Switzerland WT/TPR/S/13
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III. POLICY DEVELOPMENTS AFFECTING TRADE AND INVESTMENT
(1) Main Features
1. Switzerland hasaliberal régime forindustrial trade, withborder protection relying almost
exclusively ontariffs. In1995, theunweighted average advalorem equivalent ofSwitzerland 'sspecific
duties onindustrial items wasestimated atlessthan3percent, ascompared tosome 80percenton
farmproducts. Theauthorities havenever applied anti-dumping orcountervailing measures, norquotas
undertheMultifibreArrangementortheWTOAgreementonTextilesandClothing.Importsurveillance
oncertain textile items expired in1995; andthelastsafeguard action under GATT Article XIXdates
from1982. Inaddition, thereisonlylittleevidence, ifany,ofdirect subsidies forindustry thatdistort
external orinternal competition.
2. However, Swiss consumers havedrawn onlylimited benefit from thisgenuinely opentrade
régime. Retail prices ofmany internationally traded goods compare unfavourably withneighbouring
EUcountries,despitebilateralfreetradeinindustrialproducts,generallylowersalestaxesinSwitzerland
andhigher external tariffs intheEU(Chart III.1).1
3. Across allcategories offinalconsumption, Swiss prices exceeded theEUaverage byalmost
50percentin1994. Thisnotonlyreflects theimpact ofhighlevels offarmsupport onfoodprices
(ChapterIV(3)),buttheoperationofstandards-relatedbarriersandagenerallackofinternalcompetition.
Theinitial TPR report pointed totightregulation ofmany markets andaproliferation ofcartels,
exclusivity contracts andcollusive arrangements.
4. Given Switzerland 'sexposed geo-strategic location, public opinion haslongtended tofavour
thebenefits associated withbusiness (self-)regulation -notably stability andreliability ofsupply -over
pureefficiency considerations. Inturn,thishasencouraged theemergence ofadualeconomic structure.
While Switzerland 'sexport sector isgenerally exposed tointernational competition without significant
policy support (with thepossible exception ofexport riskguarantees), large segments ofthedomestic
economy haveremained sheltered behind numerous entry barriers.2
1While significant prices gapscould hardly persist between mutually open markets, swift appreciation of
theSwiss franc since 1993 mayhave temporarily overstated Switzerland 's"price lead".
2According toaspeech given inFebruary 1995 inSt.Gallen byMr.Lusser, thePresident oftheDirectorate
oftheSwissNationalBank,whowentontosaythat"manycartelswereencouragedunderemergencyarrangements
during thefirstworld war. Rather thanunravelling thereafter, theywere further cemented bytheeconomic crisis
ofthe1930s and,during World WarII,through newinitiatives towards closer Government/industry co-operation.
Contrary toGermany, where similar structural developments hadoccurred butwhere cartels have beenbanned
since, these continued tothrive inSwitzerland. ...Asaresult, theSwiss domestic economy currently enjoys
analmostuniquelevelofprotection,externallybehindajumbleofpublicsectorregulationsandtechnicalstandards,
internally behind highcartel barriers." (Unofficial translation byWTO Secretariat.)WT/TPR/S/13
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Switzerland WT/TPR/S/13
Page 19
5. Assuggested bythe1991 TPRreport, competition inSwitzerland suffered from laxcartel
legislation aswellasimplementation problems duetounderstaffing oftheSecretariat oftheCartel
Commission. However, thisalone cannot fully explain thepervasive rôleofprivate business
arrangements. (Some verydynamic Asian economies havenocartel legislation, relying exclusively
onthedisciplining effects ofopen, contestable markets onbusiness behaviour.)3Additional factors
shielding suchpractices fromoutside competition wereseenasincluding national standards andtechnical
regulations; exclusive import rights based onintellectual property legislation; and,insome areas,
investment barriers thatdiscourage entry ofnewproducers andtraders.4
6. Over thepastfouryears, however, Switzerland hasmodernized itslegislation inmany policy
areas:
(i) anewTrademark Lawwasadopted inAugust 1992;
(ii) the1995LawonTechnical Barriers toTrade provides aframework fortheinternational
harmonization oftechnical regulations, withaparticular viewtoEUregulations;
(iii) thenewInternal Market LawofOctober 1995istobring down impediments tointernal
factor mobility andtrade, providing, interalia,fortherecognition between cantons
ofprofessional certificates; and
(iv) anewCompetition Lawwillenter intoforce inJuly1996.
7. Thesechangeshavebeencomplementedbystepstoliberalizegovernmentprocurementatfederal
andcantonal level, motivated bothbySwitzerland 'saccession totheWTO Agreement onGovernment
Procurement andbypressures fromexport-oriented firms seeking better access abroad. Positive effects
oncompetition arealsolikely toresult fromtheintroduction, inJanuary 1995, ofvalue-added taxwhich
removed thepremium forvertical integration implied intheprevious system ofmulti-stage turnover
taxation. Thenewtaxalsoseems tobebroader initssectoral andproduct coverage, andsimpler in
itsstructure, thanitscounterparts inmost other OECD countries.5
8. Although these changes needtimetofeedthrough theeconomic system andbearfruit, their
general orientation points toimproved market access forbothexternal andinternal suppliers, tothe
potential benefit ofSwiss consumers andtheeconomy asawhole.
(2) Tariffs andTrade-related Taxes andCharges
9. Switzerland 'snewvalue-added taxistheConfederation 'slargest source ofincome. In1996,
thetaxisexpected toprovide about onethirdoffederal revenue, ahigher share thanincome taxand
comparing withlessthan4percentfrom tariffs andother border taxes (Chart III.2).
3GATT (1994).
4GATT (1991).
5Therelatively lowgeneral taxrateof6.5percentmayhave contributed toeasing lobbying pressure for
exemptions.WT/TPR/S/13
Page 20Trade Policy Review
(i) Border taxation
(a) Import tariffs
10. Switzerland istheonlyindustrialized country torelyexclusively onspecific rather than
advalorem customs duties. Theauthorities consider thecurrent system tobeefficient bothinterms
ofprocessingtimeandnumberofstaffinvolved,allowingforswiftandaccurateassessmentofindividual
consignments. These advantages areconsidered tooutweigh possible drawbacks suchaslackof
transparency andvariations intariffincidence asaresult ofpriceandexchange ratechanges. Reflecting
thenature ofthesystem, theincidence oftariffs tends tobehigher forrelatively heavy andinexpensive
products thansophisticated high-value supplies within thesame tariff category.
11. Implementing Uruguay Round results, Switzerland converted allquantitative restrictions on
agricultural products intotariffs and,on1July1995 and1January 1996, carried outthefirsttwo
stages oftariffreductions. Theauthorities estimate thatfullimplementation ofthereduction programme,
generally byJanuary 2000, willresult inannual revenue losses ofSwF100to200million relative
to1993.6
6Textiles andclothing aretheonlyareas withalonger implementation period, expiring on1January 2004.Switzerland WT/TPR/S/13
Page 21
12. Charts III.3andIII.4present estimates ofthetariff profile foragricultural andmanufacturing
products, following thefirstreduction stage in1995.7Theaverage tariff onindustrial products was
estimated at2.6percentin1995; foragricultural products, thecorresponding average amounted to
81.5percent,reflecting thetariffication ofallprevious import restrictions. Inorder nottocurbtrade
flows insectors subject toprohibitive tariffs, Switzerland hasopened atotalof28tariffquotas covering
about 15percentoftariff linesintheagricultural sector (Chapter IV(3)). Inthefruitandvegetable
sectors previously subject toseasonal tariffs orimport prohibitions under the"three-phase system",
thetariff quotas aredefined onaseasonal basis.
13. Nearly 400tariff linescarry duties whose advalorem equivalent exceeds 50percent. Inthe
main, these apply toagricultural andfood products, withthehighest ratebeing levied onmalt
(Table III.1).8High-tariff items intheindustrial sphere include acyclic ethers (143percent); various
petroleum products (over 200percent); andpolyethylene bags(90percent).9
14. Switzerland hasbound alltariffs onagricultural andfooditems, inaccordance withWTO
provisions, andclose to99percentofitstariffs onindustrial products. Notcurrently bound arethe
ratesongas,petroleumandrelatedproducts.Virtuallyallbindingsonindustrialgoodsareinanalternate
format, i.e.inspecific oradvalorem terms, thehigher ratebeing relevant. Thebound ratesarenormally
those applied.10
15. Tariffs affecting thenon-food industrial sector are,onaverage, evenly spread across
manufacturing stages. There islittleevidence oftariffescalation favouring domestic processors, except
intextiles, clothing andbasic chemicals (Table III.2).
7Being based onactual dutyrevenue andimport value inindividual product categories, these estimates reflect
thepotentiallydeterrentimpactofspecificdutiesonlow-priceditemsand,thus,tendtounderstatetherestrictiveness
oftherégime. Inaddition, asnoted above, there maybesignificant variations intariff incidence from yearto
year, reflecting changes inmarket conditions andexchange rates. Further uncertainties arise, when trade flows
arenegligible and,possibly, notrepresentative. Forexample, withnotariff changes, theadvalorem equivalents
provided inSwiss customs statistics forcream declined from 31percentin1990 to19percentin1991 and
increasedsubsequentlyto29percentby1994.Totaldutyrevenueintherelevanttariffcategoryfluctuatedbetween
SwF176in1990, SwF5,388 in1991 andSwF527in1994.
Tosimulate theoperation ofthefirsttariff reduction stage under theWTO Agreement andthetariffication
process inagriculture, theadvalorem equivalents available for1994 were updated to1995, relying onthe1994
and1995 specific dutyratesasconversion factors. Inthiscontext, boththe1995 in-quota andout-of-quota duty
rates were used forindividual farm products. (Table III.1 reflects onlytheout-of-quota rates.) Inalimited
number ofcases, where noadvalorem equivalents were available for1994, earlier datawere used.
8UsingdataprovidedbytheSwissauthorities,TableAIII.1listsallfarmproducts,101intotal,withadvalorem
equivalents exceeding 100percent. While theestimates presented inTable III.1arebased on1994 data(out-of-
quota), Table AIII.1 reflects theactual situation inthesecond halfof1995. However, asnoted bytheauthorities,
therepresentativeness ofthese datamaybeseriously affected bytheshortness oftheobservation period, problems
inapplying thenewtariff régime, andseasonal fluctuations infarm trade. Inaddition, given thegeneral
restrictiveness oftherégime, Table AIII.1 islikely toreflect predominantly thesituation forimports entering
under in-quota tariff rates.
9According totheauthorities, asofJanuary 1996, thetariffs onpolyethylene bagswere reduced totheir
Uruguay Round final level ofSwF88per100kg.or20percentadvalorem.
