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II. TRADE POLICY INACHANGING ENVIRONMENT
(1) External Challenges andInternal Reform
1. Over thepastfouryears, Switzerland hassought toredefine itstrade policy within arapidly
changing European andinternational environment. Negotiating pressures andopportunities inthe
Uruguay Round coincided withefforts inneighbouring Europe tostrengthen economic integration and
political co-operation. Switzerland 'srejection oftheTreaty ontheEuropean Economic Area(EEA)
inDecember 1992ledbothtoare-thinking ofitslinkswithEuropean partners andencouraged strong
participation inthemultilateral liberalization process.
2. Non-membership intheEEAhasmeant arelative deterioration ofSwitzerland 'spreferential
status inEUandEFTA markets. EEAmembers (Norway, Iceland, Liechtenstein) and,incertain areas,
central andeastern European countries havemeanwhile attained higher levels ofintegration withthe
European Union. While falling short ofestablishing acustoms union, theEEAwould haverequired
Switzerland tofullyimplement, inonestroke, EUregulations inareas suchasstandards, competition
policy andgovernment procurement andtoextend theEUservices régime toitsjurisdiction. Inturn,
thiswould haveeliminated "informal" access barriers intoregulated orcartelized areas(Chapter III(1))
andensured freecirculation ofEEA-originating products across theSwiss border andviceversa.
3. Thenegative voteontheEEA focused attention onthe"multilateral challenge" andhelped
Switzerland 'sWTO implementing legislation, including asignificant reorientation offarmpolicies,
topasswithout referendum. Atthesame time, theGovernment launched arevitalization programme
which, initsfirststage, aimed predominantly ataligning domestic regulations asclosely aspossible
withEEA provisions.1FullEUmembership hasremained along-term policy objective.
4. Therevitalization programme contains awiderange ofmeasures toenhance theeconomy 's
response tointernational market trends, remove regulatory distortions, streamline Government and
reduceitsinterferenceinindividualmarkets.2Sincethe1991TPRreview,Switzerlandhasthusreformed
itssystem ofindirect taxation bytheintroduction ofavalue-added tax,removed many oftheinternal
barriers totrade andfactor mobility, harmonized domestic withinternational technical regulations,
reviewed itspublic procurement legislation, andoverhauled itscompetition legislation. Further reforms
building ontherevitalization programme aimatremoving, curtailing orstreamlining monopolies in
areas suchasagricultural marketing, telecommunications andpostal services, electricity andrailways.
5. Consultation andco-operation between theConfederation andthecantons hasintensified with
theobjective ofinvolving thecantons more closely intheformulation ofexternal andinternal trade
policies. Inkeeping withSwitzerland 'stradition ofpolitical andeconomic decentralization, contacts
between cantons andborder regions inneighbouring countries areencouraged (Chapter III(4)(iii)(a)).
1According totheFederal Council, theSwiss people "deprived itself, forthetimebeing, ofthestimulating
effects oncompetition ofcloser European integration. This, inturn, hasrendered therevision ofcartel legislation
and,ingeneral, ofthecompetition principle even more urgent". Conseil fédéral (1994a).
2TheGovernment usesseven criteria priortoadopting anyneweconomic policy: Aremarkets notfunctioning
effectivelyand,thus,inneedofintervention?HavesufficientmeasuresbeentakentoensurethatStateintervention
reaches itsobjective? Will themarket remain open fornewentrants under thenewpolicy? Will theprice
mechanism remain efficient? HastheState abandoned ownproduction activities asmuch aspossible? Isthe
number ofregulations limited toaminimum? WillState intervention berapid andefficient? Conseil fédéral
(1994b).Switzerland WT/TPR/S/13
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Following afirstadministrative reform inlate1995, amore comprehensive review ofgovernment
functions hasbegun.3Thereview might ultimately leadtoareform oftheConstitution andaredefinition
oftherôles oftheFederal Council, theFederal Assembly (National Council andCouncil ofStates)
andofthereferendum process.4
6. Switzerland iscurrently involved inaprocess ofsectoral negotiations withtheEuropean Union
tobetter integrate goods, services andfactor markets. Thisincludes stepstoliberalize airandground
transport, mutual recognition oftestsandcertificates, better access toprocurement markets (mainly
intheareas oftelecommunications andrailtransport), intensified co-operation intheareaofresearch
andtechnology, andimproved cross-border mobility oflabour. Inthesamevein,Switzerland endorses
internationalnegotiations,includinginWTOandOECDfora,toaddressincompatibilitiesincompetition
law,restrictive investment policies orother practices considered tocontravene theliberalizing thrust
oftheUruguay Round Final Act.
