguay Round commitments. Proposals to
improve theGSPscheme would soonbepresented toParliament.
(ii) Agriculture
111. MembersacknowledgedSwitzerland'scommitmentsundertheWTOAgreementonAgriculture,
andwelcomed plans forreform fortheperiod to2002. Thelatter were allthemore necessary as
Switzerland hadthehighest leveloffarmsupport intheOECD area. Participants welcomed themove
away fromprice support towards direct payments. Tariffication, while increasing transparency, was
unlikely toimprove access markedly intheshort run,given thehighaverage duties onagriculture
andfoodproducts. Members alsonoted thatcertain import charges, including those onrice,coffee,
cocoa andpoultry, hadnotbeenincluded inthetariffication exercise.
112. Members questioned themechanism usedtoallocate Swiss tariff quotas, andparticularly the
compatibility withtheTRIMs Agreement ofthe"prise encharge" system, under which tariff quota
access iscontingent onthepurchase ofdomestic products. Noting thatSwitzerland wastheworld 's
fourth largest exporter ofcheese, assisted bysignificant export subsidies, members asked whytheSwiss
Cheese Union hadnotbeennotified totheWTO asaState-trading enterprise. They alsoasked why
Switzerland considered itnecessary tocontinue promoting theproduction ofcereals, oilseeds, potatoes
andsugar.
113. Therepresentative ofSwitzerland recalled thesmall share ofagriculture intheSwiss economy
anditslowrateofself-sufficiency. Reforms proposed in"Agricultural Policy 2002" foresaw reduction
ofStateinterventioninmanysectors,cutsinconsumerprices,anddecouplingoffarmpricesandincomes
withanincrease indirect payments. Switzerland 'sUruguay Round commitments onagriculture were
farfrommodest. Many tariff quotas hadbeenmore thanfilled; domestic support hadalready fallen
bysome 20percentandexport subsidies hadnotbeenfullyutilized. The"prise encharge" system
waslegally acceptable under theWTO, didnotinvolve anyextra restrictions onimports andwasnot
administered byproducer interests; Switzerland intended tomaintain it.
114. Inresponse tothespecific questions raised, theSwiss representative saidthattheSwiss Cheese
Union wasresponsible fortheadministration ofexport subsidies, andonlyofcertain cheeses andwas
not,therefore, aState-trading enterprise inGATT terms; itsabolition wasenvisaged for1997.
Compulsory stock-holding wasfinanced through private import organizations. Since suchcharges
werelevied fornational security reasons ongoods notproduced domestically, theywerenotsubject
toceilings under GATT 1994. Theintroduction ofasingle-rate taxonalcoholic beverages wasunder
study; thiswould remove potential discrimination between domestic production andimports. The
abolition ofStatemonopolies onbread-flour andbutter wasenvisaged in"Agricultural Policy 2002"
andthatforstrong alcohols wasunder study. Details werealsogiven onsanitary andphyto-sanitary
restrictions andonVATratesonagricultural imports. Clarifications weresupplied ontheadministrationSwitzerland WT/TPR/M/13
Page 23
oftariffquotas andimport permits forpoultry, meat, fruitandvegetables, cutflowers, dairy products,
animal feeds andwhite wine, aswellasontariffs onbutter, andagricultural support forsugar, cereals
andpotatoes.
(iii) Competition policy
115. Members remarked onthepersistence ofcartel arrangements intheSwiss economy, frequently
intheform ofvertically integrated concerns, often withexclusive links tosuppliers abroad. Such
practices reduced imports fromthelevelthatcould beexpected under competitive conditions, andhad
detrimental effects onprices.
116. ThenewCompetition Lawwaswelcomed, although itwasnoted thatthelegislation stilldid
notprohibit cartels andother restrictive practices. Questions were asked regarding theinstruments
available totheSwiss authorities forenforcing thenewlegislation.
117. Therepresentative ofSwitzerland noted thatnotallpricedifferences could beascribed tocartel
behaviour; inahighincome country likeSwitzerland, quality played amajor rôleinsales. However,
theCartel Commission waswellaware oftheproblems ofcollusive behaviour andexclusive distribution
agreements. ThenewCompetition Law, expected tocome intoforceon1July1996, would strengthen
thelegalframework. Theprinciple ofabuse, contained inthenewlaw,could achieve thesame results
asaprohibition ofcartels (which would imply amendment oftheSwiss Constitution). Thestaffof
thenewCompetition Commission hadbeenexpanded anditslegalpowers extended totakedecisions,
contrasting withtheexisting situation where theCartel Commission could onlymake recommendations.
Substantial finescould belevied incaseofnon-compliance. Merger control would bebased oneffective
competition andabusive behaviour criteria, similar totheTreaty ofRome; exceptions wereenvisaged
onlyinthecaseofhighest-priority public interests.