10About 0.3percentofalltariff linesaresubject tobindings atceiling rates, covering mainly fishproducts,
food preparations, andclothing.WT/TPR/S/13
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Switzerland WT/TPR/S/13
Page 23
WT/TPR/S/13
Page 24Trade Policy Review
Table III.1
Advalorem tariff equivalents forselected farm products, 1995a
HSCode Description Applied rate1994 Tariff 1995 Base rate
1988Reduction
1995 relative
tobaserate
(Percent)SwF/
100kg.Advalorem
equivalent
(Percent)SwF/
100kg.Advalorem
equivalent
(Percent)SwF/
100kg.
(1) (2) (3) (3)/(1)*(2) (4) [(3)-(4)]/(4)
1107.10.12 Malt 1.5 49.9 150.0 4,990.0 158.0 -5.1
1107.20.12 Malt, roasted 1.5 41.9 150.0 4,190.0 158.0 -5.1
1103.11.19 Durum wheat, meal andpellets 4.5 63.6 132.3 1,869.8 171.0 -22.6
0709.90.79 Mache, seasonal (15.07-01.07) 10.0 5.4 1,962.0 1,059.5 2,066.0 -5.0
1103.13.90 Maize groats andmeal 4.5 25.9 162.3 934.1 171.0 -5.1
0405.10.19 Butter fresh unsalted 20.0 9.6 1,835.0 880.8 1,932.0 -5.0
2202.90.19 Grape juice withwater 50.0 78.1 480.0 749.8 506.0 -5.1
1802.00.10 Cocoa pellets 1.0 40.2 14.0 562.8 41.0 -65.9
0207.35.11 Poultry liver, fresh 30.0 5.6 2,527.0 471.7 2,682.0 -5.8
2204.29.29 White wine 38.0 43.9 365.0 421.7 385.0 -5.2
0202.30.19 Boneless vealfrozen 9.0 1.8 2,099.0 419.8 2,420.0 -13.3
1104.21.20 Barley hulled pearled 10.0 23.6 165.3 390.1 174.0 -5.0
1003.00.10 Barley, seed 0.6 3.1 66.5 343.6 70.0 -5.0
0407.00.90 Eggs 15.0 11.2 415.0 309.9 437.0 -5.0
0709.90.49 Parsley, seasonal (15.03-31.12) 10.0 5.4 572.0 308.9 602.0 -5.0
0210.90.89 Other poultry meat andproduct 30.0 2.2 4,036.0 296.0 4,485.0 -10.0
2009.60.29 Grape juice 50.0 33.5 440.0 294.8 464.0 -5.2
0101.20.99 Liveasses 12.0a2 1,431.0b238.5 1,507.0b-5.0
1002.00.40 Rye, animal fodder 0.6 3.4 41.0 232.3 57.0 -28.1
0603.10.49 Fresh roses, seasonal
(01.05-05.10)12.5 0.8 3,500.0 224.0 4,970.0 -29.6
1501.00.19 Lard 20.0 26.8 163.2 218.7 281.0 -41.9
0210.90.79 Turkey meat andproducts 30.0 2.2 2,917.0 213.9 3,241.0 -10.0
0210.90.69 Poultry meat andproducts 30.0 2.2 2,894.0 212.2 3,216.0 -10.0
0204.41.90 Lamb frozen 10.0 2 938.6 187.7 1,009.0 -7.0
1001.10.40 Wheat, animal fodder 0.6 3.4 30.0 170.0 56.0 -46.4
1203.00.23 Copra 0.1 0.2 84.3 168.6 163.0 -48.3
1214.10.10 Lucerne 0.2 1 33.0 165.0 41.0 -19.5
1602.41.19 Tinned ham 65.0 12.5 830.0 159.6 1,000.0 -17.0
0207.33.99 Geese andfowl, whole, frozen 30.0 2.9 1,249.0 120.7 1,315.0 -5.0
1206.00.23 Sunflower seed 0.1 0.2 59.2 118.3 138.0 -57.1
0402.29.20 Cream 140.0 11.3 1,340.0 108.2 1,584.0 -15.4
1701.99.99 Sugar 22.0 52.9 44.3 106.6 72.0 -38.4
2004.10.99 Prepared potatoes 70.0 29.2 250.6 104.5 264.0 -5.1
2005.20.99 Other prepared potatoes 50.0 15.1 257.3 77.7 1,100.0 -76.6
0204.50.90 Goat meat 9.0 0.8 742.0 66.0 823.0 -9.8
2302.30.22 Bran 0.3 1 17.0 56.7 54.0 -68.5
3502.11.90 Eggalbumin 80.0 11.6 255.0 37.0 2,280.0 -88.8
1513.29.19 Coconut oil 35.0 7.2 178.2 36.7 286.0 -37.7
a Out-of-quota rates.
b SwFperunit.
Note: Estimates based ontheassumption thatinput prices remained unchanged between 1994 and1995.
Source: Swiss Customs Tariff (Tarifdesdouanes suisses ,D3)1995; Statistique ducommerce extérieur delaSuisse, Statistique annuelle
1994,Vol.3;WTO Secretariat estimates.Switzerland WT/TPR/S/13
Page 25
Table III.2
Tariff escalation inselected sectors, 1995
(Percent)
Sector Unprocessed inputs Semi-processed products Final products
Textiles 2.0 5.7 8.7
Clothing 0.5 0.9 4.9
Basic chemicals 1.8 1.5 13.1
Other chemicals 0.9 3.7 4.0
Petroleum products 0.6 0.8 1.8
Rubber products 0.3 1.0 3.3
Allindustry (except food) 3.0 2.6 2.9
Food 15.3 93.1 94.0
Source: Dataprovided bytheGovernment ofSwitzerland; WTO Secretariat estimates.
16. Thewithdrawal from EFTA ofAustria, Sweden andFinland tojointheEuropean Union on
1January 1995 would haveresulted inthemutual reintroduction ofduties inafewareas where the
EFTA Convention wasmore comprehensive thanSwitzerland 's1972FreeTrade Agreement withthe
EU.Switzerland andtheEUthusestablished zero-tariff quotas, onanautonomous basis, tomaintain
prior access conditions in1995 and1996.11Switzerland isseeking acontractual framework forthe
continuation ofthese measures, without quantitative limits.
17. GSPbenefits resulted inrevenue losses ofsome SwF30million in1994. Asshown in
Table III.3, GSPutilization ishigher foragricultural products, reflecting thegenerally highlevelof
m.f.n. tariffs inthisarea, andhasincreased overtime. Themostintensive users wereChina, India
andThailand. While nosignificant changes haveoccurred intheSwiss GSPscheme sincethe1991 TPR
review, anextensive revision isscheduled forMarch 1997 atthelatest (Chapter II(2)(iii)(c)). The
rulesoforigin applicable toGSPimports wererelaxed witheffect from1July1996(section (3)(iv)).
Table III.3
GSPutilization rates, 1991-94
(Percentage ofeligible imports actually entering under GSPpreferential tariff rates)
Sector Countries Allproducts
andsources Year Agriculture Industry China India Thailand
1991 88 36 78 85 54 40
1992 89 39 81 83 44 43
1993 87 46 84 90 48 49
1994 88 52 85 87 51 55
Source: Government ofSwitzerland.
(b) Additional duties andcharges onimports
18. Carsandcarparts, fuels andrelated products aresubject tofiscal duties (droits dedouane
àcaractère fiscal).12Thepetroleum taxalone accounts for13percentofprojected federal budget
11Products concerned areduvet feathers, mineral waters, lemonade andother softdrinks, petfood, cigarettes
andtobacco.
12Currently, theregular taxonunleaded petrol amounts toSwF48.5per100kg.,including anadditional
taxofSwF0.3perlitrewhich wasintroduced following apopular voteinMarch 1993.WT/TPR/S/13
Page 26Trade Policy Review
revenue in1996. Intheabsence ofsignificant domestic production, these duties areeconomically
equivalent toaninternal tax.Following aconstitutional amendment inNovember 1993, theyareto
bereplaced byspecial consumption taxes inJanuary 1997.
19. Coffee, tea,cocoa andricearesubject toimport charges inorder tofinance minimum reserve
stocks heldforsecurity reasons.13(Thecharge oncoffee amounts toSwF0.18perkg.,equivalent
toabout 2percentoftheimport value.) Inotherareas, including sugar, similar charges wereconverted
intotariffs implementing theUruguay Round results.
(c) Export taxes
20. Switzerland nolonger levies export taxes. Export taxesonmetal andsteelscrap wereremoved
inJuly1993. Thelastremaining taxes, affecting some animal products, wereabolished witheffect
from 1January 1995.
(ii) Internal taxation
(a) Turnover tax
21. Switzerland 'snewvalue-added tax(VAT), introduced on1January 1995, islevied atageneral
rateof6.5percent. Thetaxapplies across thefullrange ofdomestic production anddistribution,
andcovers allimported goods andservices (butonlyservices contracts exceeding SwF10,000).14
Allpersons performing commercial orprofessional activities withanannual turnover exceeding
SwF75,000 onSwiss territory areliable. Areduced rateof2percentapplies toalimited range
of"essential"productsandservicesand,fromOctober1996,hotelserviceswillbenefitfroma3percent
rate.15
22. Thetransition toVAT removed twomajor distortions resulting fromtheprevious multi-stage
turnover tax,namely animplicit premium onvertical business integration andabiasagainst exports.
Thenewsystem, byallowing forthededuction ofVAT oninputs, nolonger discriminates against
processing chains involving independent enterprises. Bythesame token, taxrefunds forexports are
nolonger limited tothefinalproduct butextend toallprocessing stages.
23. Excluded fromVAT arearange ofeducational, cultural, health andsocial services; insurance
contracts; money market operations; capital market transactions (excluding private fundmanagement
13Given thisspecific purpose, theauthorities havenotfeltitnecessary toinclude thecharges intheschedules
ofSwitzerland 'sWTO bindings. Minimum reserve stock requirements currently apply tofuels; sugar; rice;
edible oilsandfats; coffee, teaandcocoa; animal feeding stuff; maize; certain seeds; antibiotics; fertilizers;
soaps anddetergents; lubricants; coalandcoke; andsoftwheat. Thestocks normally cover sixmonths of
consumption andareheld, depending onthearea, byassociations orco-operatives ofprivate importers. The
system isbased onthepremise thatitisfortheprivate sector tokeep stocks, withtheensuing costs tobeborne
byconsumers (official estimates for1994 amounted tobetween SwF55and84perhead ofpopulation).
14Temporary imports areexempt from VAT, subject, however, tothelodging ofthefullamount asadeposit
withcustoms until re-exportation.
