Swiss-China FTA Set to Increase Trade

The Free Trade Agreement signed by Swiss Federal Councilor Johann Schneider-Ammann and Chinese Minister of Commerce Gao Hucheng on July 6, 2013, came into effect on July 8, 2014, making Switzerland the first mainland European country to enter into such an agreement with China. The deal came about as a result of two years of negotiations between Bern and Beijing and is designed to cut through excessive red tape and regulate import and export tariffs, with a view to, among other factors, Switzerland gaining access to the sizable Chinese consumer market and China gaining the benefit of Swiss technological innovations.

As China is already importing chemicals, pharmaceuticals and machinery from Switzerland, and analysts have noted that the new deal would likely be most beneficial to small and medium-sized companies, while China’s manufacturers will gain from duty-free access to a range of Swiss products. These savings in customs duties may give Swiss-made products a price advantage over products supplied by countries that have not entered into Free Trade Agreements with China – the 28-member European Union falling into that category. Moreover, the FTA reinforces intellectual property protection of Swiss goods in China, which is seen as a sign of commitment by China to the free global market. Intellectual property infractions have long been a source of conflict between China and the EU.

With the Swiss-Chinese FTA already in operation, analysts note that Switzerland may become the hub for Chinese companies investing in Europe, particularly as the EU is battling for consensus among its members regarding entering into FTAs with China. When visiting Brussels in June, China’s President Xi Jinping persuaded the EU to consider an FTA. However, with key players such as Britain being in favor, and France and Italy being opposed, it may be some time before the EU and China enter into any Free Trade Agreements.

As China experiences an increase of wealthy, brand-conscious consumers, Swiss quality products are increasingly in demand. Also, as China’s manufacturers look to automation to decrease their reliance on labor, Swiss machinery manufacturers will be ready fill the gap.