WT/TPR/S/141 Trade Policy Review 
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II. TRADE AND INVESTMENT REGIMES 
(1) GENERAL FRAMEWORK  
1. The foundations of Swiss foreign economic law are primarily contained in Articles 54, 101, 
103 and 184 of the Federal Constitu tion. Article 54 gives the Confederation comprehensive authority 
in the sphere of foreign economic  affairs and provides the basis for actions in such areas as 
international treaties, embargos, development assist ance, and debt rescheduling.  Article 101 gives the 
Confederation responsibility for encouraging Swi ss economic interests abroad (e.g. through export 
promotion measures), and protecting Swiss domestic economic interests (e.g. through the federal law 
on external economic measures and the Customs tarif f).  Article 103 provides the basis for export and 
investment risk guarantee measures, and for legislat ion on technical barriers to trade.  Article 184 
gives the Federal Council the right to pass time -limited ordinances "when safeguarding national 
interests requires it".   
2. There have been a considerable number of am endments and revisions to Switzerland's main 
trade-related laws since the last review (Table II.1). 
Table II.1 
Main trade-related laws and regulations in Switzerland, September 2004 
Legislation Date of entry into force Reference 
Federal Law  on Foreign Economic Measures   1982, as amended up to 2000  RS 946.201 
Federal Law on National Economic Supply  1982, as amended up to 2001  RS 531 
Federal Customs Law 1925, as amended up to 2002  RS 631 
Federal Customs Tariff Law 1986, as amended up to 2003 RS 632 
Federal Law on the Application of In ternational Sanctions  2002 RS 946.231 
Federal Law on Agriculture 1998, as amended up to 2003 RS 910.1 
Ordinance on annual husbandry  1998, as amende d up to 2003 Laws in the series RS 916.3 
Laws on animal welfare  1971-1998 Laws in the series RS 455 
Laws on conservation of animal species 1986, as amended up to 2003 Laws in the series RS 922 
Ordinance on import of agricultural products   RS 916.01 et seq. 
Ordinance on export and import  of fruits, vegetables, 
flowers and horticultural plants   RS 916.121.109 
Stamp Duty Law 1973, as amended up to 2002 RS 641.10 
Value-Added Tax Law 1999, as amended up to 2003  RS 641.20 
Laws on duties on tobacco, beer, distilled spirits, motor 
vehicles, and mineral oils   RS 817.06, 641.311; 1934/1971; 
RS 680; RS 741; RS 641.6, 725.16.2 
Federal Law on Public Procurement  1994, amended up to 2002 RS 172.056.1 
Federal Law on Technical Barriers to Tr ade 1995, as amended up to 2001 RS 946.51 
Federal laws on intellectual property, including author’s 
rights, industrial propert y and data protection   Laws in the series RS 23 
Federal Law on Therapeutic Products  2000, as amended up to 2004 RS 812.21 
Federal Law on Toxic Substances  1969, as amended up to 1998 RS 813.0 
Export Risk Guarantee Law 1958, as amended up to 1996 RS 946.11 
Export Promotion Law 2000 RS 946.14 
Federal Law on the Internal Market  1995 RS 943.02 
Federal Law on Consumer Information  1990, as amended up to 2001 RS 944.0 
Federal Law on Cartels 1995, as amended in 2004 RS 251 
Federal Law against Unfair Competiti on 1986, as amended up to 2002 RS  241 
Federal Law on Price Surveillance  1985, as amended up to 1996 RS 942.20 
Ordinance on Notification of Prices  1978, as amended up to 2004 RS 942.211 
Source: Swiss Confederation (2004a). Switzerland and Liechtenstein WT/TPR/S/141 
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3. Switzerland and Liechtenstein are linked by a Customs Union Treaty dating from 1923.1 
Under the Treaty, trade policy measures affecting im ports, and the agricultural policy of the customs 
union, are formulated by Switzerland. The Swiss regime generally applies to Liechtenstein's trade in goods with all countries, except the EEA members.
2  Therefore, few trade policy instruments are 
actually set up by Liechtenstein, although measures re lating to the internal market may also have 
effects on trade.  In particular, Liechtenstein maintains its own legislation on trade in services, 
embargoes under United Nations resolutions, gov ernment procurement, consumer protection, 
intellectual property, investment, and competition. 
4. Switzerland and Liechtenstein have monistic legal systems.  In both countries, international 
treaties become an integral part of the national law upon entry into force, and may be cited in court if 
the relevant provision is directly applicable.  Li echtenstein's membership of the European Economic 
Area, while Switzerland’s links to the European Un ion depend on a series of bilateral agreements, 
create certain administrative complications for the c onduct of external trade policy for both countries.  
These are dealt with in the context of EEA/EFTA relations and bilaterally  between Switzerland and 
Liechtenstein. 
(2) AGENCIES INVOLVED IN TRADE POLICY IMPLEMENTATION  
5. In Switzerland, the State Secretariat for Economic  Affairs (seco) is the Confederation's main 
agency dealing with economic policy issues. It is responsible for the conduct of foreign trade policy 
and for all policies relating to trade in goods and services, and is the lead representation of 
Switzerland in multilateral institutions such as WTO, UNCTAD, ILO, UNIDO, OECD and EFTA, as 
well as the World Bank and the regional developmen t banks. Seco and the Department of Foreign 
Affairs maintain a joint Integration Office that  coordinates relations and negotiations between 
Switzerland and the EU. Seco is also the agency responsible for economic development co-operation 
within the Confederation and, as such, is in char ge of trade-related technical assistance.  In the 
domestic economy, seco acts as an interface betw een business, trade unions, NGOs, and economic 
policy. It promotes Switzerland as a location for business.   It also supports regionally and structurally 
balanced development, and deals with issues relating to employee protection. 
6. In Liechtenstein, the Office of Economic Affair s (formerly Office of National Economy) is 
the main agency dealing with economic policies in  areas not covered by the Customs Union Treaty.  
The coordination function for membership in interna tional agreements (including those on trade, such 
as the WTO Agreements and the EFTA Convention), as well as their administration, usually lies with 
the Office for Foreign Affairs; coordination units ma y be established to deal with new international 
agreements (e.g. the EEA Co-ordination Unit).  E ach office formulates policies in collaboration with 
other national offices or institutions, including th e Office of Customs Affairs and the Office for 
Agriculture, and in consultation with the private s ector (e.g. the Chamber of Industry and Commerce, 
the Chamber of Trade and Commerce, the Agri cultural Union, the Labour Union, and the 
Liechtenstein Association for Environment).  
(3) TRADE POLICY OBJECTIVES  
7. Given the degree of integration of their ec onomies, Switzerland and Liechtenstein broadly 
share the same trade policy objectives, categorized  by Switzerland as "offensive", "defensive" or 
"solidarity".  "Offensive" objectives give priori ty to opening or improving conditions of access in 
                                                      
