30 May 1996
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
CONCLUDING REMARKS BY THE CHAIRPERSON Back
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
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
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.
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.
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
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
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
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