15These include allfoodproducts andnon-alcoholic beverages, liveanimals, cutflowers, cereals, fodder,
fertilizers, pharmaceuticals, newspapers, magazines, books, other printed media andnon-commercial radio and
television services.Switzerland WT/TPR/S/13
Page 27
anddebtcollection); rental andsaleofbuildings; lotteries andsimilar games; services performed
bycertain social associations andofficial stamps. Inthesecases, VATpaidonproduction inputs cannot
bereclaimed.
(b) Excise duties
24. According totheauthorities, there havebeennomajor changes overthepastfouryears to
Switzerland 'ssystem ofexcise taxation. Excise taxesarelevied ontobacco, beeranddistilled beverages.
Thetaxbaseoncigarettes washarmonized withtheEUsystem inMarch 1996; thetaxonthemost
popular range ofcigarettes iscurrently assessed atSwF1.85perpacket of20.TheGovernment has
announced thatfrom 1July1999, excise taxes ondistilled spirits ("eaux devie") willnolonger
differentiate between domestic production andimports.16
(3) Other Policies Directly Affecting External Trade
(i) Licensing requirements
25. Pursuant toitsobligations under theWTO Agreements onAgriculture andonImport Licensing,
Switzerland recently changed itslicensing system forfarmproducts. Non-automatic licensing, affecting
some 233tariff lines, isused inparticular toadminister thenew tariff quota system
(Chapter IV(3)(ii)(a)). Inaddition, automatic licensing applies toarange ofproducts subject to
mandatory reserve stock requirements.
26. Import licensing fortextile andclothing products wasabolished in1995. Thepractical effects
were limited, however, astheprevious surveillance andprice certification system, under the1987
Ordinance onTextile Imports, hadbeenconfined tosome 37tarifflinesimported mostly fromEastern
Europe, accounting forsome 4percentoftotaltextile andclothing imports.17Under thenewrégime,
thecountries oforigin andexportation mustbespecified intheimport declaration. According tothe
authorities, given thesensitivity ofthesector, itisnecessary totrace changes inthepattern of
international production andtrade.
27. Parallel importers ofmotors vehicles notinpossession ofSwiss homologation documents must
belicensed andaresubject toanimporter 'slicensing tax(Chapter IV(8)).
(ii) Trade controls, prohibitions andsanctions
28. Switzerland'ssystemofimportcontrolsforhealth,safetyorsecurityconsiderations,hasremained
virtually unchanged since the1991 TPRreport (Box III.1).
16Atpresent, while imported distilled beverages areliable toimport duties (e.g. SwF80perkg.ofbrandy),
an"ordinary monopoly tax"(SwF3,120 per100kg.forconsignments oflessthan50kg.)andVAT, theSwiss
producers 'direct sales areliable onlytoarelatively modest domestic tax(SwF24perlitreofalcohol) andVAT.
17GATT (1991).WT/TPR/S/13
Page 28Trade Policy Review
BoxIII.1 Trade controls andprohibitions, 1996
Substances thatdeplete theozone layer: restrictions ontrade andproduction inaccordance with the
Montreal Protocol.
Packaging: domestic banonsales ofPVC bottles.
Certain chemical substances: export licence requirements under theConvention onChemical Weapons
andadditional domestic legislation.
Radioactive substances andobjects (including nuclear fuels, nuclear reactors andreactors equipment,
nuclear technology): imports subject tofederal authorization inaccordance withtheTreaty onNuclear
Non-Proliferation.
Transport ofhazardous waste: application oftheBasel Convention andadditional domestic requirements.
Endangered species ofwild fauna andflora: controls andprohibitions inaccordance with CITES and
additional national restrictions toprotect indigenous species.
Specified vegetal products: phytosanitary controls inaccordance withtheInternational Convention onthe
Protection ofVegetal Products.
Medicines: imports subject tolicensing bythecanton ofdomicile; marketing requires prior registration
withtheIntercantonal Office fortheControl ofMedicines (IKS).
Narcotics, psychotropic substances andprecursors: imports subject tofederal authorization andlicensing
based onUNConventions.
Blood andimmuno-biological products: imports subject tofederal authorization andlicensing.
Toxic products andsubstances: marketing subject toregistration withtheFederal Office ofPublic Health
Certain toxic substances arebanned.
Military material: trade prohibitions depending onnational interest.
Animals andanimal products: import andtransit controls bytheFederal Veterinary Office toprotect
public andanimal health, andanimal welfare.
Source: Government ofSwitzerland.
29. Draft legislation currently before Parliament provides forageneral banonthepurchase,
importation, exportation andtransit ofnuclear, biological andchemical weapons. Anewlawondual-use
products, alsointheParliamentary process, isaimed atpreventing dissemination ofmassive destruction
weapons inaccordance withtheConvention onChemical Weapons; additional restrictions maybe
taken ifdeemed necessary.18
30. Switzerland currently applies autonomously theUnited Nations 'embargoes ontrade withthe
Republic ofIraqandLibya. Atthetimeofthisreport, trade sanctions ontheformer Republic of
Yugoslavia hadbeensuspended, inaccordance withtheDayton Agreement.
18Conseil fédéral (1995b) and(1995c).Switzerland WT/TPR/S/13
Page 29
31. Export restrictions onspecified metal residues anddischarges aretodisappear on1July1996.
Asnoted intheinitial TPR report, these hadserved toimprove supply conditions fordomestic
processors, given comparable restrictions inother countries.
(iii) Trade defence mechanisms
32. Switzerland doesnotmaintain, norintend toestablish, anyspecific safeguards, anti-dumping
orcountervailing mechanisms. However, likeallother international obligations thatarebinding on
thecountry, theWTO Agreements onSafeguards, Anti-Dumping, andSubsidies andCountervailing
Measures became part,onratification, ofthenational legalsystem. Asexplained inthe1991 TPR
report, these agreements havelegalforce inSwitzerland.19
33. While there havebeennocases todate, theFederal Office ofExternal Economic Affairs is
thecompetent authority toconduct aninvestigation intoalleged cases ofdumping orsubsidization.
Anysubsequent decision tointroduce orincrease tariffs could betaken bytheFederal Council onthe
basisoftheCustoms Duty Law(Loifédérale surletarifdesdouanes ),Article 7.Thelawalsoallows
fortemporary tariff increases onagricultural products inapplication ofsafeguard provisions under
international agreements onfarmtrade(Article 11).Non-tariff measures inemergency situations could
beintroduced under theFederal LawonExternal Economic Measures (Loifédérale surlesmesures
économiquesextérieures),Article1.AnysuchactionmustbeapprovedbyParliamentwithinsixmonths.
34. Switzerland 'slastsafeguard action under Article XIXofGATT, ontablegrapes, wastaken
in1982 andexpired aftersixweeks.20
(iv) Rules oforigin
35. Thepreferential rulesoforigin governing Switzerland 'stradeinindustrial products, other than
textiles andclothing, withtheEUandEFTA were partially liberalized inJanuary 1994. Thenew
rulesfacilitate theincorporation ofsemi-manufactured inputs fromthirdcountries aswellasprocessing
activities outside thepreferential zone, without jeopardizing thefinalproduct 'spreferential status.21
Special criteria forchemical substances andproducts allow third-country rawmaterials toreach
40percentofthevalue oftheresulting basic chemicals (HSchapters 28-29) and25percentofthe
value ofplastic products (HSchapter 39)without lossofpreferential status. TheEFTA members '
recent free-trade agreements withcountries incentral andeastern Europe andtheMiddle East, while
containing EU/EFTA-type origin rules, donotinclude these modifications (Chapter II(2)(iii)(b)).
36. Asof1January 1996, theorigin rulesoftheSwiss GSPscheme allow forthecumulation of
Swiss-originating inputs withinputs frombeneficiary countries. Inaddition, under ageneral "tolerance
rule", preferential status ismaintained iftheshareofthird-country components -otherwise notaccepted -
doesnotexceed 5percentofaproduct 'sex-factory price. Cumulation isalsopossible among members
19Under Swiss law,thequestion ofdirect threat applicability ofinternational agreements isdetermined by
thecourts, andinthelastinstance bytheFederal Court, onacase-by-case basis.
20Article 7oftheCustoms Duty Lawserved asthelegal basis.
21Under ageneral tolerance rule,certain semi-manufactured inputs fromthirdcountries, which arenotalready
included inaspecial list,maynowconstitute upto10percentofthefinalproduct 'sex-factory price. Aloosening
oftheterritoriality principle allows fortemporary exportation, provided thevalue added outside thepreferential
areadoes notexceed 10percentoftheex-factory price.WT/TPR/S/13
Page 30Trade Policy Review
ofregional economic groupings. According totheauthorities, however, onlyASEAN members have
sofartaken advantage ofthispossibility.22
37. Switzerland 'snon-preferential rulesoforigin havenotbeenchanged since 1991. They centre
onthelocation where theproduct hasbeenwholly obtained or"sufficiently transformed".23
(v) Local-content andlocal-purchase requirements
38. Thereisnoevidenceoflocalcontentrequirementsorrecommendationsgoverningtheproduction
ofgoodsorservices,exceptintheaudiovisualsector.TheFederalLawonRadioandTelevisionrequires
broadcasters to"payparticular attention" toSwiss audiovisual productions andtomake the"broadest
possible use"ofEuropean works (Article 3(e)and(f)).Reportedly, theconcession granted totheSwiss
Broadcasting Corporation contains similar provisions. TheSwiss pay-TV operator (Teleclub) isobliged
"totakeintoaccount" European productions "asmuch aspossible". Afilmchannel (Star TV)is
committed under itsconcession topromoting European filmproductions andencouraging theirshowing
incinemas.
39. Under the"priseencharge "system applying tocertain agricultural goods, forexample meat,
eggsandbread cereals, traders arerequired tomatch theirimports withspecified shares ofdomestic
production. While themechanism previously applied toallimports intheareas covered, itisnow
being usedasoneofthecriteria toallocate import entitlements forcertain products under thenewly
introduced tariff quota system (Chapter IV(3)).
(vi) Countertrade
40. While, asageneral principle, theSwiss Government disapproves ofcountertrade practices,
offset arrangements covering military equipment arefrequent. Ongoing projects amount to
SwF3.1billion overtheperiod 1992 to2005.
(vii) Export facilitation andpromotion policies
(a) Export subsidies
41. Export subsidies aregranted oncheese andanumber ofother agricultural andfoodproducts.
Under theWTO Agreement onAgriculture, Switzerland undertook toreduce export subsidies ondairy
products from SwF444million in1995 toamaximum ofSwF284million in2000. Even atthat
level, thesubsidies arehigher thanthefunds earmarked bytheConfederation forallhumanitarian
assistance andfoodaidin1996 (SwF226million).