1 RS 0.631.112.514: entered into force on 1 January 1924. 
2 The Customs Union Treaty provides that, if Li echtenstein becomes a member of international 
conventions or organizations to which Switzerland is not  party, special agreements shall be concluded between 
Switzerland and Liechtenstein (Article 8 bis introduced in 1990). WT/TPR/S/141 Trade Policy Review 
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foreign markets for Swiss and Liechtenstein goods, services, and factors of production. "Defensive" 
priorities seek to react in an appropriate manner to measures or exceptional situations abroad that can 
harm the main economic interests of the two count ries.  "Solidarity" aspects relate to broader 
objectives of Swiss and Liechtenstein foreign policy, including development assistance.  
8. As small countries with export interests main ly in services and processed or manufactured 
products, Switzerland and Liechtenste in emphasise the need for furt her multilateral liberalization of 
trade in these sectors, and for strengthening of, and full compliance by all members with, WTO rules.  
On manufacturing and services, their main trade po licy objectives have remained broadly unchanged 
since 2000.  Agricultural policy reforms focus on f ood security, sustainability of the sector (through 
environment-friendly measures), and improvement of farmers' income (Chapter IV(2)(i)).   
(4) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) WTO 
9. Switzerland is an original member of the WTO and, as the host nation, plays a significant role 
in the organization’s activities.  Liechtenstein joined the WTO on 1 September 1995.   
10. Switzerland has clearly defined objectives in each of the negotiations under the Doha 
Development Agenda, as follows: 
− Overall, Switzerland’s aim is th at the multilateral system should function well.  It therefore 
supports a broad-based round of negotiations, covering not only market access but also 
improvement of existing trade rules, introducti on of new ones, and promotion of coherence 
between the multilateral trading system a nd other policies such as environment and 
competition.  
− On agriculture, Switzerland seeks an agreement th at, in addition to liberalization of market 
access and reduction in subsidies, takes adequate  account of non-trade aspects of agriculture 
(such as extension of geographical indication pr otection beyond wines and spirits, consumer 
information including on production methods, food safety, animal protection, and environmental protection). 
− On non-agricultural market access, Switzer land seeks improved access to other markets 
through reductions in tariffs and non-tariff measur es, especially technical barriers to trade, for 
example, testing and certification procedures. 
− In services, Switzerland is strongly committed to improved market access, and to the non 
exclusion, a priori, of any sector or mode fro m the negotiations.  Switzerland’s initial offer, 
submitted in April 2003, cove red horizontal commitments, professional services, postal 
services, telecommunications, construction, education, tourism, maritime, air and road transport. 
− Switzerland considers it important to pursue a broad approach to WTO rules, to update the 
rules regularly to match developments in the global economy, and to examine the rules regularly to promote coherence. As regards th e rules currently under negotiation, Switzerland 
maintains neither anti-dumping nor countervailing dut ies, but is in favour of strengthening the 
discipline in these areas. It favours clarifica tion of the WTO rules regarding customs unions 
and free-trade areas in order to assure comp atibility and support between regional trade 
agreements (RTAs) and the multilateral trade ag reements, while allowing flexibility to take 
account of the specific structures of the economies involved. 
− Switzerland is actively involved in negotiations  to improve the dispute settlement mechanism 
(DSM). Switzerland and Liechtenstein WT/TPR/S/141 
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− On geographical indications (GIs), Switzerland seeks the extension of the scope of GIs to 
other agricultural and industrial products, not ably cheese and watches, and creation of a 
multilateral register for wines and spirits, with legal effect. 
− Switzerland and the EU are working together in the area of trade and the environment to 
ensure coherence between trade rules and environmental agreements.  
− Switzerland takes the view that special and di fferential (S&D) treatment provisions should be 
better targeted to the needs of specific groups of developing countries; specifically, LDCs and 
countries with similar economic structures should draw greater benefit than more advanced 
developing countries. It seeks the development of objective trade-relevant criteria to this end 
and the establishment of a country-specific monitoring system as a means to optimize the benefits a given country can draw from S& D provisions and from the MTS as a whole. 
− Switzerland supports the "Cotton Initiative" launc hed by West African countries in 2003, and 
proposes threefold action: first, relevant organiza tions should work to alleviate the short-term 
problems of the countries concerned, in areas su ch as credits for small producers and transport 
infrastructure;  second, WTO Members should grant duty-free access for cotton and cotton products from the poorest countries, substantially  reduce the levels of  trade-distorting 
domestic support, particularly on co tton, and eliminate all forms of export subsidies as part of 
the agricultural negotiations;  thirdly, in case the agriculture negotiations do not achieve the 
desired result, specially tailored measures must be found. 
− On the "Singapore issues", up to July 2004, Switzerland gave priority to negotiations on 
investment and trade facilitation, especially for small and medium-sized enterprises.  
Switzerland would also have favoured multilateral agreements on competition and 
transparency in government procurement. 
− Switzerland has developed a comprehensive tr ade-related technical cooperation programme, 
originally focussing on five broad areas: tr ade policy and support in trade negotiations; 
supply-side development; market access; commod ities; and transfer of sustainable production 
technologies (environment and social). Since Doha, the programme has been expanded to 
new areas, such as intellectual property, comp etition policy, government procurement, and 
standards. 
11. In the ongoing negotiations, Liechtenstein sh ares Switzerland's views on agriculture, non-
agricultural market access, RTAs, contingency trad e remedies, S&D, trade and environment, GIs and 
DSM. 
12. Notifications by Switzerland and Liechtenstein to the WTO are presented in Table AII.1. 
(ii) Regional and bilateral agreements 
13. Switzerland and Liechtenstein are both members of the European Free-Trade Association 
(EFTA).  Liechtenstein is also a member of the Eu ropean Economic Area (EEA);   Switzerland is not a 
member of the EEA, but has observer status. 
14. Generally, under the Swiss-Liechtenstein Custom s Union Treaty, all agreements on trade in 
goods concluded by Switzerland apply equally to Liechtenstein.  Howe ver, Liechtenstein applies EEA 
rules in all areas of its trade relations with the European Union and other EEA members, except for 
agriculture.  In this area, Liechtenstein's trade is  based on the provisions of the customs union treaty 
and the 1972 free-trade agreement between Sw itzerland and the EU, through a supplementary 
agreement.  As noted in Chapter IV (2)(i), the Sw itzerland/EU bilateral agreement in agriculture does 
not yet apply to Liechtenstein, cr eating an anomalous situation. WT/TPR/S/141 Trade Policy Review 
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15. Switzerland and Liechtenstein, as EFTA members, participate in FTAs and separate bilateral 
agreements in agriculture with Bulgaria, Chile, Cr oatia, Israel, Jordan, Former Yugoslav Republic of 
Macedonia (FYROM), Lebanon, Mexico, Morocco, th e Palestinian Authority, Romania, Singapore 
and Turkey.  Switzerland also maintains a bilateral free-trade agreement with the Faeroe Islands 
(1994, through Denmark) covering products in HS Chapters 25-97 and selected agricultural products  
(Table II.2 and Chart II.1).3 
Table II.2 
Swiss and Liechtenstein  participation in free-trade agreements, September 2004 
Date signed Entry into force Notified  to GATT/WTO Name of agreement 
04.01.1960 03.05.1960  L/3328 (GATT) 
WT/REG154/1 Convention establishing the European Free Trade Association 
(applies to Iceland, Liechtenstein, Norway, and Switzerland)  
(revised June 2001, WTO document issued June 2003) 
22.07.1972 01.01.1973 L/3893 (GATT) Agreement between the EEC and Switzerland (trade in industrial 
goods)a 
10.12.1991 13.07.1992 L/6989/Add.1 (GATT) Agreem ent between the EFTA States and Turkeyb 
02.05.1992 01.01.1994 WT/REG138/1 (goods) and 
WT/REG138/2 (services) Agreement on the European Economic Area (applies to all EU Member 
States, Iceland, Norway and Liechtenstein) 
12.01.1994 01.04.1994  WT/REG24/N/1 Free Trade Agreement with the Faeroe Islands 
17.09.1992 01.08.1993 L/ 7129 & Add.1 (GATT) Agreement be tween the EFTA States and Israel (goods, IP, competition, 
state aid, dispute settlement; government procurement, services and 
investments with evolutionary clause)b 
10.12.1992 01.06.1994 L/7215 & Add.1 (GATT) Agreement be tween the EFTA States and Romania (goods, IP, 
competition, state aid, dispute settlement; government procurement, 
services and investments with evolutionary clause)b 
29.03.1993 01.06.1994 L/7257 & Add.1 (GATT) Agreement be tween the EFTA States and Bulgaria (goods, IP, 
competition, state aid, dispute settlement; evolutionary clause for 
government procurement, services and investments)b 
19.06.1997 01.12.1999 WT/REG91/N/1 Agreement betwee n the EFTA States and Morocco (goods, IP, 
competition, state aid, dispute settlement; government procurement, 
services and investments with evolutionary clause)b 
30.11.1998 01 07.1999 WT/REG79/N/1 Agreement between th e EFTA States and the PLO for the benefit of 
the Palestinian Authority (goods, IP, competition, state aid, dispute 
settlement; government procurement, services and investments with evolutionary clause)
b 
27.11.2000 01.07.2001 WT/REG126/N/1 Agreement between the EFTA States and Mexico (goods, services, 
investment, competition, state aid, go vernment procurement, IP, dispute 
settlement)b 
21.06.2001 01.01.2002 WT/REG132/N/1 Agreement betwee n the EFTA States and Croatia (goods, IP, 
competition, state aid,  dispute settlement; government procurement, 
services and investments with evolutionary clause)b 
21.06.2001 01.01.2002 WT/REG133/N/1 Agreement betwee n the EFTA States and Jordan (goods, IP, 
competition, state aid, dispute settlement; government procurement, 
services and investments with evolutionary clause)b 
19.06.2000 01.05.2002 WT/REG117/N/1 Agreement betw een the EFTA States and FYROM (goods, IP, 
competition, state aid, dispute settlement; government procurement, 
services and investments with evolutionary clause)b 
   Table II.2 (cont'd)
    
                                                      
3 The former agreements between EFTA and the C zech and Slovak Republic s, Estonia, Hungary, 
Latvia, Lithuania, Poland and Slovenia were replaced by an agreement with the enlarged EU from 1 May 2004.  
The FTAs with Chile and Lebanon are still subject  to ratification, hence not yet in force. Switzerland and Liechtenstein WT/TPR/S/141 
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Date signed Entry into force Notified  to GATT/WTO Name of agreement 
26.02.2002 01.01.2003 WT/REG148/N/1 Agreement between the EFTA States and Singapore (goods, services, 
investment, government procurement, IP, competition, state aid, dispute 
settlement)b 
26.06.2003 .. (not yet ratified) .. Agreement betwee n the EFTA States and Chile (goods, services, 
investment, government procurement, IP, competition, state aid, dispute 
settlement)b 
24.06.2004 .. (not yet ratified) .. Agreement betw een the EFTA States and Lebanon (goods, IP, 
competition, state aid, dispute settlement;  government procurement, 
services and investments with evolutionary clause)b 
.. Not available. 
a The agreement also applies to Liechtens tein under the Customs Union Treaty.  Sw itzerland also maintains an agreement on 
insurance with the EU, concluded in 1989 and in force since 1993.  The "first set" of bilateral agreements between Switzerland 
and the EU entered into force on 1 June 2002.  Political  agre ement on the "second set" of agreements was reached in May 2004.  
The coverage of the agreements in force between Switzer land and the EU was extended to the ten new EU members on 
1 May 2004.  
b Switzerland maintains separate bilateral agreements on agricultu ral products with these trading partners. The EFTA agreements  
 with Bulgaria, Chile, Israel , Jordan, FYROM, Lebanon, Morocco , the Palestinian Authority, Romania, Singapore, and Turkey 
 contain protocols on tariff reductions for specific processed agricultural goods.  
Source : WTO documents; information provided by  the Swiss and Liechtenstein authorities.  For EFTA’s agreements with 
 third parties, see EFTA Secretariat (2004a). 
 
