TRADE POLICY REVIEW BODY: REVIEW OF SWITZERLAND
TPRB'S EVALUATION Back to top

The Trade Policy Review Body of the World Trade Organization (WTO) conducted its second review of Switzerland's trade policies on 28 and 29 May 1996. The text of the Chairman's concluding remarks is attached as a summary of the salient points which emerged during the two-day discussion.

The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including: its domestic laws and regulations; the institutional framework; bilateral, regional and other preferential agreements; the wider economic needs and the external environment.

A record of the discussions and the Chairman's summing-up, together with these two reports, will be published in due course as the complete trade policy review of Switzerland and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995), Canada (1990, 1992 & 1994), the Czech Republic (1996), Chile (1991), Colombia (1990), Costa Rica (1995), Côte d'Ivoire (1995), the Dominican Republic (1996), Egypt (1992), the European Communities (1991, 1993 & 1995), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 & 1995), Kenya (1993), Korea, Rep. of (1992), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989 & 1996), New Zealand (1990), Nigeria (1991), Norway (1991), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992), Slovac Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992 & 1994), Uganda (1995), Uruguay (1992), Venezuela (1996) and Zimbabwe (1994).

TRADE POLICY REVIEW BODY:   REVIEW OF SWITZERLAND
CONCLUDING REMARKS BY THE CHAIRPERSON Back to top

The Trade Policy Review Body has now completed the second review of Switzerland's trade policies and practices. These remarks, made on my own responsibility, summarize the main points of the discussion. They are not intended to substitute for the collective evaluation and appreciation of Switzerland's trade policies and practices. Details of the discussion will be reflected in the minutes of the meeting.

The discussion developed under five main themes: (i) the economic environment and structural reforms underway; (ii) agriculture; (iii) competition policy; (iv) regional and preferential arrangements; and (v) other sectoral issues, including services.

The economic environment and structural reforms underway

Members noted that Switzerland's economic environment since 1991 was one of slow growth, rising unemployment and losses in competitiveness. Despite these unfavourable trends, Switzerland had played a leading rôle in the Uruguay Round and had embarked on a process of internal and external trade liberalization and deregulation. Implementation of the WTO Agreements implied important legislative reforms, mainly in agriculture and government procurement. The "revitalization programme", undertaken since 1993, aimed at opening internal product and factor markets, strengthening competition and harmonizing technical regulations with international requirements, in particular those maintained by the European Union. Several members noted that not all parts of the programme had yet entered into force and that others would require time to show tangible results.

While currency appreciation tended to undermine export competitiveness, in particular in sectors such as tourism, declining import prices had not translated into significant domestic price cuts, possibly reflecting internal rigidities in the Swiss economy. In this connection, members called attention to restrictions in government procurement, effects of cartel practices, and continuing access problems resulting from rigid standards and regulations in many areas of goods and services.

Switzerland's liberal trade régime for manufactures contrasted sharply with the high level of protection extended to agriculture and food processing. There were no quantitative restrictions on industrial goods; nor had Switzerland taken anti-dumping, countervailing, or safeguard actions. Although tariffs were low on average, several participants expressed concern about the persistence of tariff escalation, particularly on products of interest to developing countries, and the bias against low-priced imports inherent in Switzerland's continued reliance on specific duties. Certain members recommended the widening of Swiss GSP coverage to include more agricultural, textile and clothing items.

The representative of Switzerland agreed that the economic situation of the 1990s was very different from the expansion of the 1980s. Both open and protected sectors were subject to strong adjustment pressures. The reforms of the revitalization programme covered not only agriculture, but also health, transport and public administration. Swiss businesses, large and small, were highly involved in the international economy. The strength of the Swiss franc was partly a reflection of the weakness of other currencies, but also of Switzerland's earlier emergence from recession than some other European countries. Private consumption had been slowed by the recession, stagnation of salaries and the introduction of VAT. By contrast, the strength of domestic investment showed the attraction of Switzerland as a production centre.

The representative of Switzerland underlined that imports had grown more rapidly than exports in real terms in 1994 and 1995, partly as a result of currency appreciation. Import prices of many goods had fallen; however, high rents and salaries had their effect on the final price levels. The effects of cartels and other restrictions should not be overstated. The structural reforms underway should lead to greater competition and greater flexibility of prices.