(b) Export finance
42. Theonlyofficial export financing mechanism isamixed credit scheme, administered bythe
Federal Office forExternal Economic Affairs, forpriority development projects incertain developing
22Iftherelevant national rules oforigin correspond tothose under Switzerland 'sGSPscheme, supplies from
oneASEAN country incorporated intoanother member 'sexports would becounted asiftheyoriginated from
thelatter country.
23"Sufficient transformation" means either thatnon-originating components must notexceed 50percentof
theexport value, orthefour-digit tariff heading ofthefinalproduct must differ from thatoftheforeign inputs.Switzerland WT/TPR/S/13
Page 31
countries.24Mixed credits areavailable forexports tocountries whose GDP percapita isbelow
US$4,000 peryear, andforprojects thatwould not,ontheirown, becommercially viable. Allgoods
andservices purchased inthiscontext mustbeofSwiss origin. In1994, atotalofSwF75.4million
ofpublic funds wasdisbursed under thescheme. They were complemented bycommercial credits
ofSwF125.6 million andcovered lessthan1.3percentofSwitzerland 'sexports todeveloping
countries.
(c) Export insurance andguarantees
43. TheSwiss Export RiskGuarantee Scheme (Garantie contre lesrisques àl'exportation ,GRE)
isdesignedtocreateandsafeguardemploymentopportunities,whilepromotingforeigntrade.25Although
newguarantees donotcover more than3percentofSwitzerland 'smerchandise exports, theFederal
Council considers theGREauseful instrument indeveloping strategic markets suchasSouth-East Asia,
theMiddle East, central Europe andLatin America. Inaddition, given Switzerland 's"very special
position" intheprocess ofEuropean integration, thescheme isexpected tohelpdiversify export
destinations andunderpin the"universality" ofSwitzerland 'scommercial relations.26
44. Contrasting tosimilar schemes inother countries, until1995, theGRE provided insurance
cover onlyagainst political andrelated transfer risks, rather thanprivate insolvency risks. InMay1995,
theFederal Council proposed extending GREcover toguarantees orletters ofcredit issued byacceptable
private banks. Asageneral rule,atleast50percentoftheexport value insured must beofSwiss
origin; themaximum guarantee amounts to95percentofthedelivery value.
45. TheGRE hasbeenindeficit inallbutthree years since 1978. Losses werefirstcovered by
internal reserves andlaterbyadvances fromtheConfederation. Inthecontext ofbilateral debtreduction
agreements withleast-developed countries, theConfederation tookoversome rescheduled debt; it
alsocovered losses incurred byaforeign exchange riskguarantee scheme andforwent interest payments
onitsadvances.27Theannual costtotheConfederation offresh advances hasaveraged some
SwF70million since 1982, withonerepayment ofSwF50million in1995. However, thisisto
beseeninconnection withtheGRE'sobligation, inprinciple, topaymarket-based interest onthepublic
funds received, repay these funds, andmake provision foroutstanding guarantee commitments aswell
asrescheduled loans.
46. In1994, newexport guarantees amounted toSwF1.3billion, covering exports worth
SwF1.5billion. Some 70percentofguaranteed exports weredestined forAsia; theproduct focus
wasonchemicals (55percent)andmachinery (44percent). Themachinery sector represents about
four-fifths ofalloutstanding guarantees.
24GATT (1991).
25GATT (1991). Theunderlying legislation istheFederal LawonGuarantees against Export Risks (Loi
fédérale du26septembre 1958 surlagarantie contre lesrisques àl'exportation ).
26Conseil fédéral (1995d).
27Thescheme wasabolished in1985.WT/TPR/S/13
Page 32Trade Policy Review
(4) Policies Influencing Adjustment, Growth andTrade
(i) Internal market liberalization
47. Inspired bydevelopments intheEuropean Union, theSwiss Government hasincreasingly
emphasized, since 1991, theneedtocreate a"Swiss internal market" thatwould beEuro-compatible.
LiberalizationandderegulationinitiativesoriginallydevisedintheperspectiveofSwitzerland'saccession
totheEuropean Economic Area(EEA), havebeenconsolidated, since late1992, intoa"revitalization
strategy" fortheSwiss economy. Thestrategy isaimed atfullyintegrating domestic product andfactor
markets, building onthesuppression ofstandards-related barriers tointercantonal aswellasinternational
trade, theabolition ofimpediments tointercantonal factor mobility, andsteps toliberalize cantonal
procurement markets. Mutual recognition ofcantonal regulations andprocedures hasanimportant
rôletoplay. Theeconomic effects ofthese changes may, however, beconstrained bytheabsence
offullEEA integration.28
48. TheInternal Market Law(Loifédérale surlemarché intérieur ,LMI), which istoenter into
force on1July1996, centres ontheprinciple ofunfettered market access, throughout thenational
territory, forSwiss residents andSwiss-based companies. They mayoffergoods, services andtheir
labour inanycanton orcommune (Article 2),andareguaranteed atleastthesameterms andconditions
asforeigners under international agreements.
49. Professional certificates delivered orrecognized byonecanton aretobevalidthroughout the
country. Restrictions atcantonal levelmustbeapplied equally tolocalresidents andreflect preponderant
public interests (Article 3)29;theymustnotbeusedtofavour localeconomic objectives. Anyproduct
legally offered forsaleinonecanton maybesoldanywhere inthecountry. Infringements oftheLMI
aredealtwithbythecantons, which arerequired under theLMItoestablish acomplaints andappeal
mechanism.30Decisions maybereferred totheFederal Council.
50. TheLMIhasleftunchanged various pieces offederal legislation limiting foreign access to
Swiss factor markets (capital, landandlabour). Designed toprotect employment orthecultural or
economic identity ofthecountry, these limitations tendtodiscourage inward investment, thetransfer
oftechnical expertise and,thus, theeconomy 'sflexibility tomarket trends (BoxIII.2). Obligations
tosetuparepresentative office inSwitzerland mayhavefacilitated theinclusion offoreign companies
incartel arrangements; suchobligations areparticularly frequent inareas deemed sensitive forhealth
andsimilar reasons (e.g.medical devices).31
28Forexample, theEEA required automatic recognition ofproduct approvals andcertificates among all
participants, based onEUregulations.
29Such interests include theprotection ofhuman, animal andplant health; theprotection oftheenvironment;
theintegrity ofthemarket system; consumer protection; theachievement ofsocial andenergy policy objectives;
andtheprotection ofasufficient level ofskills forprofessional activities subject toauthorization.
30TheCartel Commission hasindicated thattheabsence ofacentralized mechanism mayaffect theuniform
application ofcompetition principles andtheeffectiveness ofthelaw. Commission suisse descartels (1995).
31First drafts ofafederal lawonmedicaments contain adomiciliation requirement forimporters.Switzerland WT/TPR/S/13
Page 33
BoxIII.2 Restrictions onfactor mobility
Residence requirements
Current federal legislation requires amajority oftheboard members ofajoint stock company (société
anonyme orsociété encommandite paractions )andamajority oftheadministrators ofaco-operative
society (société coopérative )tobeSwiss citizens with domicile inSwitzerland (except forholding
companies). Atleastonemanager ofalimited liability corporation (société àresponsabilité limitée )must
bedomiciled inSwitzerland.
Aforeign company canestablish branches only through arepresentative (natural person) residing in
Switzerland whoisauthorized fully torepresent thecompany. Similarly, anatural person establishing a
commercial presence andanassociate ofanenterprise without legal personality under Swiss lawmust
have apermanent residence permit. Thepermit isissued bythecantons.
Restrictions onshare ownership
While provisions inSwiss lawrestricting foreign share ownership were abolished in1993, joint stock
companies mayreserve theright intheir articles ofincorporation todeny registration intheir shareholder
register orissue shares withlimited ornovoting rights.
LexFriedrich andother restrictions onproperty ownership byforeigners
Theacquisition ofrealestate byforeigners whoarenotpermanently established inSwitzerland andby
enterprises withheadquarters abroad and/or under foreign control issubject toauthorization. Forprivate
houses (except holiday residences) andcommercial buildings, authorization isgranted upon verification of
thepurpose. Prohibited are:purely financial investments; realestate business operations; acquisition, on
aprofessional basis, ofholiday apartments andfacilities other thanhotels (e.g. apartment houses, camps,
sport areas); andacquisition ofagricultural realestate.
Movement ofnatural persons
TheFederal Council establishes annual quotas fornewentries offoreign workers fortheConfederation
andindividual cantons. There arethree main categories: annual workers withorwithout possibility of
prolongation, short-term workers, andseasonal workers. After several stays, seasonal workers maybe
granted annual, andlater (EUandEFTA), permanent residence. Ofthe1.3million foreigners living in
Switzerland, about 70percentarepermanent residents (1995). Alarge majority hadinitially entered as
seasonal workers.
Under theGATS, Switzerland haslimited itscommitments concerning themovement ofnatural persons,
tomeasures affecting entry andtemporary stayofspecified groups ofexecutives andspecialists. To
enter andstay, foreign service suppliers must have botharesidence andawork permit; authorization is
granted within anoverall limit ofwork permits. According toSwitzerland 'sGATS Schedule, executives,
senior managers andspecialists -iftransferred within aspecific business orcompany -must notstay
longer thanthree years. Anextension ispossible uptoamaximum ofafurther fouryears. Forother
"essential personnel" (e.g. executives seeking toestablish acommercial presence inSwitzerland), the
period ofstayislimited tothree months peryear. Toqualify forrenewal inthefollowing year, the
applicant must stayabroad atleasttwomonths between thetwoconsecutive stays inSwitzerland. Under
theThird Protocol totheGATS, Switzerland willassume commitments pertaining tospecialists in
engineering services, computer hardware consultancy services andsoftware implementation services
(employees ofaforeign enterprise without commercial presence inSwitzerland thathasconcluded a
service contract withaclient inSwitzerland). Under these commitments, alimited number ofservices
suppliers, percontract, mayenter forasingle period ofthree months.
Labour market regulation
Foreign companies performing acontract inSwitzerland must respect theworking conditions prevailing
inthebranch andplace ofactivity. Thisincludes compliance withregulations orcollective agreements
fixing wages, working hours, etc.WT/TPR/S/13
Page 34Trade Policy Review
(ii) Standardization policies
(a) General orientation
51. Harmonization ofdomestic withinternational technical regulations isakeyelement ofthe
Government 'srevitalization strategy. Some 30federal lawsand150ordinances containing technical
prescriptions deemed toaffect trade havebeenreviewed andmodified since 1991.32Inthiscontext,
thepolicy emphasis hasbeenasmuch onfurthering themarketability ofSwiss products abroad ason
improving access to,andcompetition in,thelocalmarket. According totheauthorities, over80percent
ofSwiss technical regulations arecurrently EU-compatible, covering areassuchasfoodproducts, motor
vehicles andtelecommunications terminal equipment. Arecent study suggests thatincompatibilities
maypersist mainly insafety-related product fields suchaspharmaceuticals (Table III.4).33
Table III.4
Technical barriers affecting imports from countries participating intheEuropean Economic Area (EEA), 1995
Marketing inSwitzerland subject toformal product approval?