(2) Trade Policy Objectives andRecent Initiatives
(i) Strengthening theWTO
7. Switzerland ratified theUruguay Round Final ActinJune1995tobecome afounding member
oftheWorld Trade Organization (WTO). Inorder toimplement WTO provisions, 16lawsand
63ordinances were adopted, modified orabrogated.5While changes were made across arange of
policy areas, from intellectual property protection tobanking (Chapters III(5)(ii) andIV(5)(i)), the
mostsignificant reforms concerned agriculture. Implementation oftheWTO Agreement onAgriculture
willgiveanewboost toanongoing process, partly inanticipation oftheUruguay Round results, of
reorienting farmpolicies fromproduction-related measures todirect income support. Table II.1gives
anoverview theofmain actions taken intheUruguay Round implementation process.
3Asaresult ofthe1995 reform, federal offices canbeshifted from onedepartment (ministry) toanother
bytheFederal Council without approval bytheFederal Assembly. Asoneexample,the Swiss Federal Institute
ofIntellectual Property wasinstitutionally separated from thefederal administration andallocated abudget of
itsown.
4Under thecurrent Constitution of1874, allfederal lawsanddecrees aretobedecided byboththeNational
Council, whose 200seats areallocated among cantons according topopulation size,andtheCouncil ofStates,
where each canton hastworepresentatives (six"half cantons" have oneseateach). TheFederal Council,
Switzerland 'stopgoverning andexecutive body ismade upofseven members whoareelected bytheFederal
Assembly. AnyConstitutional changes andaccessions tocollective security organizations (such astheUnited
Nations)andsupranationalinstitutions(suchastheEU)mustbeapproved,throughobligatorypopularreferendum,
byamajority ofbothelectors andcantons. Inaddition, referenda must beheldonfederal laws, specified types
ofdecrees andcertain international treaties ifsodemanded byatleast50,000 citizens oreight cantons. (Inorder
tobeapproved, theproposal must beendorsed byamajority ofelectors.) Referenda onfinancial issues are
notpossible atfederal level. Anygovernment regulation maybeappealed totheFederal Court foraruling on
itsconformitywithhigherrankinglegislation;theCourtisalsocompetenttodecideonthecompatibilityoffederal
laws withSwitzerland 'sinternational obligations. Formore details seeGATT (1991).
5Conseil fédéral (1994c).WT/TPR/S/13
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Table II.1
Principal notifications inthecontext ofimplementing WTO Agreements, March 1996
Agreement Action
General Agreement on
Tariffs andTrade 1994- Schedule ofConcessions onmarket access submitted on15April 1994 (ListLIX).
General Agreement on
Trade inServices- Submission ofSwitzerland 'sSchedule ofSpecific Commitments (GATS
document GATS/SC/83, 15April 1994) andofArticle II(m.f.n.) exemptions (GATS
documents GATS/EL/83 andSuppl.1/Rev.1 of15April 1994 and4October 1995).
Agreement onTrade
Related Intellectual
Property Rights (TRIPS)- Articles 1.3and3.1: Notification thatSwitzerland rejects thecriterion offirstfixation
provided forinArticle 5.1(b) oftheInternational Convention fortheProtection for
Performers, Producers ofPhonograms andBroadcasting Organizations (WTO document
IP/N/2/CHE/1, 29June1995).
- Article 4(d): Switzerland hasnotified multilateral andbilateral agreements providing
exemptions from m.f.n. treatment (WTO document IP/N/4/CHE/1, 7February 1996).
- Article 63.2: Switzerland hasnotified domestic laws andregulations onintellectual
property rights (WTO document IP/N/1/CHE/1, 5March 1996).
Agreement onAgriculture - Switzerland has notified theadministration oftariff quotas (WTO document
G/AG/N/CHE/1, 8December 1995).