The representative noted that 80 per cent of Swiss technical regulations were now compatible with those of the EU. Switzerland's system of specific duties was accepted and bound in the Marrakesh Protocol; the ad valorem incidence had also been bound, guaranteeing transparency. Low rates applied to industrial goods ensured that tariffs generally played no crucial rôle in protection and that escalation was minimal; further reductions would be made under Uruguay Round commitments. Proposals to improve the GSP scheme would soon be presented to Parliament.

Agriculture

Members acknowledged Switzerland's commitments under the WTO Agreement on Agriculture, and welcomed plans for reform for the period to 2002. The latter were all the more necessary as Switzerland had the highest level of farm support in the OECD area. Participants welcomed the move away from price support towards direct payments. Tariffication, while increasing transparency, was unlikely to improve access markedly in the short run, given the high average duties on agriculture and food products. Members also noted that certain import charges, including those on rice, coffee, cocoa and poultry, had not been included in the tariffication exercise.

Members questioned the mechanism used to allocate Swiss tariff quotas, and particularly the compatibility with the TRIMs Agreement of the "prise en charge" system, under which tariff quota access is contingent on the purchase of domestic products. Noting that Switzerland was the world's fourth largest exporter of cheese, assisted by significant export subsidies, members asked why the Swiss Cheese Union had not been notified to the WTO as a state-trading enterprise. They also asked why Switzerland considered it necessary to continue promoting the production of cereals, oilseeds, potatoes and sugar.

The representative of Switzerland recalled the small share of agriculture in the Swiss economy and its low rate of self-sufficiency. Reforms proposed in "Agricultural Policy 2002" foresaw reduction of State intervention in many sectors, cuts in consumer prices, and decoupling of farm prices and incomes with an increase in direct payments. Switzerland's Uruguay Round commitments on agriculture were far from modest. Many tariff quotas had been more than filled; domestic support had already fallen by some 20 per cent and export subsidies had not been fully utilized. The "prise en charge" system was legally acceptable under the WTO, did not involve any extra restrictions on imports and was not administered by producer interests; Switzerland intended to maintain it.

In response to various specific questions raised, the Swiss representative said that the Swiss Cheese Union was responsible for the administration of export subsidies, and only of certain cheeses and was not, therefore, a State-trading enterprise in GATT terms; its abolition was envisaged for 1997. Compulsory stock-holding was financed through private import organizations. Since such charges were levied for national security reasons on goods not produced domestically, they were not subject to ceilings under GATT 1994. The introduction of a single-rate tax on alcoholic beverages was under study; this would remove potential discrimination between domestic production and imports. The abolition of State monopolies on bread flour and butter was envisaged in "Agricultural Policy 2002" and that for strong alcohols was under study. Details were also given on sanitary and phyto-sanitary restrictions and on VAT rates on agricultural imports. Clarifications were supplied on the administration of tariff quotas and import permits for poultry, meat, fruit and vegetables, cut flowers, dairy products, animal feeds and white wine, as well as on tariffs on butter and agricultural support for sugar, cereals and potatoes.

Competition policy

Members remarked on the persistence of cartel arrangements in the Swiss economy, frequently in the form of vertically integrated concerns, often with exclusive links to suppliers abroad. Such practices reduced imports from the level that could be expected under competitive conditions, and had detrimental effects on prices.

The new Competition Law was welcomed, although it was noted that the legislation still did not prohibit cartels and other restrictive practices. Questions were asked regarding the instruments available to the Swiss authorities for enforcing the new legislation.

The representative of Switzerland noted that not all price differences could be ascribed to cartel behaviour; in a high income country like Switzerland, quality played a major rôle in sales. However, the Cartel Commission was well aware of the problems of collusive behaviour and exclusive distribution agreements. The new Competition Law, expected to come into force on 1 July 1996, would strengthen the legal framework. The principle of abuse, contained in the new law, could achieve the same results as a prohibition of cartels (which would imply amendment of the Swiss Constitution). The staff of the new Competition Commission had been expanded and its legal powers extended to take decisions, contrasting with the existing situation where the Cartel Commission could only make recommendations. Substantial fines could be levied in case of non-compliance. Merger control would be based on effective competition and abusive behaviour criteria, similar to the Treaty of Rome; exceptions were envisaged only in the case of highest-priority public interests.