No Yes
Different technical
requirements
between EEA
countries and
Switzerland?NoHousehold appliances (some aspects)
Certain electro-medical equipment
Textiles
Cosmetics
Toys
Tobacco products
MachineryHousehold appliances (some aspects)
Certain electro-medical equipment
Lifting andmechanical handling appliances
Construction machinery
Certain electrical equipment
Information technology, telecommunications and
dataprocessing
YesFoodstuffsa
Construction products
Motor vehiclesbMedicinal products
Dangerous substances
Precious metals
a Except forirradiated foodstuffs which must beapproved inSwitzerland.
b Technical differences eliminated from 1October 1995.
Source: Hanser etal(1995).
52. The1995 LawonTechnical Barriers toTrade (Loisurlesentraves techniques aucommerce ,
LETC) defines thelegalframework forharmonization. Itrequires Swiss technical regulations tobe
aligned withthose ofmajor trading partners, contains provisions ontheunilateral recognition offoreign
testing andconformity certificates, andprovides thebasisfortheFederal Council toconclude mutual
recognition agreements. Negotiations onsuch anagreement arecurrently underway with the
European Union. Inthefieldoftechnical regulations, theLETC maybeconsidered astheexternal
complement totheLawontheInternal Market.
32Asnoted inthe1991 TPRreport onSwitzerland, standardization isinthehands ofprivate bodies, grouped
under theSwiss Association forStandardization. OfSwitzerland 'scurrent 6,400 standards, some 65percent
correspond tointernational standards (ISO/IEC, CEN, CENELEC, ETSI). Between January 1991 and
November 1995, 2,411 newstandards were issued; 7percentwere purely national standards. Technical
regulations must, inprinciple, beapproved byParliament. Inpractice, however, these powers havebeenlargely
conferred ontheFederal Council oronindividual Departments which mayissue implementing ordinances.
33Pharmaceuticals, construction materials, liftsandchemicals areamong theareas inwhich harmonization
initiatives arecurrently under way.Switzerland WT/TPR/S/13
Page 35
53. TheLETC covers areasunder federal competence anddoesnotchange therelative competence
oftheConfederation andthecantons. Inprinciple, theConfederation hastheexclusive authority to
issue regulations affecting theoffer ofproducts forsaleinSwitzerland (Article 31bis (2)ofthe
Constitution). Cantonal competence covers areas thattheConfederation hasnotyetregulated, in
particular, drugs, medical devices andconstruction materials. While, inthehealth sector, cantonal
co-operation intheform ofaConcordat helps toensure uniform regulation throughout thecountry,
nosuchco-operation currently exists intheareaofconstruction materials. However, owing tothe
LawontheInternal Market, regulatory differences between cantons would notaffect themarketability
ofconstruction materials released forsaleelsewhere inthecountry. TheFederal Council hasalso
noted thepotential fortrade restrictions insectors governed byfederal regulation, whose application
relies oncantonal bodies.34
54. Switzerland 'sapproach totesting andconformity certification generally relies on,oratleast
allows for,private sector participation. Forexample, under anewordinance governing safety controls
fortechnical appliances andinstallations, private companies areauthorized tocarry outconformity
assessments.35The1995Ordinance onFoodProducts confers maintenance andsurveillance ofdrinking
water facilities onqualified private associations andother professional organizations. TheCartel
Commission hasstressed theneedtoensure, including through threat ofsanctions, thatsuchprivate
organizations donoterect barriers discouraging newmarket entrants.36
(b) Initiatives withanenvironmental background
55. Aconstitutionalamendment,approvedbypopularvoteinSeptember1990,authorizedtheFederal
Government tocarry outanenergy policy inpursuit ofspecified goals. InFebruary 1991, theFederal
Council introduced anaction programme toencourage therational useofenergy ("Energy 2000") and
thepromotion ofrenewable forms ofenergy. Theprogramme isconsidered bytheInternational Energy
Agency asSwitzerland 'smostimportant energy efficiency initiative.37Among other measures, target
consumption levels havebeendetermined forallelectrical appliances andpassenger cars. According
totheauthorities, while these target levels arenotcompulsory, theynevertheless constitute aclear
incentive formanufacturers andimporters. Apart fromefficiency objectives, strong emphasis isplaced
on,andsubsidies areprovided for,thedevelopment anduseofrenewable energy sources (heatpumps,
etc.). Theaction programme aswellastheunderlying energy legislation arescheduled forextension
beyond 2000.
56. Tocomplement the"Energy 2000" initiative, theGovernment hasstarted consultations ona
draftlawestablishing atimeframe forreducing carbon gasemissions. Thetimeframe isinaccordance
withtheresults ofthe1994 Berlin Climate Conference. Objectives willbespecified foreacharea
ofuse(production, households androadtransport). Thedraftlawprovides fortheintroduction of
acarbon taxifother measures (e.g.the"Energy 2000" project, thecurrent energy law,andadditional
34TheFederal Council gave theexample ofamachine toslicemeat which maybedeclared asconforming
tofederal regulations inonecanton butnotinanother (Conseil fédéral ,1995e).
35Ordonnance surlasécurité d'installations etd'appareils techniques (OSIT) du15juin1995.
36Commission suisse descartels (1995).
37International Energy Agency (1995). Among other objectives, theProgramme isaimed atstabilizing fossil
energy consumption andCO2emissions attheir 1990 levels by2000, withsubsequent unspecified reductions;
andslowing thegrowth ofelectricity demand by2000, andstabilizing electricity consumption thereafter.WT/TPR/S/13
Page 36Trade Policy Review
fueltaxes tofinance thetrans-alpine railway tunnels) prove ineffective; electricity generation would
beexempt. Thelawistospecify amaximum rate,aswellascriteria determining theintroduction
andincidence ofthetax.Inthiscontext, theeffects onSwitzerland 'scompetitive position aretobe
taken intoaccount, andthegeneral leveloftaxation must notincrease.
(c) Labelling andother information requirements
57. Mandatorylabellingandpackagingrequirements,seenasnecessaryforhealth,safetyandsimilar
reasons, arenormally defined inthecontext ofsector orproduct-specific technical regulations. Such
requirements areparticularly frequent intheareas offoodstuffs andtechnical appliances. Inaddition,
the1990LawontheProtection ofConsumers provides aframework forprivate sector andconsumer
associations todetermine product-related information requirements intheconsumers 'interest. Ifno
agreement isreached, theFederal Council mayissuecompulsory labelling requirements. Theprovisions
havenot,however, beenusedtodate.
(iii) Government procurement
58. Considerable emphasis hasbeenplaced inrecent years ontheopening ofSwiss government
procurement markets, reflecting internal efficiency considerations, financial constraints andexternal
negotiating requirements.
(a) International obligations
59. Given Switzerland 'snon-participation intheEEA, thePlurilateral Agreement onGovernment
Procurement (GPA) constitutes theprincipal framework currently governing cross-border activities
intheprocurement area. Theagreement, which currently haseightmembers, covers sources ofover
95percentofpresent Swiss imports. With theimplementation oftheGPA, thenumber offederal
purchasing entities committed tointernational competition increased from22to34,duemainly tothe
inclusion ofentities purchasing services. ForSwitzerland, therelevant services include roadandair
transport, financial services, andcertain professional services suchasadvertising, counselling, and
publishing.38Inaddition tocontracts awarded byfederal purchasing entities andthecantons, purchases
bypublic companies inthefollowing areas have been included: production, transportation and
distribution ofwater andelectricity; urban transport services; ports andairports. Incontrast,
procurement byprivate companies operating under licences inthesesectors isnotcovered (Table III.5).
60. SwitzerlandhasmadeanumberofreservationsontheapplicationoftheGPAtoothersignatories
whohavenotextended comparable andeffective access toSwiss firms incertain areas. Thereservations
currently apply toCanada andtheUnited States (non-application toregional bodies andentities inthe
water, electricity andlocaltransport sectors, andtoairports andports); Japan (electricity andlocal
transport); theRepublic ofKorea (airports andlocaltransport); andIsrael (local transport).39
38Thisextensionneedstobeseen,however,inthelightoftherestrictionsplacedonthemovementofpersonnel,
except forsenior executives andspecialists, which mayprevent foreign companies from employing their own
labour force inSwitzerland. Inaddition, suppliers from low(er) wage countries aredenied thepossibility of
competing athome market conditions; theyhave torespect thegeneral employment andwage agreements in
place inSwitzerland (Box III.2).
39Hong Kong, asignatory totheTokyo Round Agreement, didnotfinally signtheGPA because ofother
participants 'introduction ofsectoral non-application provisions andofreciprocity clauses intheservices area.
GATT (1994).Switzerland WT/TPR/S/13
Page 37
Table III.5
Value thresholds under theWTO Agreement onGovernment Procurement bytypeofexpenditure, 1996
(SDRs)
Government level/organization Goods andservices Works
Federal Administration 130,000
Cantons 200,000
Urban railtransport, trams, buses andcable transport
Airports 5,000,000
Ports ofBasel 400,000
Electricity plants
Water works
Communes andrelated public authorities
Telecommunications
Railways Notcovered
Gassuppliers
Private companies operating under licence intheareas
ofwater, energy, urban transport andairports
Note: 1SDR approximates SwF2.
Source: WTO Secretariat.
61. TheGPA wastransposed intoSwiss federal legislation bytheFederal LawonGovernment
Procurement andwastobetranslated intocantonal lawbythecantons 'ratification ofanIntercantonal
Concordat. According totheauthorities, nocanton hasraised objections ofprinciple totheConcordat;
inearly 1996, twocantons hadsigned theConcordat (Fribourg andSchaffhausen) while another (Bern)
hadincorporatedtheGPAdirectlyintoitsprocurementlegislation.40GeneralacceptanceoftheConcordat
mayimply major changes inprocurement practices asprevious cantonal arrangements provided scope
forbuy-local,buy-regionalandbuy-nationalpreferences(ChapterIV(4)).Provisionsspecifyingminimum
residency periods forbidders aretobeabolished.41
62. BoththeFederal LawandtheConcordat areaimed atensuring effective competition between
bidders, providing fortransparent tendering procedures andimpartiality intheaward ofcontracts.
Inaddition, theLawontheInternal Market stipulates theprinciple ofnon-discrimination inpublic
procurement atcantonal, regional andlocallevel. Itthusensures thattheaccess rights conferred by
theConfederation under international agreements alsoaccrue toanyperson residing inSwitzerland
(Article 3(1)).