Agreement onTextiles and
Clothing- Submission ofthelistofproducts tobeintegrated intoGATT 1994 onentry intoforce of
theWTO Agreement (WTO document G/TMB/N/50, 28April 1995). Switzerland
reserves theright tousetheprovisions ofArticle 6(transitional safeguard mechanism;
WTO document G/TMB/N/22, 6March 1995).
Agreement on
Trade-Related Investment
Measures (TRIMs)- Information thatSwiss lawsdonotcontain measures thatarenotinconformity withthe
Agreement (WTO document G/TRIMS/N/1/CHE/1, 20September 1995).
Agreement onAnti-
Dumping Practices- Information thatSwitzerland hasnolaws orregulations within themeaning ofthe
Agreement (GATT documents G/ADP/N/1/CHE/14 May1995).
Agreement onCustoms
Valuation- Notification thatSwitzerland hasnoparticular legislation relating tocustoms valuation
(WTO document G/VAL/N/1/CHE/1, 28August 1995).
Agreement onPreshipment
Inspection- Notification thattheOrdinance concerning theimplementation ofpreshipment inspection
entered intoforce on17May1995 (WTO document G/PSI/N/1/Add.2, 26July1995).
Agreement onRules of
Origin- Notification ofnon-preferential rules oforigin under Article 5.1(WTO document
G/RO/N/4, 7August 1995).
Agreement onSubsidies
andCountervailing
Measures- Information thatSwitzerland hasnolaws orregulations within themeaning ofthe
Agreement (GATT document G/SCM/N/1/CHE/1, 4May1995).
Agreement onSafeguard
Measures- Notification thatSwitzerland hasnolaws within themeaning ofArticle 12.6 (WTO
document G/SG/N/1/CHE/1, 24July1995).
Understanding onthe
Interpretation ofArticle
XVII oftheGATT (State
trading)- Notification ofproducts traded byState-trading entities: butter, alcohol andbread flour
(WTO document G/STR/N/1/CHE, 6December 1995).
Plurilateral Trade
Agreements- Switzerland hassigned theAgreement onGovernment Procurement, theInternational
Dairy Agreement, theInternational Bovine Agreement andtheAgreement onTrade in
Civil Aircraft.
Source: WTO Secretariat.
8. Inarecent communication onSwitzerland 'sinternational economic agreements, theFederal
Council stressed theneedforfurther strengthening ofthemultilateral system. Thecommunication
callsforadditional initiatives tosecure market access forgoods, services, investment, technology and,
toacertain extent, persons.6Inthiscontext, priority should begiven to:trade liberalization with
aviewtofacilitating intra-industry trade; thedefinition ofnewnational andinternational competition
6Conseil fédéral (1996).Switzerland WT/TPR/S/13
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rules; andthedevelopment ofdisciplines forindustrial, technological, environmental andsocial policies
thataffect trade. TheSwiss authorities express disappointment atthelowlevelofcommitments in
virtually allareas ofservices, while considering theGATS auseful andnecessary toolforfurther
liberalization. Similarly, given theimportance toSwitzerland oftechnology transfer andinvestment,
theauthorities would havewished forbetter enforcement ofnatural legislation forintellectual property
andimproved protection fornewtechnologies intheAgreement onTrade-Related Intellectual Property
Rights (TRIPS); theAgreement onTrade-Related Investment Measures (TRIMs) isseenascontaining
onlyalimited setofbasic rules.
(ii) Co-operation inother international fora
9. Following areferendum inMay1992, Switzerland became amember oftheInternational
Monetary Fund andtheWorld Bank. While participating inU.N. special agencies, suchasthe
International Labour Office (ILO), theWorld Health Organisation (WHO) andtheUnited Nations
Conference onTrade andDevelopment (UNCTAD), Switzerland hasnotjoined theUnited Nations.
In1995, itwithdrew fromtheCommon Fund forCommodities andtheInternational Natural Rubber
Agreement.
10. Reflecting theimportance offoreign direct investment (Chapter IV(2)), Switzerland is
participating actively inthecurrent OECD negotiations onaMultilateral Investment Agreement (MIA).