(iv) Regional andpreferential arrangements
118. Several participants noted thefocus ofSwiss trade policies onbilateral negotiations withthe
European Union, following therejection oftheEEAAgreement inDecember 1992. Observing that
Switzerland hadconcluded alargenumber ofother preferential trading agreements, mostly withcentral
European andMediterranean countries, members stressed thattradepolicies should notbetooheavily
concentrated onEurope attheexpense ofother regions.
119. Therepresentative ofSwitzerland recalled thatin1991 theFederal Council haddefined two
objectives oftradepolicy assuccess intheGATT negotiations andinnegotiating theEuropean Economic
Area; membership oftheEUhadbeenestablished asastrategic objective in1992. Following the
rejection, byreferendum, oftheEEA Agreement, bilateral negotiations withtheEUwere begun in
December 1994 onresearch, technical requirements, agriculture, public procurement, movement of
persons, airandroadtraffic. FortheEU,allthese areas were interlinked. Inconducting these
negotiations, theSwiss authorities sawcompatibility withWTO provisions asapriority andexpected
thatconformity withArticle XXIV could beassured.
120. Regarding thenetwork offree-trade andco-operation agreements withother partners, the
representativeemphasizedthatalthoughSwitzerland'spositionincentralEuropeimpliedastrongregional
interest, there wasnodeliberate concentration onrelations within Europe. Trade would grow onthe
basis ofmarket development andSwitzerland sawWTO commitments ascentral tothisaim.WT/TPR/M/13
Page 24Trade Policy Review
(v) Other sectoral issues, including services
121. WhilerecognizingthatmanySwissserviceindustrieswerehighlycompetitive,membersobserved
avariety ofinterlinked obstacles tomarket entry, including work permit regulations, nationality
requirements forboard members, andrestrictions onrealestate acquisition andshare transfers.
Participants urged theauthorities toallow cross-border supply ininsurance, where foreign participation
wasstillverymodest. Although liberalization ofground handling services wasappreciated, participants
observed thatSwitzerland 'snon-participation inthegeneral deregulation ofEuropean airtransport
entailed highcosts. Several members sought more information ontheannounced liberalization ofbasic
telecommunications services.
122. Clarification wassought onhowrevenue feesforwidespread copying would beallocated to
foreign copyright holders; onlocal-content requirements intheaudiovisual sector; andonchanges
totheexcise taxrégime formotor vehicles.
123. Inreply, theSwiss representative recalled Switzerland 'scomprehensive schedule ofspecific
commitments under theGATS. Horizontal exceptions wereoflimited importance. Thus, acquisition
ofrealestate waspermitted, except forrealestate business assuch. Domicile andnationality
requirements forboard members hadnotbeenapractical obstacle toforeign investment orcontrol.
Regulations onmovement ofnatural persons hadbeenloosened in1993tofacilitate access forbusiness
people andspecialists. Exclusivity arrangements were theexception; reforms were under way.
124. Theabolition ofcantonal insurance monopolies, aconstitutional issue, wasdelicate, although
itwasalong-term aim. Certain insurance services could already beprovided onacross-border basis;
some other areas were possible onthebasis ofmutual recognition agreements covering insurance
supervision. Liberalization ofairtransport services would takeplace inappropriate bilateral or
multilateral frameworks.
125. Concerning telecommunications, anewlawwastobesenttoParliament inJune1996, with
aviewtoentry inforce on1January 1998. Therepresentative underlined thatmarket mechanisms
were atthebaseofthenewlegislation.
*******
126. Overall,oneofthemainthemesthatemergedmoststronglyfromthediscussionwasthedifficulty
inachieving access totheSwiss market. Thiswasfelttoapply indifferent waysacross different sectors.
Domestic agriculture issheltered behind ahighlevelofprotection; inthenon-agricultural sector, the
levelofpriceadjustment thatwould normally beassociated withsignificant currency appreciation has
notoccurred. Intheservices sector, avariety ofrestrictions wereseenascombining todiscourage
foreign competition.
127. Atthesametime,membersappreciatedthatimportantstepsarebeingtaken-eitherautonomously
orunder WTO commitments -toensure more genuine openness intheSwiss economy. Time will
beneeded toevaluate theimpact ofthevarious reforms ofeconomic legislation thatareunder way.
However, given thedegree ofexisting market distortions perceived bymany Members, some doubts
were expressed astotheadequacy ofthescale andpaceofreforms contemplated.
128. Members acknowledged theunderlying strengths oftheSwiss economy andthedynamic rôle
which Switzerland hasplayed intheWTO. Many feltthataneconomy withsuchstrengths could afford
tobemore open, andthatindeed thebenefits ofincreased openness would befeltdomestically aswell
asbySwitzerland 'strading partners. Members looked forward tobeing abletoassess tangible progress
inthisdirection assoonasthecurrent legislative reform bears fruit.