Chart II.1
Regional and bilateral trade agreements, August 2004
Source: WTO Secretariat, based on information provided by the Swiss authorities. WT/TPR/S/141 Trade Policy Review 
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(a) European Free Trade Association (EFTA) 
16. Switzerland and Liechtenstein are members of the European Free Trad e Association (EFTA), 
along with Iceland and Norway.4  The EFTA Convention, as revised and consolidated in 20015, takes 
account of the agreements concluded between EFTA  members and the EU, in particular the EEA 
Agreement and the Switzerland-EU b ilateral agreements signed in 1999.  In addition to free trade in 
industrial products and in fish a nd other marine products, the convention covers technical barriers to 
trade, state aid, practices of public undertaki ngs and monopolies, competition rules, intellectual 
property rights, free movement of  persons (including c oordination of social security systems and 
mutual recognition of professional qualifications), investment, trade in services, and government 
procurement.6   
17. WTO multilateral and plurilateral provisions are referred to in two areas of the revised EFTA 
Convention. In relation to state aid and counter vailing measures, the WTO Agreement on Subsidies 
and Countervailing Measures is incorporated into the convention; however, EFTA member states 
agree not to apply anti-dumping measures, c ountervailing measures or "measures against illicit 
commercial practices attributable to third countries" among themselves.7  In relation to government 
procurement, EFTA member states have undertaken commitments (in terms of sectoral coverage in 
goods and services, and threshold values) more substantial than those under the Plurilateral 
Agreement on Government Procurement (Chapter III (2)). 
18. EFTA states maintain a network of bilateral trade agreements with third parties, on industrial 
goods, fish, marine products, and processed agricu ltural goods. Trade in unprocessed agricultural 
products is covered by bilateral agreements between individual EFTA members and third countries.  
As a result of successful negotiations between the EEA/EU, EFTA states, and central and eastern 
European countries on a common set of rules of orig in, pan-European cumulation of origin currently 
applies within EFTA and among the bilateral trade agreements. 
19. The EFTA states are currently negotiating bila teral free-trade agreements with Canada,  
Egypt, the members of the Southern African Customs Union, and Tunisia.  They also envisage 
entering into bilateral negotiations  on free-trade agreements with, inter alia , Algeria, Korea, and 
Thailand. 
The European Economic Area (EEA) 
20. Liechtenstein is a member of the European Economic Area, which unites all 25 members of 
the EU (since 1 May 2004) and Iceland, Norway a nd Liechtenstein into a single market providing for 
free circulation of goods, capital, and persons.8  The EEA enlargement instrument was concluded in 
                                                      
4 Switzerland is a founding member  of the EFTA, while Liechtenstein acceded in 1991.  Up to 1991, 
Liechtenstein had been covered by the EFTA Convention through a Protocol under which its interests were represented through Switzerland. 
5 The Vaduz Convention of 21 June 2001.  
6 See EFTA Secretariat (2004b).  Annexes to th e Vaduz Convention cover rules of origin; customs 
matters; agriculture; tariff concessions; seeds; organi c agriculture; sanitary and phytosanitary measures;  
technical regulations; mutual recognition in relation to conformity assessment; intellectual property rights; free 
movement of persons; national reservations by the member states in relation to services and investment; land 
transport; air transport; public procurement; Council bodies;  arbitration; and territorial application.  Joint 
Declarations by the members cover competition; developmen t of law; investment protection in relation to third 
states; mutual recognition in relation to conformity asse ssment; mutual recognition of good clinical practice and 
inspections relating thereto; and quotas for vehicles. 
7 EFTA Convention, Articles 16 and 36. 
8 See WTO (2000). Switzerland and Liechtenstein WT/TPR/S/141 
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October 2003, entered into force provisionally as from 1 May 2004, and awaits full ratification by all 
member states.  
21. Because the EEA EFTA states have not transferre d legislative competence to EEA organs and 
are not, therefore, able directly to accept decisions  by the European Commission or Court of Justice, 
the institutional connection between the EFTA st ates and the EEA operates under a "two-pillar" 
system of EEA bodies on the one hand and EEA/EFTA bodies on the other.  The EEA bodies are the Council (of Ministers), Joint Committee (of Am bassadors and high level officials), Joint 
Parliamentary Committee (of representatives fro m the EFTA Parliamentary Committee and the 
European Parliament), and Consu ltative Committee (linking with workers, employers and other "civil 
society" organizations). EEA/EFTA bodies are the Standing Committee (meeting at Ministerial or 
official level), the EFTA Surveillance Authority (whi ch monitors the application of the provisions of 
the EEA agreement in the member states) and th e EFTA Court (which judges cases brought to it by 
the Surveillance Authority concerning infringement  of EEA rules). The EEA agreement also gives 
EFTA EEA states the right to participate directly  in a number of EU programmes and second staff 
members to the European Commission.
9  
22. The Chairmanships of EFTA bodies rotate am ong member states on a six-monthly basis. 
Exceptionally, Liechtenstein was Chair of the EFTA Standing Committee on the EEA from July 2003 to June 2004, during the period of th e EU/EEA enlargement negotiation.   
23. Following its EEA membership and in order to guarantee the marketability of goods under 
either the Swiss or the EEA rules, Liechtenste in established a Market Control and Surveillance 
Mechanism (MCSM);  its Customs Union Treaty with  Switzerland was accordingly amended in 1994.  
The MCSM applies to goods subject to technical regulations and/or cust oms tariffs under the EEA 
agreement that are different from those prevailing under the Customs Union Treaty, and to salt (Box II.1).  In general, Swiss legislation on trade in goods applies in Liechtenste in's relations with all 
countries, except the EEA members; EEA legisla tion applies in EEA-Liechtenstein relations.  
Liechtenstein applies EEA rules of origin in trade with other EEA members and the rules contained in 
the 1972 Switzerland-EU free-trade agreement with ot her countries. The former imply full cumulation 
with all other EEA members; the latter, full cumulation with Switzerland. 
                                                     