Areasundernegotiationincludemarketaccess,treatmentandprotectionofforeigninvestment;movement
ofqualified "key personnel"; investment incentives, performance requirements, privatization,
monopolies/State-owned enterprises, andprivate investment restrictions; andbinding liberalization
commitments.
(iii) Upgrading regional andbilateral trade relations
(a) Relations withtheEuropean Union
11. Given Switzerland 'snon-participation intheEEA, theGovernment isseeking toeliminate
"preferential policy deficits" withtheEUinstrategically important areas, notably including trade in
services andrules governing factor mobility (capital, technology andlabour). Bilateral negotiations
cover movement ofpersons; research; market access foragricultural products; technical barriers
totrade; government procurement; andground andairtransport.7TheEuropean Union hasstressed
theneedforadequate progress inallareas inorder forthewhole package tobeconcluded successfully
("parallélisme approprié ").BoxII.1gives anoverview ofthenegotiating objectives fromtheSwiss
authorities 'perspective.
7Switzerland initially offered tonegotiate onrulesoforigin; outward processing trade intextiles andclothing;
processedagriculturalproducts;technicalbarrierstotrade;governmentprocurement;veterinaryandphytosanitary
rules; intellectual property protection; airtransport; ground transport; research; audiovisual programmes;
statistics; andeducation andtraining. Conseil fédéral (1995a).WT/TPR/S/13
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BoxII.1 Sectoral negotiations with theEU,1996
Research:
Swiss objective: Conclusion ofanagreement providing fortheparticipation ofSwitzerland inthefourth
EUframework programme forresearch andtechnological development (1995-98), including the
involvement ofSwiss researchers intheinitial phases ofresearch projects. EUobjective: Compatible
withSwiss objective, subject toagreement inother areas ("parallélisme approprié ").
Market access foragricultural products:
Swiss objective: Reciprocal improvements inmarket access forcertain products, onadifferentiated and
progressive basis respecting the"multifunctionality" ofSwiss agriculture andinaccordance with the
internal reform process. EUobjective: Conclusion ofapreferential agreement providing forthelargest
possible liberalization, including theremoval oftechnical obstacles toagricultural trade.
Government procurement:
Swiss objective: Extension ofEEA-type conditions toSwitzerland, i.e.application ofthedisciplines
contained inthe WTO Agreement onGovernment Procurement tocommunes, railways,
telecommunication operators andprivate companies inthetransport, energy andwater sectors. EU
objective: Compatible withSwiss objective.
Technical barriers totrade:
Swiss objective: Reciprocal recognition ofconformity assessments (including certain official notification
andauthorization procedures, e.g.forchemicals). EUobjective: Compatible withSwiss objectives.
Road transport:
Swiss objective: Agreement providing reciprocal market access forroadtransport, abolishing quantitative
restrictions; reciprocal cabotage rights; harmonization ofcertain technical andsocial regulations. The
agreement could beextended torailtransport. Development ofaco-ordinated transport policy inthe
Alps taking intoaccount direct andindirect costs. EUobjective: Progressive access totheSwiss road
network forlorries above 28tonnes; admission of40-tonne lorries toSwitzerland 'smain centres of
production andconsumption; reduction ofthenumber ofhours during which thenight driving ban
applies; nocabotage rights; EUparticipation intheimplementation oftheinitiative fortheprotection of
theAlps.
Airtransport:
Swiss objective: Agreement providing forreciprocal access totheEUinternal market, including
cabotage; suppression ofprior approval requirements fortariff and flight programmes; and
liberalization ofcapacity andtraffic rights. EUobjective: Liberalization ofdirect flights toandfrom
Switzerland, butnotofflights between andwithin member States; adoption bySwitzerland ofEU
competition rules forratesetting andState subsidies; EUinstitutions would beincharge ofsurveillance
andinterpretation ofCommunity rules; consultation procedures prior toanyagreement between theEU
orSwitzerland andthird countries; conclusion ofanagreement would beconditional onanagreement
regarding ground transport.
