# 13 / 2016

Free Trade Agreement with China – A Milestone for Swiss Business

The free trade agreement between Switzerland and China has been in force for more than two years now. An interim assessment reveals that not only big Swiss corporations but also many SMEs are taking advantage of easier access to the Chinese market and benefiting from it. We have taken a closer look at how the free trade agreement is working around two years on.

Executive summary

The free trade agreement between Switzerland and China represents a milestone in Swiss foreign trade policy. Signed by the two countries in Beijing on 6 July 2013, this comprehensive bilateral agreement entered into force on 1 July 2014. Switzerland is the first continental European country to conclude an FTA with China. This is an important step both economically and symbolically in enhancing the competitiveness of Swiss companies.

The free trade agreement between Switzerland and China has been in force for over two years now. The present "dossierpolitik” has been prepared as an interim report: What experiences have Swiss firms had with application and implementation of the Agreement? What are the challenges they face and what are the prospects?

Even before it came into force Swiss firms showed a great deal of interest in the Agreement. The information event held by economiesuisse in June 2014 was attended by SMEs and large corporations from various industries and every seat was taken. The signalling effect of obtaining privileged access to the large and growing Chinese market prompted Swiss businesses to action, which in the past had had little or no use for FTAs.

Overall the vast majority of customs tariff lines and Swiss export volumes (roughly 95 percent) enjoy tariff dismantling. These were either implemented with entering into force of the FTA or through annual reduction steps within transitional periods (of mostly five or ten years, but in some cases twelve or fifteen years. For roughly three percent of tariff lines, or roughly 16 percent of export volume) tariffs are reduced by 60 percent. China and Switzerland have also agreed on improvements in the areas of intellectual property, customs procedures and services. As far as agricultural products are concerned the interests of Swiss farmers remain protected.

The second meeting of the Joint Committee on the free trade agreement between Switzerland and China was held in Beijing in September 2016. The review clause anchored in the Agreement provides that tariff concessions under the Agreement are to be reviewed every two years. This was the first time in 2016.

Positions of economiesuisse

  • The free trade agreement between Switzerland and China is an important achievement, giving Swiss businesses privileged access to the large and fast-growing Chinese market.
  • The review clause in the free trade agreement provides for periodic review of the agreed tariff concessions. As such it is not a static agreement, which is a positive point for businesses.
  • The FTA does not yet provide for complete elimination of all tariffs. For Swiss exporters it is therefore important that further tariff concessions on imports of their goods into China are concluded.
  • To make use of the Agreement, import/export firms have to meet additional requirements, particularly in the area of proof of origin. Minimising paperwork and documentation required in China is thus important for Swiss enterprises.
  • China's systematic routine inspection of direct transport creates an unnecessary administrative burden for businesses. Companies should be relieved from having to provide additional details proving that such shipments passed through third countries are subject to permanent customs controls. Essential to receive preferential shipping treatment is the proof of origin which can be verified. Switzerland should discuss the benefits of a risk-based approach with China.
  • The improvements in intellectual property protections are welcomed. With this Switzerland and China have partially gone beyond the scope of the WTO TRIPS Agreement.