 
9 See EFTA Secretariat (2004c) . WT/TPR/S/141 Trade Policy Review 
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Box II.1:  Liechtenstein's Market  Control and Surveillance Mechanism 
The 1923 Customs Union Treaty provid es for the application of Swiss legislation on trade in goods in 
Liechtenstein (Article 4 of the Treat y).  The Treaty has been extended by various arrangements (including 
on agriculture).  As a consequence of its EEA membership since 1 May 1995, and in order to maintain the Customs Union with Switzerland while also participa ting in the EEA (Switzerland is not EEA member), 
Liechtenstein has to guarantee within its territory the marketability of goods under both the Swiss and the 
EEA rules.  To this end, it has adopted a mechanism for the parallel application of Swiss and EEA regulations, the so-called Market Control and Surve illance Mechanism (MCSM).  The MCSM is aimed at 
preventing goods solely destined for Liechtenstein being put on the Swiss market via the open border.   
The MCSM applies to professional trader s, i.e. distributors/dealers (but not  to small importers), and to three 
categories of goods:  products on which Swiss and EEA technical regulations are different, e.g. dangerous 
goods, fertilizers, foodstu ffs, animal feed, seeds, medicinal pr oducts, cosmetics and tobacco;  goods 
carrying different tariffs under the 1972 free-trade agreement between Switzerland and the European Community on the one hand, and the EEA agreement on the other, e.g. fish, flax, and cork;  and salt 
because, in accordance with the EEA principle of treatment of state m onopolies, Liechtenstein no longer 
participates in the Swiss state mon opoly over this product (Liechtenstein  has replaced the monopoly with an 
excise duty).  In the case of differe nces in technical regulations, goods de stined for Liechten stein, in transit 
in Switzerland, are registered at th e Swiss Customs, which reports to the Liechtenstein Office of Customs 
Affairs by means of a copy of the customs documents.  The customs documents are processed in 
Liechtenstein, where a final decision is made with rega rd to the imports.  When in doubt (e.g. whether an 
importer has obtained a wrongful reimbursement of customs duties, or has paid the required customs duties on goods re-exportated to Switzerland), the Liechtenste in administration may launch further investigations.  
For this purpose, any business invo lved in the production and importa tion of the goods must appoint an 
official contact person with the necessary professional skills. Wholesalers and retailers must specify in their 
stores that the use of the products is limited to the Liechtenstein territory and must keep proof of sales. 
Under the MCSM, the Swiss Federal Customs Administration clears imports to Liechtenstein, collects 
duties (except on salt), and informs the Liechtenstein Offi ce of Customs Affairs.  In the case of differences 
in customs tariffs, the Office reimburses importers th e duties paid and informs them of their obligations, 
including proofs of sales in Liechtenstein to be submitted to the Office by wholesale traders.  In case of re-
exportation of the goods to Switzerland, the Office collect s the corresponding customs duties.  In the case of 
salt, a similar MCSM applies without duty  collection on imports to Switzerland. 
For imports subject to licensing requirements (e.g. fe rtilizers and medical pro ducts), the Liechtenstein 
importer must obtain an import permit from the Swiss Customs Administration, which informs it (through the competent Liechtenstein administrative branch) about the MCSM.  Infringers of provisions of the 
MCSM may be liable to fines of up to twenty times the amount of the customs duties wrongfully 
reimbursed or unpaid, or to imprisonment for up to six months.  Infringements identified so far have not entailed any criminal action;  they have led only to written reprimands.  
The Office of Customs Affairs, established following Liechtenstein's EEA membership, confirms the 
Liechtenstein origin of exports by verifying the certifi cates of origin (EUR1);  th ese are then processed by 
the Swiss Federal Customs Administration on behalf of the Office. 
The MCSM is accepted by the other EEA members (EEA  Council Decision No 1/95 and Article 3 of the 
Act on the marketability of goods) with a view to avoidi ng restrictions on trade with Switzerland that would 
have resulted from the membership of Liechtenstein in the EEA.   
 
(b) Developments in Switzerland’s rela tionship with the European Union 
24. The European Union is by far Switzerland’ s largest trade and investment partner. 
Membership of the EU remains a long-term aim of  the Swiss Government.  But this will depend on 
fulfilment of three conditions: firstly, acceptable expe rience with the bilateral agreements with the 
EU; secondly, close examination of the effects of en try on central tenets of Swiss policy, including the Switzerland and Liechtenstein WT/TPR/S/141 
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division of tasks and competences between the cen tre and the cantons, direct democracy, the Swiss 
fiscal regime, and agriculture;  and thir dly, a large measure of popular support.10   
25. Following rejection of the EEA agreement by referendum in 199211, the Swiss authorities 
have taken substantial steps to move closer, in prac tical terms, to the EU.  To this end, Switzerland 
has revised much of its own legislation to make it  "Euro-compatible", and has concluded two sets of 
bilateral agreements with the EU. 
26. A first set of seven bilateral agreements between Switzerland and the EU was signed in 
Luxembourg on 21 June 1999.  They  were accepted by popular vote  on 21 May 2000, ratified by the 
Swiss Government on 16 October 2000 , and entered into force on 1  June 2002.  From 1 May 2004, 
all but one of the bilateral agreements were exte nded to the ten new member States of the EU;  the 
bilateral agreement on free movement of persons wi ll be extended to the new EU member States in 
2005 at the earliest, following negotiations to adap t the agreement.  Joint Swiss/EU committees are 
charged with the administration of the agreements. 
27. The first set of agreements cover agricultura l (but not processed food) products; mutual 
recognition in relation to conformity assessment (MRA); certain aspects of government procurement; 
air transport; land (road and rail) transpor t; research; and free movement of persons. 
28. Following the signature of the first set of bila teral agreements, the Sw iss and EU authorities 
continued to seek agreements in nine other areas (B ilaterals Bis).  Two of these were specifically 
requested by the EU: agreement on direct taxation of savings, and on countering indirect tax fraud.  
The Swiss authorities sought greater cooperation in the fields of justice, police, asylum and migration 
(under the Schengen and Dublin agreements), and "l eft-over" items from the first set of bilateral 
agreements, i.e. processed agricultural products, the environment, statistics, pensions, audiovisual 
policy, and a package of measures relating to edu cation, occupational training, and youth.  Political 
agreement on these areas was reached in May 2004  between the Swiss Federal Council and the EU 
Commission and Council of Ministers.12 
29. Eight of the second set of nine bilateral ag reements (all except education, professional 
training, and youth) are to be submitted to the Swiss parliament in the 2004 winter session for 
approval;  seven of these eight (all except the agr eement on processed agricultural goods, which is 
seen as an adaptation of an existing agreement) are open to the possibility of calling a popular referendum.
13  The Government’s aim is for most of the ag reements to be in force by 1 July 2005. The 
Schengen/Dublin agreements are not expected to  be in force before 2007, although there is the 
possibility of earlier provisional application. 
                                                      
  10 See seco (2004).  
11 In March 2001, a non-governmental initiative "Yes to Europe", seeking immediate membership 
negotiations with the European Union, was also rejected by popular vote. 
  12 See European Commission (2004a).  
13 See Federal Chancellery (2004). WT/TPR/S/141 Trade Policy Review 
Page 30 
 
 
The first set of bilateral agreements14 
Agricultural products 
30. The agreement on agricultural products provides for complete reciprocal liberalization of 
trade in cheese, after a five year transition peri od; duty-free access, generally under tariff quota, for a 
range of other products such as meat, horticultura l products and cut flowers; and mutual recognition 
of many sanitary and phytosanitary norms. Labelling of wines and spirits on the basis of geographical 
origin will be given mutual protection, and Switzer land has the right to certify goods for export on the 
basis of EU norms.   
31. The Swiss authorities note, inter alia , that the agreement goes hand-in-hand with 
Switzerland’s domestic agricultural reform programme; that although Sw iss farmers will face greater 
competition in some areas, the agreement improves Swiss market prospects for dairy products and 
high-quality "bio" products in the EU; that Swiss producers will be able to export large amounts of 
fruit and vegetables to neighbouring EU markets afte r certification in Switzerland; and that there will 
still be considerable protection for pr oducts such as grains and meat.  
32. Table AII.2 sets out the main concessions cont ained in the agreement on both the Swiss and 
EU sides. Switzerland's concessions on fresh pro ducts are generally on a seasonal, and restricted, 
basis. 
33. The initial assessment by the Swiss authorities of the operation of the agreement notes, inter 
alia, that volumes of exports and imports have not varied significantly; that other problems (e.g. 
market closing in some EU countries following the BSE crisis) have had a significant effect on the 
possibility for Swiss exports of meat products and live animals15; and that "Swiss exporters are only 
timidly taking advantage of tariff-free quotas extended by the EU".16 
Conformity assessment 
34. The Swiss-EU Mutual Recognition Agreement in  relation to conformity assessment (MRA) 
establishes mutual recognition of results of testing,  inspection, and certification procedures, and of 
authorizations in certain product areas (e.g. motor ve hicles including agricultural and forestry tractors, 
machines, medical devices), inspections of good  manufacturing practice and batch certification in 
pharmaceuticals, testing of chemicals according to good laboratory practice, toys, noise emissions from construction plant and equipment, radio equi pment and telecommunication terminal equipment, 
measuring instruments, gas appliances and bo ilers, electrical equipment, electromagnetic 
compatibility, equipment and protective systems intended for use in potentially explosive 
atmospheres, personal protective equipment, a nd pressure vessels. Although the agreement does not 
yet cover chemicals, phytosanitary products, insect icides/pesticides or construction products, new 
product areas may be included after its entry into force.  The "Cassis de Dijon" principle, which requires mutual recognition among EU and EEA member  states of legal prescriptions regarding all 
products that have not been harm onized within the EU/EEA, is not applicable under the agreement. 
Currently, the MRA applies only to products origin ating in Switzerland, the EC, and the EEA/EFTA 
states; this restriction should be removed by th e end of 2004. The agreement should considerably 
facilitate trade between Switzerland and the EU by reducing unnecessary checks. 
                                                     
 
14 The texts of all the bilateral agreements are available online at  Integration Office DFA/DFEA 
(2004a). 
15 The Swiss authorities note that this problem has been resolved by the inclusion of BSE-related 
provisions into the Swiss-EU bilateral agreement. Switzerland and Liechtenstein WT/TPR/S/141 
 Page 31 
 
