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Content - Switzerland ponders reaction to EU-Japan trade deal

  • July 27, 2018

Switzerland ponders reaction to EU-Japan trade deal

Tokyo (SCCIJ) – The European Union has just signed a free trade agreement with Japan – like Switzerland did in 2009. This European Union-Japan Free Trade Agreement (FTA) may come into force already by February 2019 whereas the Japan-Switzerland FTA has been operating for almost nine years. As a result, the new EU-Japan FTA which may come into force by February 2019 already has caused concern in Switzerland that Swiss companies may lose out to companies of the European Union. But the Swiss enterprise lobby “economiesuisse” considers this risk as rather small. There would be mainly one particular area where Switzerland may need to catch up with the EU, though, the lobby said.

Container ship as symbol of free trade

Elimination of most tariffs

Among the major benefactors of the free trade deal between the European Union and Japan are Japanese car manufacturers and European dairy producers because tariffs in both areas will be reduced over time. Altogether, 99% of tariffs are supposed to go, according to the EU Commission. 

Similarly, the Swiss-Japan trade deal eliminated most tariffs on industrial goods, although it covered less products. But overall, the Swiss disadvantage in tariffs would be less small, Jan Atteslander, a member of the executive board of economiesuisse, and Rahel Landolt, a research assistant in the area of foreign trade, have analyzed.  

Disadvantage in procurement

However, it would be possible that Swiss companies lose out in the public procurement area, the two economiesuisse authors warned. EU companies are now expected to be able to bid on major public orders in nearly 50 Japanese cities and supply rolling stock for local railways in Japan. Switzerland was not able to achieve this in its trade treaty with Japan in 2009. 

The EU's agreement with Japan also goes further than Switzerland's in the area of agricultural products and food. The Swiss cheese industry in particular fears that it will lose market share to the competition from the EU. The conditions for importing EU natural cheese into Japan - the country that imports the most cheese in the world - are now better than those found by Swiss producers, the two authors claimed.  

Update may be appropriate

However, not only cheese but also beef, bakery products or chocolate from the EU should have better market access. Switzerland thus has certain disadvantages vis-à-vis the EU in its trade with Japan, but they are manageable, the two economiesuisse analysts argued. In certain areas, it would seem appropriate to update the nine year old agreement between Switzerland and Japan, which the Swiss government already attempts to realize (SCCIJ reported earlier). 

In any case, much would still remain to be done in bilateral trade, even if Japan already ranks among the top 10 Swiss trading partners: On economiesuisse's foreign trade index, which shows the potential in bilateral trade, Japan follows directly behind the U.S., the EU and China. Japan is also the sixth most important destination for Swiss direct investments abroad. 

Important technical details

However, the technical details are extremely important - sometimes more important than market access itself, the two authors stated. According to economiesuisse, the following aspect of the free trade agreement between the EU and Japan is extremely critical to the economy: The model of the so-called origin verification, which the EU, but also Switzerland, have so far been familiar with, is being radically revamped.  

Up to now, the customs authority of the exporting country has checked with the company whether the product has actually been processed sufficiently in the respective country to have to pay less customs duty. It shall inform the import customs authority of the result of this examination. 

Changed proof of origin

However, in trade between the EU and Japan, the customs authority of the importing country may now require confidential data from the foreign company to verify that the origin has been correctly declared. This can range from recipes and supplier names to raw material prices.  

The European Union and Swiss companies with export activities from the EU region must now make a decision with this new model: Either they disclose confidential product and business information to their foreign competitors or they are not exempt from customs duties, the economiesuisse analysts said.  

For the highly innovative Swiss economy, it is already clear that this model is out of the question for them in future agreements, they concluded. Incidentally, the business associations of the EU would also be opposed to this model.  

 

Text: SCCIJ based on an economiesuisse publication in German; Photo: pxhere CC0

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