Movement ofpersons:
Swiss objective: Agreement providing forqualitative improvements ofemployment andresidence
conditions forSwiss citizens intheEUandEUcitizens inSwitzerland, notably seasonal workers and
cross-border commuters. Envisaged further steps include liberalization ofresidence conditions forself-
employed persons, service providers andnon-professionally active persons (e.g. students andpensioners)
andco-ordination intheareaofsocial security. EUobjective: Free circulation ofworkers; right of
establishment; freedom toprovide services; mutual recognition ofdiplomas; co-ordination ofsocial
security provisions; right ofresidence forstudents, pensioners andother non-professionally active
persons; andabolition ofbarriers tocapital movement which could hamper thefreemovement of
persons.
Source: Conseil fédéral (1995a).Switzerland WT/TPR/S/13
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(b) Newpreferential arrangements
12. InEFTA,Switzerlandhassoughttodeveloppreferentialtieswithcountriesincentralandeastern
Europe, Israel andTurkey.8Apart frombroader political considerations, recent agreements withthese
countries wereintended toensure access conditions similar tothose available totheEuropean Union.9
Additional agreements areenvisaged withCyprus, Malta andsome other Mediterranean countries.
13. Theagreements generally provide forduty-free trade inindustrial goods, specified processed
farm products, fishandother marine products. While theEFTA countries removed their tariffs
immediately, thepartner countries aregranted implementation periods ofuptotenyears. Trade in
unprocessed farmproducts isgoverned bybilateral agreements between individual EFTA States and
therespective partner countries. Asinthefree-trade agreement withtheEuropean Union, theSwiss
Government sees"deficits" inthenewagreements. Further commitments aresought inareas such
asgovernment procurement, technical barriers totrade, services, investment andcompetition.
14. Negotiations between EU,EFTA andcentral andeastern European countries onacommon
setofrules oforigin, completed in1995, arecurrently awaiting political approval. Thenewrules
would allow forfullregional cumulation andthusremove amajor obstacle tocloser vertical integration
ofprocessing stages across thedifferent regional groupings inEurope.
(c) Preferences fordeveloping countries
15. Switzerland hasaccorded autonomous tariff preferences under GSPtodeveloping countries
since 1972. Arevision ofthesystem isunder waywithaview toimplementation byMarch 1997
atthelatest. Thegeneral objective istoensure transparency andpredictability, andtakeintoaccount
theeconomicsituationoftheleast-developedcountriesintheformofspecialpreferences.Theauthorities
arealsoconsidering thegraduation ofbeneficiaries thathavereached acertain levelofdevelopment
(fullgraduation) orsectoral competitiveness (partial graduation); therelevant criteria would beinline
withthose developed intheOECD Development Assistance Committee.
16. TheGSPrevision isintended tocompensate, atleastinpart,fortheerosion ofpreferential
margins under Uruguay Round tariff cutsandrecent freetrade agreements. With thisinview,
Switzerland isconsidering extending theproduct coverage ofthescheme, interalia,through inclusion
ofcertain farmproducts fortheleast-developed countries. Theauthorities arehesitant tograntadditional
preference onsocial andenvironmental grounds as,intheirview, Switzerland 'sliberal GSPrégime
offers almost noroom formanoeuvre.
8Since theinitial TPR report, preferential agreements have entered intoforce withTurkey (April 1992);
Czech andSlovak Republic, andRomania (December 1992); Israel (July 1993); Estonia, Lithuania andLatvia
(March 1994); andHungary, Bulgaria andPoland (September 1994). TheAgreement withthethenCzech and
Slovak Republic hassince been replaced byseparate agreements withtheCzech andSlovak Republics.
9Similarly, Switzerland 'sstrategy forEFTA istoupgrade trade relations withnon-European countries and
country groups, including NAFTA, MERCOSUR andASEAN, withaview toavoiding agradual erosion of
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(d) Non-preferential co-operation
17. Switzerland recently concluded bilateral framework agreements withUzbekistan, Kazakhstan,
Belarus, Russia, Ukraine, Moldova, Albania andMacedonia.10Theagreements provide form.f.n.
andnational treatment, andcontain measures toensure theprotection ofintellectual property rights.
TheFederalCouncilalsointendstoconcludeadditionalinvestmentpromotionandprotectionagreements
withcountries inAsia, Latin America, andmembers oftheCommonwealth ofIndependent States.11
10Prior agreements withAlbania andtheformer Republic ofYugoslavia have been abrogated.
11In1991, 41bilateral agreements were inforce.