 
Public procurement 
35. The agreement on certain aspects of public procurement between Switzerland and the EU is 
founded on the Uruguay Round Agreement on Government  Procurement (GPA). It extends the scope 
of the GPA in the Swiss and EU markets on a re ciprocal basis to procurement above specified 
thresholds by all municipal administrations17; by public and private enterprises in the railway and 
telecommunications sectors; to gas, oil, and coal  heating supply companies, whether public, semi-
public, or private; and to other entities in the tr ansport sector such as cable cars and ski-lifts. 
36. The following thresholds are established:  Sw  F 383,000 for district and municipal purchases 
of goods and services, and Sw F 9, 575,000 for construction;  Sw F 766,000 for water, electricity, 
public transport, gas and heating suppliers’ pur chases of goods and services, and Sw F 9,575,000 for 
construction;  Sw F 640,000 for railway co mpanies’ purchases of goods and services, and 
Sw F 8 million for construction;  Sw F 960,000 fo r telecommunications entities’ purchases of goods 
and service, and Sw F 8 million for construction.  Service providers that are in competition in 
liberalized sectors in particular geographic areas  are exempt from the obligation to apply public 
procurement rules. For purchases below the thresh old levels, the two parties agree to encourage 
entities not to apply discriminatory treatment against each other.  
Civil aviation 37. The agreement on civil aviation extends EU law to Switzerland and grants it (on a reciprocal 
basis), phased-in, flying rights for its airlines within the EU virtually equivalent to those of EU-based 
airlines. Specifically, Swiss airlines have access to the deregulated EU market, and obtain the freedom 
to establish and invest in the field of civil aviation. The "3
rd and 4th freedoms" (e.g. operation of 
Zurich-Paris and Paris-Zurich flights) took eff ect immediately on the entry into effect of the 
agreement (2002); the "5th and 7th freedoms" (e.g. Zurich-Paris-Madrid with possibility of taking on 
passengers in Paris, and Paris-Madrid) two years later (2004); and negotiations on the "8th freedom" 
(e.g. cabotage Paris-Lyon) are to begin five year s later (2007). Swiss airline companies may become 
majority shareholders in EU airlines without the latter losing their Community-based status.  
38. The Swiss authorities state that the new regime  under the agreement h as created much more 
flexibility for air services between Switzerland and the EU/EFTA countries and, in particular, has 
generated significant growth in low-cost services.  
Land transport 39. The agreement on land transport calls for th e coordination of overland transport policy 
between Switzerland and the EU. Its provisions are d esigned to ensure gradual reciprocal opening of 
the markets for transportation of persons and goods by road and rail between Switzerland and the EU. 
Implementation involves a transitional period endi ng on 31 December 2004, with full implementation 
by 2008. The agreement guarantees reciprocal access for Swiss firms to  the single European market 
and for EU firms  to Switzerland. Swiss firms may also undertake EU cabotage between member 
States (but not within any one Member). 
40. Under the agreement, the limit on the maximu m weight of heavy goods vehicles (HGVs) 
allowed to enter Switzerland was raised from 28 to 34 tonnes in 2001 and is to be increased to 40 tonnes in 2005. At the same time, the fee for H GVs for a 300 km distance (equivalent to a run 
between Basle and Chiasso) is be ing increased substantially, from Sw F 40 for a 28-tonne truck in 
                                                                                                                                                                    
 
16 Federal Office for Agriculture (2004) , Chapter 3. 
17 Municipal enterprises in ener gy, water, and transport are already covered by the GPA. WT/TPR/S/141 Trade Policy Review 
Page 32 
 
 
2000 to an average of Sw F 172 in 2001 for a 34-tonne truck, Sw F 292.50 in 2005 for a 40-tonner 
and to Sw F 325 once the Lötschberg rail tunnel is opened, or in any case by 1 January 2008. 
41. According to the Swiss authorities, the incr easing HGV fee, calculated on the basis of the 
distance travelled and the amount of polluting emissi ons, is intended to reach a level approximately 
equivalent to the internalization of external cost s such as pollution, road damage, under the "polluter 
pays" principle. Revenues from the fee are mainly earmarked to finance Switzerland's major railway 
development projects, in particular the New Alpi ne Railway Tunnels (NART) and Rail 2000. Both of 
these projects are seen as indisp ensable for implementation of the constitutional article calling for 
protection of the Alps, by shifting goods traffic from road to rail. 
42. During the transitional phase, the EU received an annual quota of 300,000 authorizations for 
40-tonne trucks for the years 2001 and 2002, rising to 400,000 for 2003 and 2004. Reduced fees are 
charged for a separate quota of 220,000 trips in tran sit through the Alps for empty or partly loaded 
trucks. Swiss hauliers receive the same number  of 40-tonne authorizations as well as 22,000 
authorizations for empty or partly loaded trucks.  
43. Between 2000 and 2003, the total tonnage of road  traffic crossing the Swiss Alpine routes 
increased from 8.9 million to 11.6 million net tonnes.  Transit trade grew from 4.7 million to 
5.6 million net tonnes between 2000 and 2001, falli ng slightly to 5 million in 2002 and increasing 
again to some 5.2 million net tons in 2003. 
44. Under the agreement, Swiss railway companies ga in access to the EU’s rail networks in the 
framework of Directive 91/440 EC and related regulations.  Switzerland has undertaken to improve its 
railway infrastructure by strengthening its commit ment to build the NART tunnels, while the EU has 
undertaken to improve the infrastructure, both north and south of the new route.  
Research 45. The Agreement on Scientific and Technologi cal Cooperation (Research Agreement) lays 
down conditions for Swiss participation in the implementation of the Sixth EC and Euratom 
Framework Programmes 2002-06 (FP6). The Agreemen t has been in provisional application since 1 
January 2004.  
46. The FP6, open to all private or public research institutions, has a total budget of € 17.5 billion, 
most of which will be allocated by competitive ca lls for proposals. There are no national quotas for 
funds. The EC programme covers seven key areas:   (i) genomics and biotechnology for health; 
(ii) information society technologies; (iii) nanot echnologies and nanosciences; (iv) aeronautics and 
space; (v) food safety; (vi) sustainable developm ent; and (vii) citizens and governance in an open 
European knowledge-based society. The Euratom framework programme covers three priority 
thematic areas: (i) fusion energy research; (ii) manage ment of radioactive waste;  and (iii) radiation 
protection.  
47. All legal entities established in Switzerland may pa rticipate in all the FP6 programmes and in 
the activities of the Joint Research Centre; Swiss res earchers have the same rights and obligations as 
researchers from EU member States. The Swiss contribution to the FP6 budget amounts to Sw F 200-
220 million per year. As an associate member, Switzerland is observer in the EU management and advisory bodies charged with implementing the pr ogrammes. The Swiss Federal Office for Education 
and Science has set up a network called "Euresearch" to  provide information and advice to researchers 
participating or interested in particip ation in EU research cooperation projects. Switzerland and Liechtenstein WT/TPR/S/141 
 Page 33 
 
 
48. Switzerland also participates as a founding member in Eureka and COST. Eureka, a pan-
European network for market-oriented industrial r esearch and development, was established in 1985 
to encourage a "bottom-up" approach to technologi cal development, and to strengthen the competitive 
position of European companies on world markets.18 COST, established in 1971, aims to strengthen 
basic and non-competitive research within Europe.19 
Free movement of persons 49. The Agreement on Free Movement of Persons i nvolves progressive liberalization of the Swiss 
labour market to EU citizens and the EU market to  Swiss citizens. The agreement runs for an initial 
period of seven years and is to be renewed inde finitely unless Switzerland notifies the EC to the 
contrary before 31 May 2009.  
50. The agreement provides for a transition period r unning up to 31 May 2014. On 1 June 2002, 
all EU citizens already authorized to pursue an ec onomic activity in Switzerland, acquired the right to 
full geographical and occupational mobility with in the country. Between 1 June 2002 and 
31 May 2007, Switzerland may maintain job quota lim its for two categories of residence: short-term 
(four months to one year - 115,500 persons per annum) and long-term (equal to, or exceeding, one 
year - 15,000 per annum). A special protection clause provides that if, between 1 June 2007 and 
31 May 2014, the number of new residence permits in either category mentioned exceeds the average 
for the three preceding years by more than 10%, Switzerland may, for the following year, unilaterally limit the number of new residence permits in that category to the average of the three preceding years 
plus 5%. The following year, the number may be limited to the same level.  
51. Between 1 June 2002 and 31 May 2004, the par ties to the agreement retained the right to 
maintain national priorities for admitting workers to the regular labour market, and provisions relating 
to wages and working conditions applicable to na tionals of the other parties, before issuing a 
residence permit. Since 1 June 2004, all Swiss c itizens have had unrestricted access to the EU labour 
market;  in Switzerland, the priority criteria we re phased out as from 1 June 2004, but replaced by 
new "accompanying measures" in accordance with Dir ective 96/71/EC (employment of workers in the 
framework of provision of services). These measures include: (i) a new federal law on the 
applicability of federal regulations on minimum pa y and working conditions; (ii) new criteria under 
which collective labour agreements may be declared generally binding in case of abusive and repeated 
"wage dumping";  and (iii) the opportunity for the Federal Government and the cantons, in cases of 
abusive and repeated wage dumping, to impose mini mum wages for employment contracts not subject 
to collective agreements.  
52. Annex II of the agreement deals with the coordi nation of social security schemes;  Annex III 
assures mutual recognition of state-issued degrees or diplomas for regulated professions – doctors, 
dentists, veterinary surgeons, pharmacists, general care nurses, midwives, and architects – for 
employment in Switzerland and the EU.  Recogniti on of academic degrees for the purpose of further 
education is not covered by the agreement. In th is area, Switzerland has concluded separate bilateral 
agreements with Austria, France, Germany, and Italy.  
53. An additional protocol to the agreement will be signed in autumn 2004, extending the 
agreement to citizens of the ten new EU member States.
20 Switzerland will have the opportunity to 
apply national restrictions on its labour market until 30 April 2011. Switzerland will grant annually 
                                                      