63. Inexchanges ofletters, several cantons (Aargau, Basel-Landschaft, Basel-Stadt, Bern,
Schaffhausen, St.Gallen, Thurgau andZürich) haverecently agreed, onareciprocal basis, totreat
bidders from theGerman State ofBaden-Württemberg asiftheywere locally established.
64. Bilateral negotiations withtheEUinearly1996wereintended toextend EEA-type procurement
rules toSwitzerland. Thenegotiations covered purchases by:municipalities andcompanies owned
bythecommunes; thefederal railways (CFF); thefederal telecommunications services (PTT); and
40Inorder tobeapplicable inSwitzerland, international legal obligations donotnecessarily require domestic
implementing legislation (section (3)(iii)).
41GATT (1991).WT/TPR/S/13
Page 38Trade Policy Review
private companies operating under licences inthearesofwater, energy, urban transport andairports.
Noagreement hasbeenreached todate.
(b) Domestic legislation
65. TheFederal LawonGovernment Procurement (Loifédérale surlesmarchés publics )covers
federal entities, subject toafewexceptions, aswellaslicensed public orprivate suppliers ofwater,
energy, transport andtelecommunications services.42Definitions andthreshold values correspond to
therelevant GPAprovisions.43Purchasing entities arefree,inprinciple, tocallopenorselective tenders;
single tendering istobelimited tospecific circumstances (seebelow). Contracts must beawarded
tothesupplier having presented themosteconomically advantageous offer; relevant criteria include
delivery period, quality, price, rateofreturn, operating costs, after-sale service andaesthetic and
ecological considerations (Article 21).These criteria mustbespecified inthetender documentation.
66. A1995Ordinance onPublic Procurement (Ordonnance surlesmarchés publics )specifies the
procurement régime forpurchases covered bytheFederal Law aswellasforremaining areas
(procurementbelowtherelevantthresholdvalues;purchasesbythefederalrailways,telecommunications
andmilitary entities notsubject tothelaw).44Single tendering isconfined tothecases foreseen in
theGPA, including theabsence ofoffers ontender calls, non-compliance withtender criteria, collusion,
technical restrictions (forexample, duetointellectual property legislation), orparticularly urgent
purchases.45Neither theLawnortheOrdinance contain buy-national provisions.
67. TheFederal Department ofFinance istodesignate theFederal Administration 'spurchasing
offices anddefine theirresponsibilities; thePTTandthefederal railways aretospecify theirown
offices. Theoffices must verify thatthebidsreceived conform totherequirements ofthetender
documentation andaresubmitted bysuppliers complying withtheconditions ofparticipation. Asupplier
canbeexcluded ifhehasconcluded anagreement which substantially restricts oreliminates "effective
competition" (Federal LawonGovernment Procurement, Article 11).Anaward granted toasupplier
involved incollusion maybechallenged bycompetitors before anindependent appeals body.
(c) Market structure
68. There arenostatistics available onthevalue andstructure ofpublic purchasing atallgovernment
levels. According tothegovernment 'sfinancial accounts, public sector spending oncurrent purchases
(goods, services andworks) andinvestment totalled SwF28.5billion, or8.5percentofGDPin1993
(Chart III.5). Federal procurement statistics indicate totalexpenditure ofSwF7.6billion in1994,
42Theexceptions include purchasing inthecontext offarmandsocial policy programmes, aswellasmilitary
procurement.
43Going beyond thecoverage oftheGPA, theFederal LawonPublic Procurement andtheimplementing
Ordinance (seebelow) alsoapply toproject andfeasibility studies.
44However, theopening ofprocurement markets hassome limitations aslongasnon-preferential suppliers
facehightariffs. Forexample, thetariff onrailway carsissetatSwF20per100kg.oratleast20percent
advalorem attheendoftheUruguay Round implementation process in1999.
45Asnoted inthe1991 TPRreport onSwitzerland, asignificant share ofpurchases ismade through selective
tendering.Switzerland WT/TPR/S/13
Page 39
down from arecord SwF9.3billion in1991.46ThePTTistheConfederation 'slargest purchasing
entity, accounting foronethirdoffederal procurement in1994, followed bytheCFF(16percent).
Themostimportant expenditure groups wereelectronic equipment (41percent), vehicles (20percent)
andmachinery (18percent).
69. Purchases byfederal entities inareas covered bytheTokyo Round Agreement onGovernment
Procurement reached some SwF1.1billion in1994. Ofthis,about SwF440million wasprocured
above theCode'sthreshold value ofSDR 130,000 (SwF262,000), withtheEU,theUnited States
andSwitzerland eachaccounting forabout 30percent. Thebulkofsupplies wasmade upofspecialized
andoffice machinery (50percent), furniture (13percent), vehicles (10percent) andinstruments
(6percent). Single tendering under Article V:15 oftheGATT Code amounted toSwF320million.
(iv) Regional andsectoral intervention
70. Asnoted inthe1991TPRreport, financial support toindustry isgenerally lowinSwitzerland.
Total subsidies toindustry represented about 1.7percentofGDPin1992(national accounts definition).
71. Agriculture andsome monopoly suppliers ofinfrastructural services havelongbenefited from
highsubsidization. In1993, nearly SwF3.5billion wasspent onagriculture (8.5percentoftotal
federal expenditure), while railways andotherpublic transport providers received someSwF2.8billion
46Vieéconomique ,July1995. Press reports suggest, thatoverfourfifths ofthegoods procured atfederal
level andvirtually allconstruction work involves Swiss companies (Tribune deGenève ,13July1994).WT/TPR/S/13
Page 40Trade Policy Review
intheformofdirect grants orallowances. Thedeficits incurred onpostal services havenormally been
offset byinternal cross-subsidization relying onPTT'sprofitable telecommunications branch
(ChapterIV(6)(i)(a)).Apartfromtheseareas,however,thereisnoevidenceofsignificantsector-specific
assistance.47
72. Thefederal programme ofOctober 1978foreconomically vulnerable regions ("Arrêté fédéral
Bonny ")wasextended byParliament in1994 toJune1996.48Under theprogramme, companies
established inaneligible region mayreceive financial assistance intheform oftaxexemptions, soft
loansorbankguarantees.Currently,assistanceisconditionalonaregion'sunemploymentrateexceeding
thenational average byatleast10percent. In1995, about onequarter ofthepopulation livedinsuch
regions; 34projects, worth SwF284million, were supported with bank guarantees totalling
SwF28.0million. Asuccessor programme wasapproved byParliament forafive-year period; while
there arenoprincipal policy changes, subsidized loans aretodecline relative tothetwoother support
instruments.
73. There arenotransparency requirements ortightdisciplines imposed onthecantons inthefield
ofState aid.49According theauthorities, thecantons mayinprinciple grant subsidies totheextent
thatthesedonotdistort competition between firms located indifferent cantons; theonlylegalconstraints
existfortheuseoftaxexemptions.
(v) Support forresearch anddevelopment
74. Switzerland hastraditionally ranked among themost research-intensive OECD countries.
In1992, totalexpenditure onR&D amounted tosome 2.8percentofGDP, 75percentofwhich was
intheprivate sector. However, therearesigns ofsome erosion ofSwitzerland 'sattraction asacentre
forresearch anddevelopment; according toarecent study bytheAssociation ofSwiss Industries,
R&D expenditure bySwiss firms abroad increased by35percentbetween 1989 and1992 toreach
SwF7billion. Thisexceeded forthefirsttimethefunds devoted todomestic R&D, which had
expanded by4percentduring thesame period.50Inthemachinery, electricity andmetalworking
industries, which together account fornearly halfofindustrial employment, R&D expenditure in
Switzerland declined by13percent(toSwF2.9billion) during theperiod 1989-1992, while R&D
abroad increased by53percent(toSwF3.3billion).
47Switzerland hasretained initsGATS Schedule ofCommitments, thepossibility ofproviding subsidies,
taxcredits andtaxincentives todomestic services suppliers. WTO document GATS/SC/83/, 15April 1994.
48GATT (1991).
49A1987OECDstudy,citedintheinitialTPRreportonSwitzerland,gaveanoverviewofcantonalincentives,
including taxadvantages fornewbusinesses; special taxstatus forinvestment companies; loans atpreferential
rates; guarantees forinvestment related loans; subsidies todefray certain investment costs, payinterest charges
andfinance stafftraining. Nofurther information wasprovided inthecontext ofthisreport.
50Vorort andOFS (1994).Switzerland WT/TPR/S/13
Page 41
(5) Other Policies Affecting Market Allocation andTrade
(i) Competition policy
(a) Cartels andsimilar arrangements
Introduction
75. Switzerland'sbasicapproachtobusinessarrangements,includingcartels,isrootedintheFederal
Constitution. Article 31guarantees freedom ofcommerce andindustry, extending inprinciple toall
forms ofco-operation. However, theConstitution alsoprovides forfederal legislation imposing
constraints;ifjustifiedbythe"generalinterest",theConfederationmayissuelawsunderArticle31bis(d)
toremedy theharmful economic orsocial consequences ofcartels andsimilar organizations.
76. TheFederal LawonCartels andSimilar Organizations of1985 (Loifédérale surlescartels
etorganisationsanalogues)differssignificantlyfromthecompetitionlawsofmostotherOECDcountries.
Inparticular, rather thanprohibiting cartels assuch, itfocuses onarrangements deemed toproduce,
onbalance, economically harmful effects. These effects aredefined bytwin criteria: (i)the
arrangements mustobstruct "effective competition" inamarket; and(ii)suchobstruction mustnot
beindispensable "forreasons ofoverriding general interest".
77. Rather thanrequiring companies tojustify theiractions, thecompetition authorities mustboth
identify andevaluate market restrictions andbalance theireffects withthe"general interest". Inturn,
thishassignificantly constrained theeffectiveness ofcompetition policy, further compounded bythe
factthattheCartel Commission hasnoindependent powers ofprosecution andthatitsSecretariat
comprises onlyseven professionals. Depending ontheoutcome ofaninvestigation, theCommission
maymake recommendations, forexample tomodify orterminate acartel arrangement. Ifthese are
ignored, theFederal Department ofthePublic Economy may,afterahearing, issueabinding decision
onaCommission proposal.
78. Despite theconstraints indicated above, theCommission hasaddressed awiderange ofcollusive
actions andrestrictive practices overthepastfouryears, covering themarkets formilk, cheese and
flour; bathroom appliances (wholesale andretaildistribution); ice-hockey sticks; construction material
(concrete, cement, sandandgravel); telephone switchboards; motor vehicles; aswellasthemedical,
banking, insurance andmedia sectors (Table AIII.2).