Regional and preferential arrangements

Several participants noted the focus of Swiss trade policies on bilateral negotiations with the European Union, following the rejection of the EEA Agreement in December 1992. Observing that Switzerland had concluded a large number of other preferential trading agreements, mostly with central European and Mediterranean countries, members stressed that trade policies should not be too heavily concentrated on Europe at the expense of other regions.

The representative of Switzerland recalled that in 1991 the Federal Council had defined two objectives of trade policy as success in the GATT negotiations and in negotiating the European Economic Area; membership of the EU had been established as a strategic objective in 1992. Following the rejection, by referendum, of the EEA Agreement, bilateral negotiations with the EU were begun in December 1994 on research, technical requirements, agriculture, public procurement, movement of persons, air and road traffic. For the EU, all these areas were inter-linked. In conducting these negotiations, the Swiss authorities saw compatibility with WTO provisions as a priority and expected that conformity with Article XXIV could be assured.

Regarding the network of free-trade and cooperation agreements with other partners, the representative emphasized that although Switzerland's position in central Europe implied a strong regional interest, there was no deliberate concentration on relations within Europe. Trade would grow on the basis of market development and Switzerland saw WTO commitments as central to this aim.

Other sectoral issues, including services

While recognizing that many Swiss service industries were highly competitive, members observed a variety of interlinked obstacles to market entry, including work permit regulations, nationality requirements for board members, and restrictions on real estate acquisition and share transfers. Participants urged the authorities to allow cross-border supply in insurance, where foreign participation was still very modest. Although liberalization of ground handling services was appreciated, participants observed that Switzerland's non-participation in the general deregulation of European air transport entailed high costs. Several members sought more information on the announced liberalization of basic telecommunications services.

Clarification was sought on how revenue fees for widespread copying would be allocated to foreign copyright holders; on local content requirements in the audio-visual sector; and on changes to the excise tax régime for motor vehicles.

In reply, the Swiss representative recalled Switzerland's comprehensive schedule of specific commitments under the GATS. Horizontal exceptions were of limited importance. Thus, acquisition of real estate was permitted, except for real estate business as such. Domicile and nationality requirements for board members had not been a practical obstacle to foreign investment or control. Regulations on movement of natural persons had been loosened in 1993 to facilitate access for business people and specialists. Exclusivity arrangements were the exception; reforms were under way.

The abolition of cantonal insurance monopolies, a constitutional issue, was delicate, although it was a long-term aim. Certain insurance services could already be provided on a cross-border basis; some other areas were possible on the basis of mutual recognition agreements covering insurance supervision. Liberalization of air transport services would take place in appropriate bilateral or multilateral frameworks.

Concerning telecommunications, a new law was to be sent to Parliament in June 1996, with a view to entry in force on 1 January 1998. The representative underlined that market mechanisms were at the base of the new legislation.

* * * * * * *

Overall, one of the main themes which emerged most strongly from the discussion was the difficulty in achieving access to the Swiss market. This was felt to apply in different ways across different sectors. Domestic agriculture is sheltered behind a high level of protection; in the non-agricultural sector, the level of price adjustment that would normally be associated with significant currency appreciation has not occurred. In the services sector, a variety of restrictions were seen as combining to discourage foreign competition.

At the same time, members appreciated that important steps are being taken - either autonomously or under WTO commitments - to ensure more genuine openness in the Swiss economy. Time will be needed to evaluate the impact of the various reforms of economic legislation that are under way. However, given the degree of existing market distortions perceived by many Members, some doubts were expressed as to the adequacy of the scale and pace of reforms contemplated.

Members acknowledged the underlying strengths of the Swiss economy and the dynamic rôle which Switzerland has played in the WTO. Many felt that an economy with such strengths could afford to be more open, and that indeed the benefits of increased openness would be felt domestically as well as by Switzerland's trading partners. Members looked forward to being able to assess tangible progress in this direction as soon as the current legislative reform bears fruit. Back to top