18 See EUREKA (2004).  
19 See COST (2004). 
20 Cyprus and Malta fall under the transitional regime provided in the Agreement for the "old" EU 
Member States. WT/TPR/S/141 Trade Policy Review 
Page 34 
 
 
increasing quotas to nationals of the other eight new EU member States up to a maximum of 3,000 
permanent residents and 29,000 short-term residents per year.  
The second set of bilateral agreements21 
Protocol on processed agricultural goods 
 
54. The protocol on processed agricultural goods (fo rmally, an amendment to the 1972 agreement 
on processed agricultural goods), covers a wide range  of products in HS chapters 04 to 22 and 35 
(Table AII.3).  The protocol establishes a gene ral principle of free trade between the EU and 
Switzerland in processed agricultural products, but maintains the possibility for both sides, but 
particularly Switzerland, to protect the food processing industry to a considerable extent. 
55. As a general principle, the parties may not le vy customs duties or charges with equivalent 
effect, or grant export refunds or refunds of customs or other duties, on the products listed (Article I).  
However, to take account of differences in the costs of agricultural raw materials used in 
manufacturing products specified in Table I of the protocol (i.e. Part I of Table AII.3), price 
compensation measures may be applied to these produc ts.  Price compensation measures are defined 
as "the levying of agricultural components upon im port and the granting of export refunds [or] 
refunds, remissions or non-payments, partial or  complete, of customs duties" (Article II). 
56. If the Swiss domestic reference price is higher th an that of the EU, the "basic amounts" to be 
taken into consideration in calculating the ag ricultural components on imports and the refunds 
permitted on exports are capped at either the difference between th e Swiss domestic reference price 
and the EU’s domestic reference price for the agricu ltural raw material concerned, or the level of 
Swiss import duty on the agricultural raw material wh en imported as such.  This cap is lower than the 
previous price compensation scheme, which covered the difference between Swiss and world prices (Chapter IV(2)(ii)(c)). If the Swiss domestic reference price is lower than that in the EU, the EU may 
introduce price compensation measures in the form of "agricultural components" levied on imports and refunds on exports of goods co vered by the protocol.  Export re funds or other duty refunds may 
not be granted on sugar used in the manufacture of products listed in Table II of the protocol (i.e. 
Part II of Table AII.3) (Articles III and IV). 
57. The domestic reference prices are to be defined at least annually and are initially set out in 
Table III of the protocol, based on 1 January 2002 data.  They cover common wheat, durum wheat, rye, barley, maize, common wheat flour, whole-milk  and skimmed-milk powders, butter, white sugar, 
eggs, fresh potatoes, and vegetable fat for the baking  and food industries.  They will be reviewed by 
the Joint Committee established under the agreem ent before it enters into application. 
58. The reference prices set out in the protocol i ndicate how far Swiss agricultural prices exceed 
those applied in the EU.  In percentage terms, the differences range from 34% on eggs to 288% on 
wheat flour:  in Swiss franc terms, the highest difference is Sw F 466.80 per 100 kg. on butter. 
59. Table IV of the protocol sets out the "agricu ltural component" of duties that may be applied 
under the Swiss import regime on processed products  containing the commodities described above, on 
the basis of standard recipes defined in terms of kg. of raw material used per 100 kg. net weight of 
finished product.  These agricultural components ra nge initially from zero on white sugar to Sw F 466 
per 100 kg. on butter:  some are to be reduced sligh tly as from three years after the entry into force of 
the agreement. 
                                                     
 
21 The texts of the second group of bilateral agr eements are available onlin e at:  Integration Office 
DFA/DFEA (2004b). Switzerland and Liechtenstein WT/TPR/S/141 
 Page 35 
 
 
Movement of persons, justice, police, asylum and migration:  Schengen/Dublin agreements 
60. The new agreement on cooperation in the fields of justice, police, asylum, and migration 
(Schengen/Dublin) will grant Switzerland access to the EU instruments in those fields, in order to 
enhance cooperation in the fight against transnati onal crime and abuse of asylum procedures. As an 
associate Schengen member, Switzerland will give up sy stematic controls of persons at its borders 
with the EU. Controls on goods will be maintained . Switzerland will, in return, have full access to the 
Schengen cooperation instruments, such as police c ooperation and access to databases. In the case of 
asylum (the Dublin agreement), Switzerland is to  implement the EU system whereby an asylum-
seeker may apply only once, in one country, and will be party to the EURODAC system of 
identification of asylum seekers. As an associate member of the Schengen/Dublin agreements, 
Switzerland will be able to take part in di scussions among the members, but not to vote.  
61. Under the Schengen agreement, Switzerland is bound to provide mutual legal assistance to 
other members in criminal matters.  However, to  maintain banking secrecy, an unlimited derogation 
has been agreed under which, in recognition of the double jeopardy principle, Switzerland will only 
provide such assistance in cases of tax fraud and the like (as distinct from tax evasion).  This also 
links to the agreement on taxation of savings. In addition, information provided for one purpose may 
not be used in relation to other investigations. 
Taxation of savings 62. The EU Savings Directive, expected to come into force on 1 July 2005
22, seeks to coordinate 
the taxation of income from individuals’ savings by ensuring that such income  from any source in the 
Union is taxed in the country of residence. To that end, it provides for automatic provision of 
information on income from savings held in other member States to the tax authorities of the individual’s country of residence.  Within the EU, three member States, Austria, Belgium, and 
Luxembourg, have agreed provisions within the Dir ective that allow them to charge a withholding tax 
on savings, which is then distributed to the rele vant member states, instead of providing the 
information to the states concerned.  This solutio n permits these member st ates to maintain their 
banking secrecy.  
63. The agreement on taxation of savings conclude d between Switzerland and the EU contains 
similar withholding tax provisions.  According to the Swiss authorities, these provisions also safeguard Switzerland’s banking secrecy. Switzerland has agreed to impose a withholding tax on 
interest payments from non-Swiss sources made by Sw iss banks to individuals resident in an EU 
member State, and to transfer 75%  of the collected amount to the tax authorities of the country of 
residence.  For the first three years after the entry into force of the agreemen t, the withholding tax will 
be 15%; for the next three years, 20%; and from the seventh year, 35%.  Individuals have the option of instructing their Swiss bank to declare the relevant  income to the tax authorities in their country of 
residence. Switzerland and the EU also agree to ex change information in cases of tax fraud or the like 
(as distinct from tax evasion).  At the same time, ta xation at source of dividends, interest, and royalty 
payments between subsidiary and parent compani es in Switzerland and the EU (e.g. a company with 
head office in Switzerland and subsid iaries in France) is abolished.  
Fight against indirect tax fraud 64. The agreement on the fight against fraud stems from a protocol to the EU-Switzerland free 
trade agreement, signed in 1997, providing for stre ngthened cooperation between the relevant customs 
authorities against smuggling and customs fraud. Sw itzerland and the EU started negotiations in 2001 
                                                     