Newlegislation
79. Aspartofitsrevitalization strategy, inlate1992, theFederal Council initiated atotalrevision
ofSwiss cartel legislation. Theresulting Competition Lawisduetoenter intoforce on1July1996.
While notimposing ablanket prohibition oncartel activities, mainly forconstitutional reasons, the
lawintroduces stringent constraints. Itdeclares illicit: (i)arrangements having atangible impact on
competition without being justified for(specified) reasons ofeconomic efficiency; and(ii)any
arrangements having theeffect ofsuppressing "effective competition". While bothcategories include
vertical andhorizontal forms ofbusiness co-ordination, arrangements among competitors tofixprices,
restrict quantities orsegment markets areautomatically deemed tofallintothesecond category.51
51Inthecaseofvertical arrangements, theonus isontheauthorities toprove thesuppression of"effective
competition".WT/TPR/S/13
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80. Thelawapplies inprinciple toallanti-competitive arrangements producing theireffects in
Switzerland, regardless ofthesector ofeconomic activity oracompany 'sownership status. Italso
extends toState-trading enterprises unless theseareexpressly exempt fromcompetition under relevant
legislation.
81. Thenewlawdirectly addresses anti-competitive actions carried outbydominant enterprises
(trade boycotts, price discrimination, etc.)52andcontains anotification requirement formergers and
acquisitions beyond specified value thresholds. Aproject maybeimplemented iftheCompetition
Commission, which istosucceed theCartel Commission, doesnotopenaninvestigation within one
month. Therelevant provisions arelessstringent thanthose contained inEUlegislation and,according
totheFederal Council, willaffect onlyafewcases.53Inprinciple, mergers mustbeapproved unless
theyresult inadominant position liable tosuppress "effective competition" intheSwiss market.
82. Investigations under thenewlawaretobecarried outbytheSecretariat oftheCompetition
Commission andsubmitted totheCommission fordecision. Thisensures aseparation ofinvestigatory
from decision-making instructions, while thefinalpolitical responsibility lieswiththeGovernment.
Apublic interest clause allows theFederal Council toauthorize, inexceptional cases, arrangements
found illicit.
83. TheCompetition Commission, istoconsist ofbetween 11and15persons, mostly "independent
experts", whotakedecisions bysimple majority. Themembers oftheCommission areappointed by
theFederal Council which alsonominates thePresident andtwoVice-Presidents. TheSecretariat 's
professional staffisscheduled toincrease to40.
84. Remedial action maybesought under civillaw-tobeinvoked bypersons whose access to,
orexercise of,competition isaffected byarestriction -orunder administrative law.54Thelatter route
maystartwiththeSecretariat carrying outapreliminary investigation onitsowninitiative attherequest
ofaffectedcompanies,orbasedonthirdpartycomplaints.TheSecretariatistolaunchafullinvestigation
either onevidence ofan"illicit restriction" oroninstruction bytheCompetition Commission orthe
Department ofthePublic Economy. Self-initiations bytheSecretariat mustbeendorsed byamember
oftheCommission 'sPresidency. While theSecretariat maysuggest anamicable solution tosolve a
case, theunderstanding reached issubject totheCommission 'sapproval.55Allsuchcases must be
published.
85. Therecent merger ofCiba-Geigy andSandoz, theworld 'sninthandfourteenth largest producers
ofpharmaceuticals (1995), isnotlikely tobeaddressed under thenewCompetition Law. Thetwo
52Under the"old" LawonCartels andSimilar Organizations, abusive behaviour bydominant enterprises
could beaddressed through treating them as"similar organizations".
53Conseil fédéral (1994a). Theapproval requirement applies toenterprises whose combined international
turnover exceeds SwF2billion (SwF500million inSwitzerland) iftheturnover inSwitzerland ofatleasttwo
participants exceeds SwF100million.
54Intheformer case, theCompetition Commission istobeasked foranopinion ifthelegality ofarestraint
tocompetition isatstake.
55Non-compliancewithunderstandingsordecisionsmaydrawsanctionsofuptothreetimestheprofitsrealized
or,ifnotfeasible, 10percentoftheinfringing company 'sannual turnover inSwitzerland.Switzerland WT/TPR/S/13
Page 43
companies made theirplans known inearly March 1996, three months before theentry intoforce of
thenewlaw.
(b) Price regulation andsurveillance
86. ThenewCompetition Lawhaslefttherôleofpricesurveillance unchanged. Under theFederal
LawonPriceSurveillance of1985(Loifédérale concernant lasurveillance desprix),thePriceInspector
continues toobserve price developments withaviewtopreventing orrectifying abusive behaviour.56
Since thelawestablishes alinkbetween theabsence of"effective competition" and(thepotential for)
abusive pricing, theInspector focuses inparticular oncartelized orofficially regulated areas. Inthe
event ofpriceabuse, heisrequired toseekanamicable solution, ininformal contacts, withthecompanies
ororganizations involved. While heismandated toorder apricereduction ifsuchattempts fail,there
havebeennosuchcases todate.
87. Intheperiod 1992to1994, thePrice Inspector launched major enquiries inthefollowing areas:
health(withspecialenquiriesintodoctors'fees,dentists'fees,laboratoryfeesanddrugprices);insurance
(including carinsurance andaccident insurance); utilities andservices related tohousing (including
electricity, mortgage loans, waste disposal, chimney-sweeping, liftsandboiler maintenance, architects '
feesandnotary charges); telecommunications; taxis; driving schools; foreign books; cigarettes;
andratescharged bycopyright management companies.
88. CartelsandsimilarorganizationsarerequiredtonotifyanypriceincreasestothePriceInspector.
During 1992-94, thiswasthecase,interalia,forcredit cardcommissions charged byrestaurants, and
skirentals.57
(c) Exclusivity rights (State-trading)
89. Reflecting recent moves toopenprotected sectors andexpose long-entrenched monopolies to
competition, therange ofexclusive (public, semi-public orprivate) suppliers ofgoods andservices
isboundtonarrowovertime.58Thus,theoverviewinTableIII.6ofcurrent"State-trading"organizations
maysoonbeovertaken byevents. TheTable extends beyond thetraditional range ofState-trading
organizations intheareas ofgoods, asdefined under Article XVII ofGATT, toinclude similar
organizations inservices areas andentities focusing onregional orlocalmarkets.
56ThePrice Inspector isappointed bytheFederal Council; heissupported bynineassistants.
57Additional notifications concerning cigarettes, driving schools andwaste disposal resulted intheenquiries
referred toabove.
58SeeChapters IV(3) andIV(6).WT/TPR/S/13
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Table III.6
Exclusivity arrangements affecting production ortrade, 1996
Goods orservices Entity Coverage
AGRICULTURE
Wheat, (bread flour) andother cereals
forhuman consumption, feeding stuff,
straw andrelated productsMembers oftheSwiss Cereal andFodder
Co-operativeImports atin-quota tariff rates
(until 1997)
Bread flour Federal Office ofAgriculture Import monopoly
Cheese Swiss Cheese Union (allproducers and
traders ofEmmenthal, Gruyère, Sbrinz)Exclusive wholesale trader; prices fixed
bytheFederal Council
Butter Swiss Butter Supply Board (BUTYRA) Exclusive importer atin-quota tariff
rates; management ofthedomestic
market tomaintain thegovernment-set
price level
Distilled beverages andspirits Swiss Alcohol Board Import rights conferred ontheprivate
sector
MANUFACTURING SECTOR AND UTILITIES
Gunpowder andproducts Federal monopoly Delegated toprivate parties
Salt Monopoly jointly administered bythe
cantonsExclusive production anddistribution
rights
Electricity; drinking water Cantonal orlocal public authorities or
companies
Gas Swissgas andpublic regional suppliers
Telecommunications network Swiss Telecom (PTT) Infrastructure monopoly
SERVICES
Railtransport Federal railways (CFF) Federal licence granted byParliament,
exclusive supply rights
Passenger transport by
bus,tramway, cable, etc.Public cantonal orlocal companies Exclusive supply rights
Airtransport Swissair Privileges asnational flagcarrier
(exclusive route access, etc.)
Airtraffic control Swisscontrol Monopoly provider ofspecified services
Airtraffic management Public authorities orcompanies
Ports Ports ofBasel-Stadt andBasel-Landschaft Exclusive installation andmanagement
rights
Certain telecommunication services Swiss Telecom (PTT) Transmission monopoly forvoice
telephone services
(except forclosed usergroups onthe
basis ofleased lines)
Radio andtelevision SSR Solenation-wide broadcaster
Postal services PTT Most areas, withexceptions forcourier
services andnewspaper distribution
Certain insurance services Cantonal monopolies Fireandnatural damage insurance
Federal monopoly Insurance against workplace accidents
(industry)
Certain mortgage bonds Certain Swiss banks Issuance of"Schweizer Pfandbriefe"
onlythrough cantonal banks andbanks
whose mortgage loans amount toatleast
60%oftheirbalance sheet
Chimney sweeping Official chimney-sweepers Exclusive services providers incertain
cantons
Source: Government ofSwitzerland, WTO Secretariat.Switzerland WT/TPR/S/13
Page 45
(ii) Intellectual property protection
(a) Overview
90. Switzerland 'sintellectual property legislation hasundergone several changes inrecent years,
aimed atextending andstrengthening protection andincorporating provisions oftheWTO Agreement
onTrade-Related Aspects ofIntellectual Property Rights (TRIPS). According totheauthorities, current
lawlargely corresponds toEUlegislation.59
91. Theabsenceoflegaldifferencesdoesnot,however,ensuremutualmarketintegration.Importers
havesought toinvoke intellectual property legislation withaviewtoshielding exclusive arrangements
from "unauthorized" imports ofgenuine, non-infringing products. Given several conflicting
interpretations bycantonal courts, itisnowfortheFederal Court toclarify thescope forsuchpractices
under trademark legislation.
92. Tofightinfringements ofintellectual property rights (IPRs), Swiss legislation offers several
avenues under civilandpenal law. Under civillaw,ajudge mayorder thepayment ofindemnities
covering theopportunity costs oftheinfringement, theeconomic damage caused bytheerosion of
therightduetotheinfringement, andtheadministrative costsincurred indefending theright. Under
company legislation, compensation maybegranted fornon-pecuniary injury andanyprofits beawarded
totheright holder. Criminal proceedings mayresult infines ofuptoSwF100,000 and/or
imprisonment.
(b) Policies inindividual areas
Trademarks andindications oforigin
93. Switzerland 'strademark legislation wascompletely revised inAugust 1992 withthepassage
ofthenewLawontheProtection ofTrademarks andIndications ofOrigin (Loifédérale surlaprotection
desmarques etdesindications deprovenance ).Thenewlawextends protection toindications oforigin
inthefieldofservices, indirect indications oforigin, andtypes orrecipes thatimply ageographical
origin. Theorigin ofgoods isdetermined bytheplace ofmanufacture orthelocation ofthebasic
materials orcomponents usedformanufacturing.60Services aredeemed tooriginate from theplace
where thesupplying company hasitsregistered office orfromthecountry ordomicile ofthepersons
exercising actual control overthecompany.
