'The Switzerland-China Free Trade Agreement (FTA) entered into force 10 years ago and it became gradually more important as China reduced its tariffs in accordance with a schedule that—for most tariff lines—extended over 10 years," said Swiss Ambassador to China Jürg Burri at a gathering celebrating and reflecting on the agreement's impact.

More than 120 diplomats, academics, experts and businesspeople working in the field of bilateral foreign trade attended the gathering in Beijing on April 16.

Over the past 10 years, the FTA has benefited exporters from both countries, but there is still room for improvement, according to an evaluation report launched at a panel discussion during the event.

A milestone

Negotiations of the FTA between China and Switzerland began in 2011, and it was signed on July 6, 2013. The agreement entered into force on July 1, 2014, and has become the most utilized FTA outside Europe for Swiss exporters.

The FTA builds upon the longstanding relationship between the two countries. Switzerland was one of the first countries to recognize the People's Republic of China after its founding on October 1, 1949. In September 1950, they established diplomatic relations. Bilateral economic ties were consolidated in a trade agreement in 1974, which established a joint bilateral economic commission. The joint commission still operates now and meets regularly, discussing issues that hinder trade, Burri said.

Fifty years ago, the volume of trade between China and Switzerland was still very low, at about $100 million per year. China was mainly exporting mostly silk and cotton to Switzerland at that time. The boost came in the 1980s, when many Swiss companies began establishing operations in China.

"Today, the trade volume is more than 100 times greater and textiles make up only 16 percent of it now," Burri said. "You see how China evolved when it comes to the Chinese offer on the market."

Since 2010, China has been Switzerland's largest trading partner in Asia and third largest globally after the European Union and the United States.

Data from the General Administration of Customs of China and the Swiss Federal Office for Customs and Border Security showed, in 2022, Chinese exports to Switzerland exceeded $19 billion and Swiss exports to China reached more than $15 billion. Among all, the top three of Chinese exports constituted electrical machinery, machinery and chemicals. As for Switzerland, they were watches, machinery and jewelry.

Room for improvement

The anniversary is also a good time to review the implementation of the FTA, Burri pointed out in his speech. He said, "With the FTA having its anniversary, we want to examine it and develop it further."

During the event, the Chinese version of the Sino-Swiss Free Trade Agreement—2023 Academic Evaluation Report (10th Anniversary Edition), jointly completed by the Sino-Swiss Competence Center of the University of International Business and Economics in Beijing, the University of St. Gallen in Switzerland and the Shanghai Customs College, was released. This is the second time the three institutions have collaborated to prepare an evaluation report on the FTA since 2018.

Between 2018 and 2022, Chinese exporters' tariff savings from the FTA increased from CHF148 million ($162.8 million) to CHF213 million ($234.3 million), and those of Swiss firms exporting to China jumped to $220 million from $70 million, the report said.

The impact of any free trade agreement is evidenced by its utilization rates. The report calculated the utilization rates of the FTA for various products in trade between the two countries and analyzed the reasons why the agreement is or isn't utilized.

While utilizing the FTA has the potential to provide tariff savings and price advantages for Chinese exporters, there are also costs and risks involved, the report said. However, the costs and benefits can vary widely depending on the specific industry, product and priorities. Many of the challenges in utilizing the FTA are also faced by Swiss exporters, while some have a greater effect on Chinese companies, it added.

To address these challenges and promote a wider utilization of the FTA, authorities, trade organizations and businesses need to collaborate to raise awareness, provide training sessions, simplify administrative processes, increase the efficiency of audits and inspections, facilitate communication when investigations are launched, and ensure that exporters, especially small and medium-sized enterprises, have the necessary resources to navigate the FTA requirements effectively, according to the report.

Broader significance

Also at the gathering, the Swiss Embassy in China hosted a panel discussion under the theme Making Good Use of Free Trade Agreements. The participants shared their views in a range of topics including the added value and utilization rate of the FTA, its effect on bilateral trade and the broader significance of foreign trade for economic development.

Tomas Casas i Klett, a professor at the University of St. Gallen, said the case between China and Switzerland shows that people can collaborate with countries that are different on a win-win basis. Promoting free trade, investment and collaboration at the business level does help for prosperity and peace, he added.

Tu Xinquan, Dean of the China Institute for WTO Studies at the University of International Business and Economics, also one of the authors of the report, said he hopes that companies from both countries can foster closer collaboration in investment and trade, corporate management and consumer services.

Tu also said China had signed 22 FTAs with its trading partners. Opening up has been helping grant Chinese enterprises access to the world market, improve the efficiency of the Chinese market, and perfect China's market economy system.

He called for closer cooperation on regulation standards between government departments and industries. Difference between those standards could cause trouble for companies seeking market access, Tu added.

Jennifer Zhong, an economist at Swiss bank UBS, said she believes China should stay open and even more so perhaps in the challenging environments that we have today.

Nicolas Musy, founding partner of China Integrated, a Swiss consultancy helping companies do business in China, said the FTA is beneficial to Swiss companies for an additional reason, which is price reduction. While Swiss products are usually expensive, the FTA is helping Swiss companies reduce their prices in the Chinese market in comparison to other international competitors.

Martin Matter, Counselor of the Swiss Embassy in China, reiterated Switzerland's commitment to free trade and expressed optimism for further collaboration between Switzerland and China.

"Swiss believes in free trade, and we have a very good free trade agreement with China. We are good trading partners. But there are still some room for improvement, including the utilization of the agreement, and its modernization," he said.

China and Switzerland have completed the joint feasibility study on upgrading the FTA and agreed to support the early launch of formal FTA upgrade negotiations, Chinese Premier Li Qiang and President of the Swiss Confederation Viola Amherd jointly announced in January.

"Based on further communication, China and Switzerland will respectively undertake their domestic procedures to strive for the early commencement of negotiations on upgrading the FTA," said He Yadong, a spokesperson of the Chinese Ministry of Commerce, at a press conference in January.

He said that both sides will "delve into various fields including trade in goods and services, as well as investment, aiming to forge a high-level upgraded agreement to benefit more enterprises and people from both countries." 

(Print Edition Title: Building Up Synergy)

Copyedited by G.P. Wilson

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