 
22 In practice, it will come into force when ratified by all member States. WT/TPR/S/141 Trade Policy Review 
Page 36 
 
 
to strengthen cooperation in combating offences in  indirect taxation (e.g. customs duties, VAT, 
specific excise duties on tobacco, spirits, and mineral oils), subsidies, and public procurement. The 
objective was to simplify and speed-up cooperation be tween the customs, tax and legal authorities on 
either side.  
65. Under the new agreement, Switzerland and the EU and its member States are bound to give 
mutual administrative and legal assistance in the ar ea of indirect taxes. Assistance would cover illegal 
activities committed six months or more after the agreement was signed. Coercive measures (such as 
house searches or seizure of bank documents) will be  possible under three conditions: the offence 
must be punishable in the country requesting coerci ve measures as well as in the country to which the 
request is addressed; the amount of the offence must exceed € 25,000 or the value of the goods 
exported or imported without authorization must  exceed € 100,000; and (in cases of administrative 
assistance) the request must be presented in a search warrant issued by the relevant authority. Money 
laundering arising from indirect tax fraud or commercial smuggling ( contrebande par métier ) is 
covered by the agreement. Foreign officials may be  present when a request for administrative or legal 
assistance under the agreement is being executed; however, the procedures must always be conducted 
by an official of the country to  which the request is made. Direct taxes are not subject to the 
agreement, and information sent to other countri es in cases of assistance under the new agreement 
cannot be used in the area of direct tax (e.g. income tax) proceedings.  
Environment 66. The agreement on environment provides for full participation by Switzerland in the activities 
and projects of the European Environmental Agency (the Agency). The agreement is indefinite in 
duration, and can be terminated on six months’ no tice. Switzerland will gain full access to the EEA’s 
information and observation network (EIONET), and provide comparable information, which will be 
published in the Agency’s reports. Switzerland w ill have a seat on the board of the Agency, but 
without voting rights. Switzerland can participate act ively in the organization of projects and research 
at a European level, and coordinate its ow n activities with those of EU member States.  Swiss 
institutions, for example universities and polytechni cs, may take part in programmes, tender for 
projects, and obtain European grants and subsidi es. Switzerland will pay an annual contribution, 
derived by dividing the annual payment from the EU to the Agency by the number of EU member States.  
Statistics 
67. The agreement on statistics provides for the pr ogressive harmonization of statistical data 
collection between Switzerland and the EU. The agre ement initially runs for five years;  if not 
revoked within this period, it will be extended indefinitely.  Either party may terminate it at six 
months’ notice. Switzerland will gain improved access to data published in the EU, and Swiss data 
will be published in statistics compiled by Euro stat. The agreement provides that various EU 
directives and regulations concerning compilation of statistical data should also be compulsory for 
Switzerland;  a transitional period is available to make the necessary adjustment measures. The EU 
multi-annual statistical programme will become the framework for Swiss statistical activity;  joint 
annual programmes for Switzerland and the EU will be  developed within this framework. Switzerland 
may participate, without voting rights, in the panels that support the European Commission in 
designing its statistical programme. Switzerland and Liechtenstein WT/TPR/S/141 
 Page 37 
 
 
Media  
68. The agreement on "MEDIA" provides for full pa rticipation of Switzerland in the EU’s 
MEDIA programmes, which encourage production a nd distribution of audiovisual productions and 
promote training in the sector, festivals, development of networks, etc. Swiss audiovisual 
professionals will be placed on an equal footing w ith their EU counterparts.  The annual cost of 
€ 4.2 million is expected to be more than offset by the revenues earned in the sector.  Participation in 
the MEDIA programmes will also require Switzerland to fulfil the conditions laid down in the EU 
Television Directive (89/552/EEC) on content and origin of audiovisual productions.  
Education, professional training, and youth 
69. Switzerland and the EU are to negotiate an ag reement on education, professional training, and 
youth. Currently, the EU maintains three programm es at Community level encouraging exchange of 
secondary and tertiary students, professional trainees , and youth in general. "Socrates II" comprises 
the Erasmus programme of exchange among universities, the Comenius programme for collaboration 
among schools and professional training of teachers, Lingua for promotion of apprenticeships and 
foreign language teaching in all languages of the Union, Grundtvig for adult education and Minerva to 
promote new technologies in education. "Leonardo Da Vinci II" covers "lifelong training" 
programmes, offers possibilities for exchange of professional trainees, and promotes coordination of 
professional training among the participant states. "Youth" programmes are extramural activities available to school students, such as European vol unteer programmes or international encounters of 
young people between 18 and 25.  
70. Thirty countries in all are full participants in these programmes:  all member states of the 
EEA and the associated states of central and eastern Europe.
23 Since 1994, Switzerland has been a 
"sleeping partner" in the arrangements; this h as allowed Swiss institutions and individuals to 
participate and Switzerland to originate, coordi nate, and direct multinational projects under the 
programmes. The EU has agreed th at Switzerland should be a full partner in the next wave of 
programmes, beginning from 2007. To this end, negotiations between Switzerland and the EU will 
begin at the earliest in 2006 to define Switzerla nd’s participation, financial contribution, and 
representation in the various committe es and governing bodies.  In the meantime, the two sides are to 
meet annually to prepare the ground for these negotiations.  
(iii) Trade disputes and consultations 
71. During the period under review, Switzerland has b een involved in one dispute settlement case 
in the WTO as a complainant:  "United States - Definitive Safeguard Measures on Imports of Certain 
Steel Products".24  Switzerland has not been involved in  any dispute cases as a respondent.  
Liechtenstein has not been i nvolved in any dispute cases. 
72. There have been no disputes between Switzerland or Liechtenstein and their EFTA partners in 
the period under review.25  
                                                      
23 The 25 EU member States, the three EEA/EFTA me mbers, and the associated  countries of Romania 
and Bulgaria. See Europe an Commission (2004b). 
24 WT/DS248, 249, 251, 252, 253, 254, 258 and 259 – case brought jointly by Brazil, China, the European 
Communities, Japan, Korea, New Zealand, Norway, and Switzerland; Panel report: WT/DS248/R/- series;  and 
Appellate Body report: WT/DS/248/ABR. 
25 Any disputes arising from the EF TA Convention would be dealt with  according to the provisions of 
Chapter XVII of the Convention, which provides for consultations among member states, and dispute settlement WT/TPR/S/141 Trade Policy Review 
Page 38 
 
 
(5) FOREIGN INVESTMENT REGIMES  
(i) Switzerland 
73. Switzerland has an open and welcoming attitude towa rds foreign direct investment (FDI).  As 
a general rule, the freedom of trade and indust ry guaranteed by the Constitution allows anyone, 
including foreign nationals, to operate a business in Switzerland, to establish a company or to 
purchase an interest in one. In general, no approva l from the Government, chambers of commerce or 
professional associations is required to establish a business.  
74. Investment restrictions still apply in areas under state monopolies, including rail transport, 
postal services and certain insurance services, a nd commercial activities (e.g. trade in alcoholic 
beverages, salt).  Special licensing provisi ons apply to the following activities:  
− banks, insurance companies, and investment brokers; 
− hotels and restaurants (in certain cantons); 
− physicians, dentists, pharmacists and attorneys;  and 
− certain mercantile and services businesses (e.g. wine merchants, private employment 
agencies, temporary employment services). 
 75. Foreign nationals may perform these activities in Switzerland if they have the required 
permits. In certain cases, approval is subject to "demonstration of need" clauses (Chapter IV(9)). As 
noted (section (4
)(ii)(c)), residence qualifications for nationals of the EU and EEA will be completely 
liberalized by 2014, under the bilateral agreement with the EU on free movement of persons. 
76. There is no screening of foreign investment, nor are there any sectoral or geographical 
preferences or restrictions. There are no exchange  control restrictions on capital flows.  Since 1997, 
permission has not been required to buy commercial or  industrial real estate, or principal residences. 
(a) Non-financial sector 
77. Switzerland’s revised Law on Stock Corporations , adopted in 1991, forms the basis of its 
investment legislation.  Corporate governance (ex cept in the banking sector) is generally based on a 
unitary system in which the board of directors h as supreme strategic responsibility for the conduct of 
a company’s affairs.26 Related powers may not be delegated,  nor may they be withdrawn by the 
shareholders. 
78. Swiss law recognizes nine main forms of business ownership:  stock corporations (AG/SA), 
including real estate companies ( sociétés immobilières , SI); limited liability companies (GmbH/Sarl); 
sole proprietorships; general, limited, or ordi nary partnerships; cooperatives, foundations; and 
branches of foreign companies. The most common fo rm of incorporation is the stock corporation, 
which provides for limited liability, share capital in the form of registered shares, bearer shares or 
participation certificates, and other specific legal requirements.27  A stock corporation (as well as a 
                                                                                                                                                                     