94. Under thenewlaw,thekeycondition forcarrying atrademark isitsregistration rather than
actual use.However, marks should beused, either inSwitzerland orforexportation, within fiveyears
ofregistration. Persons having usedatrademark under theoldlawhadapriority right toregister
until1April 1995, i.e.during aperiod oftwoyears from theentry intoforce ofthenewlaw. The
59Anumber ofrecent initiatives areintended toensure compatibility with EUlaw. These include the
introduction ofasupplementary protection certificate formedicinal products andenhanced protection for
geographical indications andlabels. Inaddition, there areintentions toalign theFederal Copyright andRelated
Rights Actof1992 with harmonized EUlegislation (e.g. introduction ofrental rights forphonograms and
videograms).
60Swiss Federal Institute ofIntellectual Property (1993). Further conditions mayinclude compliance with
manufacturing principles andquality requirements customary ormandatory intheoriginating country orregion.WT/TPR/S/13
Page 46Trade Policy Review
owner ofanearlier mark mayfileopposition against registration within three months ofthemark's
publication intheSwiss Official Journal ofCommerce (Feuille officielle suisse decommerce ).
95. Customs directly informs trademark holders ofsuspected counterfeits andotherinfringements.
Therightholder mayrequest theseizure ofsuchgoods which arethenwithheld fortenworking days
toallow himtoseekaprovisional injunction.61Pursuant totheTRIPS Agreement, thisperiod may
beextended foranother tendaysinjustified cases. Thesame procedure applies inmostother areas
ofintellectual property (e.g.copyrights andrelated rights, topography ofintegrated circuits, industrial
designs), withtheexception ofpatent lawwhere customs canintervene onlyafterajudicial procedure.
Intheevent ofinfringements ofgeographical indications, inparticular ofthe"Swiss made" label, the
Swiss Federal Institute ofIntellectual Property (Institut fédéral delapropriété intellectuelle ),notified
bycustoms, maycontact theaddressee andinform himofpossible penal consequences.
96. In1993, Customs acted onnineinfringements oftrademarks relating toclothes, andsixcases
ofincorrect origin indication. Intwoinstances, thegoods wereseized attheborder. In1994, there
were fouractions oncounterfeits (shoes, bicycles, clothes andpurses) andfiveonimports bearing
incorrect indications oforigin (toys, milkpumps, bedlinen, cosmetics andties).
Patents
97. TheTRIPS Agreement resulted invarious changes totheSwiss patent law,implemented in
December 1994. They concern mainly theconditions forgranting compulsory licences andthe
circumstances inwhich apatent isconsidered tobeexploited.62Importation ofaprotected product
isequated withexploitation.
98. Therevised lawprovides forthegranting ofacompulsory, non-exclusive licence if:(i)the
exploitation ofanewpatent, which represents animportant technical development ofconsiderable
economic interest, would violate aprior patent (Article 36); or(ii)apatent holder hasfailed to
"sufficiently exploit thepatent inSwitzerland" (Article 37).63Inaddition, ifthegranting ofalicence
"fails tosatisfy theneeds oftheSwiss market" within twoyears, anyinterested person mayseeka
revocation ofthepatent (Article 38).64Ingeneral, suchmeasures aredeemed justified onlyifefforts
toobtain alicence contract at"reasonable" conditions havenotsucceeded within a"reasonable" period;
thelicence isgranted inprinciple tosupply thedomestic market (Article 40.b). According tothe
authorities, there havebeennosuchcases todate.
61There were 16such seizures in1994, followed byprovisional measures in11cases.
62Inaddition, while aninvention wasnotpreviously eligible forprotection ifitspublication orexploitation
couldaffectpublicorderormorality,henceforth,exploitationisthesoleadmissiblegroundforrefusingprotection.
Swiss Federal Institute ofIntellectual Property (1994).
63Inthelatter case, thelicence must notbegranted lessthanfouryears from thedateoffiling thepatent
application andthree years from thedateofgranting thepatent. Licensing ispossible onlytotheextent that
thepatent holder 'sinactivity isnotjustified. Asnoted before, importation ofthepatented product isequated
withexploitation.
64TheFederal Council maydeclare theprovisions ofArticles 37and38inapplicable vis-à-vis residents of
countriesgrantingreciprocity.SuchdeclarationwasmadeinJanuary1908vis-à-visU.S.residents(WTOdocument
IP/N/W/CHE/1, 7February 1996).Switzerland WT/TPR/S/13
Page 47
Designs, copyright andrelated rights
99. The1992LawonCopyright andRelated Rights ofProtection (Loifédérale surledroitd'auteur
etlesdroits voisins ),effective since July1993, introduced newprovisions governing thewidespread
useofprotected works.65Thefollowing forms ofcompensation areprovided: alevyonblank cassettes
usedforprivate audio andvideo recordings; charges onphotocopies usedbycompanies, educational
institutions andlibraries; feesontherental ofcopies ofworks andonphonograms andaudiograms
usedforperformance orbroadcasting purposes. Producers ofphonograms areeligible forprotection
iftheyarenationals ofaWTO member orifthefirstpublication ofthesound recording tookplace
inaWTO member 'sterritory.66
100. Under thenewCopyright Law, protection wasextended from 50to70years following the
author 'sdeath. Thelawexplicitly covers computer programmes; compulsory licences maybegranted
onlyfortheproduction ofphonograms. Arecent amendment extended customs 'authority toactions
oninfringing goods destined forexportation.
101. Therighttoremunerationforwidespreaduse,e.g.ofphotocopies,canbeexercisedonlythrough
collecting societies. Theroyalties fortherights (exclusive andremuneration rights) under collective
management should notexceed 10percentoftherevenue received bythecopyright user(3percent
inthecaseofrelated rights).
102. TheLawonIndustrial Designs wasrevised inorder toincorporate TRIPS provisions regarding
priority rights andenforcement.
(c) Provisions affecting parallel imports
103. Established importers havesought tobartherelease forsaleinSwitzerland ofgenuine products
soldabroad withthetrademark owner 'spermission (parallel orgreyimports). Intheabsence ofa
defining ruling bytheFederal Court, itiscurrently open, however, whether andtowhatextent Swiss
trademark legislation canbeusedforsuchpurposes. Courts atcantonal levelhavegiven conflicting
interpretations onwhether arighthasbeenexhausted inSwitzerland (andcannolonger beexercised)
oncetheprotected product hasbeenputonthemarket abroad bytheowner orhislicensee under the
identical trademark.67
104. TheFederal Council haswarned against anunconditional banonparallel imports, which would
contravene thepolicy thrust thatinspired major recent legislation, including thenewCompetition Law,
theLawontheInternal Market, andtheLawonTechnical Barriers toTrade. Ontheother hand, the
Council hasalsonoted thatcompetition policy should notbeusedtointerfere withintellectual property
65These include photocopies, copies ofphonograms andaudiograms forprivate use,useofphonograms for
broadcasting orperformance purposes, andrental ofcopies ofworks. Swiss Federal Intellectual Property
Office (1993).
66Switzerland hasnotified under Article 1.3oftheTRIPS Agreement thatitwillnotapply thecriterion of
fixation ofthesound recording.
67Signatories ofaParliamentary Motion haveconsidered therelevant provisions inthe1992 Trademark Law
tobe"obsolete anddangerously ambiguous". Intheirview, arestrictive interpretation, forexample forperceived
reasons ofconsumer protection, could result inablanket banonparallel imports andcontravene theGovernment 's
revitalization strategy. Motion Tschopp (No. 943531).WT/TPR/S/13
Page 48Trade Policy Review
legislation.68While indicating thepossibility ofreciprocal agreements withthirdcountries toguarantee
international exhaustion ofintellectual property rights, theCouncil doesnotapparently consider
autonomous measures -e.g.viaamendments totheTrademark Law-toproduce sucheffects in
Switzerland. Participation intheEEAwould haveensured unimpeded market access forproducts that
havebeenreleased forsale,withtherightholder 'sapproval, inanEUmember State, Norway, Iceland
orLiechtenstein.
105. Adegree ofuncertainty alsosurrounds theinteraction between intellectual property and
competition law.Switzerland 'snewCompetition Lawexpressly excludes fromitscover those effects
oncompetition thatresult "exclusively fromintellectual property legislation" (Article 3.2,emphasis
added). Inturn,thisimplies thatcompetition policy comes intoplayifother factors, e.g.restrictions
oninter-brand competition, haveproduced additional priceeffects. However, theseeffects mayprove
difficult toisolate andquantify.69
106. Notwithstanding suchconcerns, thelifting ofstandards-related barriers, including national
homologation requirements, mayhelptonarrow thescope forrestrictive orcollusive arrangements
overtime. About one-third oftheSwiss population liveswithin 30kmoftheborder andcould easily
shopabroad should price differentials, forwhatever reasons, exceed critical thresholds. Thisapplies
inparticular toover-the-counter products suchasfood(Box IV.1).
107. There remains thepossibility, however, ofprivate dealers abroad seeking toboycott Swiss
customers. Particularly vulnerable inthiscontext arehigh-value products, suchasmotor vehicles,
whose finaldestination canbetraced. Press reports haveindicated thatItalian-based cardealers,
instigated bytheirsuppliers, refused toselltoSwiss residents, thusunderpinning higher "official" sales
prices inSwitzerland. Such private initiatives appear nottobecovered byECcompetition law,if
theydonotdistort competition within thecommon market, andmayprove difficult toaddress onthe
Swiss side.70While Swiss competition lawextends inprinciple toallpractices affecting thedomestic
market, regardless oftheplace oforigin, enforcement could poseproblems. Theauthorities have
indicated thepossibility ofraising theissue intheJointCommittee under theFreeTrade Agreement
withtheEU,based onthecompetition rules oftheAgreement.
68Conseil fédéral (1994a).
69TheCartelCommissionhasnotnormallychallengedexclusiveimportarrangements,relyingontheavailability
ofsubstitutes tolimit adverse price orsupply effects.
70Volkswagen reportedly instructed itsItalian dealers nottoselltoSwiss andAustrian residents whowere
attracted bysignificant price differentials. While theEuropean Commission haslaunched aninvestigation
concerning therestrictions vis-à-vis Austria, which since thecountry 'saccession on1January 1995 hasbeen
subject toECcompetition law(Articles 85ffoftheTreaty ofRome), nosuchinitiative appears possible inthe
caseofSwitzerland.