through arbitration. Specific provisions on the establis hment and functioning of the arbitral tribunal and the 
implementation of arbitral awards are prov ided in Annex T of the EFTA Convention. 
26 In limited-liability corporations, a two-tier board system on the German model is also possible. 
 27 For a detailed description of Swiss corporat e governance systems, see KPMG (1999). The 
GmbH/SARL form of company is limited to a total capital of Sw F 2 million. Switzerland and Liechtenstein WT/TPR/S/141 
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limited liability company, partnership, or branch) must be entered in the commercial register.  The 
register is maintained at the cantonal level and coordinated by the Federa l Department of Justice.28 
79. All directors of stock corporations must be i ndividuals, not other companies, and the majority 
of the board of directors of a stock corporation (ex cept for holding companies) must be Swiss citizens 
with domicile in Switzerland. Switzerland has noted, in its init ial GATS offer of 2003, that a 
parliamentary procedure has been launched with a vi ew to eliminating the nationality requirement. Draft 
legislation envisaging a major revisi on of Swiss law relating to limited liability companies, including the 
liberalization of the nationality requirement for directors, originally published in the Federal Journal  in 
July 2001, is expected to enter into force by 2007. 
80. At least one managing director of a limited liability company must be domiciled in Switzerland. 
To establish a branch of a foreign company in Switz erland, an individual domici led in Switzerland must 
be nominated as representative.  A permanent reside nce permit of the associat e(s) is required under 
cantonal laws for the establishment of a commercial pr esence in the form of an enterprise without legal 
personality under Swiss law (i.e. in a form other than  stock corporation, lim ited liability company or 
cooperative society), and for the es tablishment of a comm ercial presence by natural persons.   
81. The minimum capital requirement ranges from Sw F 20,000 to Sw F 100,000 depending on 
the form of business; a maximum of Sw F 2 million is set for limited liability companies (GmbH/Sarl).  The establishment cost for a corpor ation or joint-stock company includes:  a stamp 
duty of 1% on the nominal capital
29;  and fees (registration, notary, land registry) of about Sw F 2,000 
(for small companies).  Establishment of a limited  liability company (GmbH/Sarl) does not normally 
take more than 10 days, substantially under the European average. In February 2004, the seco 
launched a website for online registration for small and medium-sized enterpri ses establishing as sole 
proprietorships.30 
82. As a general rule, companies or their manufacturing facilities must be registered at cantonal 
or district levels.  Registration costs range from Sw  F 240 to Sw F 600, plus lawyer’s fees if required. 
In a simple case, total costs may be up to Sw F 3,500; these may rise to some Sw F 10,600 depending 
on the form of business and the capital endowment.31  The time taken varies from canton to canton, 
but may be as little as one week.  For registration of a branch, the fees are 50% lower, with a maximum of Sw F 2,500.  If the headquarters is located outside Switzerland, the registration of the 
first Swiss branch bears the costs for an establishment of principal business;  subsequent branches are 
treated as such. 
83. In certain regions (e.g. in remote zones under economic renewal), the Confederation, jointly 
with the cantons, may grant exemptions from profit and capital taxes for up to ten years maximum;  
guarantee up to one third of the total cost of a project for a maximum period of eight years;  and may provide a contribution to investment credit interest e xpenses for up to one third of the total cost of a 
project over a maximum of five years.
32  Additional communal and cantonal incentives are offered.  
Depending on the location of the company, buildings  or land may be made available under favourable 
conditions;  contributions may be provided for ne w jobs created, for retraining, and towards rent, 
                                                      
28 The Federal Justice Department "ZEFIX" website permits direct access to the commercial registers 
of all cantons in German, French, Italian and English. See Federal Department of Justice and Police (2004).  
29 Establishment of corporations w ith nominal capital of, and increases in capital up to, Sw F 250,000 
are generally exempted. 
30See Swiss Confederation (2004b).  
31 Ordonnance sur les émoluments en matière de registre du commerce (21 October 1997). 
32 The interest subsidies amount to one half (one quarter each for the canton and the Confederation) of 
the normal interest to be paid over a maximum period of five years. WT/TPR/S/141 Trade Policy Review 
Page 40 
 
 
charges for ground lease, and participation in planni ng costs.  The general precondition for financial 
aid from the federal and/or cantona l governments is that private financial institutions also make 
financial resources available. For businesses that export goods or services, certain risks can be 
covered through the Government's  Export Risk Guarantee Scheme (Chapter III(3)(vii)). Other 
incentive schemes, including duty and tax exemptions and refunds, are available to investors in both 
Switzerland and Liechtenstein (Chapter III(2 )(ii)(e);  (3)(iv)-(vii); and (4)(i)-(ii)). 
(b) Financial sector  
84. Financial sector activities in Switzerland are gove rned by the Banking Act, which covers the 
activities of the Swiss National Bank and commercia l banks;  the Stock Exchange Act;  and the 
Insurance Supervisory Law.  Financial sector superv ision is undertaken by the Swiss Federal Banking 
Commission.  A detailed discussion of developments in the Swiss financial sector is contained in 
Chapter IV(11). 
(ii) Liechtenstein 
(a) Non-financial sector 
85. Under the Liechtenstein Law concerning Trade,  establishment of a commercial entity by a 
natural person is subject to prior residence during 12 years for citizens of non-EEA member states. 
Permanent domicile in Liechtenstein is also requi red. For citizens of EEA member states, no such 
residence requirements apply; th e only obligation is to register a domestic postal delivery address in 
the public register. Swiss citizens establishing bus inesses in Liechtenstein must have a permanent 
residence in Liechtenstein, but are not subject to  prior residence requirements. In all cases, the 
individual must possess sector-specific government-recognized professional qualifications. 
86. Under the Protocol regarding the Free Move ment of Persons between Switzerland and 
Liechtenstein, concluded under the revised EFTA conv ention, Liechtenstein has agreed to apply free 
movement of persons treatment (in Liechtenstein’s case, equal to that applied to EEA citizens) to Swiss citizens who are already residing in Liechtenstein  within one year of the entry into force of the 
revised convention, and for non-residents, within two or at the latest three years after its entry into 
force.  The provisions for non-residents should enter into force by June 2005.   
87. To establish a commercial presence by a legal person from a non-EEA country, the manager 
must meet the prior residence and professional qualif ication requirements. When a legal person of an 
EEA Member State establishes a legal entity in Liechte nstein, the manager of the entity is not obliged 
to be resident in Liechtenstein, but the entity is obliged to register a domestic postal delivery address. 
For non-EEA or non-Swiss citizens, the majority of the administrators authorized to manage and 
represent the legal entity must have been resident in Liechtenstein for 12 years. These requirements 
also apply to associates. All entities (natural or le gal persons) must have an office in Liechtenstein 
that is suitable to carry out the trade. 
88. Under the Person and Company Act, at least one member of the administration authorized to 
manage and represent a legal entity must be an EEA citizen domiciled in the EEA and in possession 
of a professional licence to act as a lawyer, legal ag ent, trustee or auditor, or hold a government-
recognized business qualification (so called qualified admi nistrator).  A legal entity or a branch of a 
foreign company, administered in the majority by foreigners, must nominate an EEA citizen 
domiciled in the EEA to represent it in administrativ e affairs. The requirement of a qualified manager 
is not applicable in case where a professional qualified manager is required on the basis of the Law 
concerning Trade or other specific legislation. Switzerland and Liechtenstein WT/TPR/S/141 
 Page 41 
 
 
89. The nationality requirement also applies to su rvey activities related to engineering services; 
however, foreign surveyors may work under the res ponsibility of a licensed Liechtenstein surveyor.  
For the supply of educational services, forei gners may establish commercial presence only when 
organized as legal persons according to Liechtenste in legislation.  Companies supplying accounting, 
auditing, and taxation services must be more  than 50% owned by EEA citizens.   
90. Acquisition of real estate is s ubject to authorization, which is  granted only if the applicant 
proves that the property is needed for personal housing or business purposes.  For non-EEA citizens, 
including Swiss citizens, ten years’ residence is required.  The regulation does not apply to the 
construction of "social housing" and acquisition of holiday homes.  Non-residents, including 
Liechtenstein nationals living abroad, ar e not permitted to purchase real estate. 
All companies must be registered with the Public Re gistrar.  In general, foundations (e.g. with family 
or ecclesiastical purposes) are not required to register; however, they must deposit their status with the Registrar.  Processing by the Public Registrar usually takes two to three days.  The registration fee depends on the capital endowment and the form of co mpany:  it is, on average, Sw F 700;  a lower fee 
of Sw F 350 applies to foundations.  With the excep tion of a minimum tax of Sw F 1,000 for holding 
and domiciled companies, formation and administrati on costs vary from one trust company or lawyer 
to another.
33   
(b) Financial sector 
91. Banking, investment and insurance activities are covered by specific acts and regulations: the 
Banking Act of 1992 and the co rresponding Banking Ordinance34; the Law on Investment 
Undertakings (IUG)35; and the Insurance Supervision Law (ISL)36, and the associated Ordinance.37 
Financial supervision of banks, finance companies, investment undertakings, trustees, lawyers, 
accountants, and auditors is carried out by the Fina ncial Services Authority (FSA). The provisions of 
the Banking Act apply by analogy to the Liechtenstein  branches of foreign banks, finance companies, 
and securities undertakings.  
92. Banks and finance companies require a governme nt licence in order to commence 3operations 
and can only take the legal form of a public company limited by shares ( Aktiengesellschaft ), although 
exceptions may be granted by the Government.38   
93. A detailed discussion of developments in the Liech tenstein financial sector is contained in 
Chapter IV(10). 
                                                      
33 Liechtenstein Company Law of 1926 (LGBI. 1926/4), as revised up to 1980, Article 180a. 
34 Law of 21 October 1992 on Banks and Finance Companies (LLG 1992 No. 108), as amended, and 
Ordinance of 22 February 1994 Implementing the Law on Banks and Finance Companies (LLG 1994 No. 22), as amended. 
35 Law of 3 May 1996 on Investment Undertakings (IUG), entering into force on 10 July 1996, 
LLG 1996, No. 89 
36 LLG 1996, No. 23, Law of 6 D ecember 1995 on the Supervisio n of Insurance Undertakings. 
37 Ordinance of 8 April 1997 on the Insurance Supervision Act (LLG 1997, No. 85), in force from 
24 January 1997. 
38 Article 18, paragraph 1 of the Banking Act. 