Free trade agreements are international treaties concluded between two parties (individual countries or transnational groupings) in order to safeguard free trade.
Free trade agreements are designed to improve business links with important partners around the world. They aim to eliminate or at least minimise barriers to international markets for the Swiss economy. Customs duties and non-tariff trade barriers (e.g. technical regulations, packaging and labelling regulations, import quotas) are to be reduced.
In addition to the EFTA agreement and the free trade agreement with the European Union, Switzerland currently has a network of 28 free trade agreements with 38 partners outside the EU, and new agreements are continually being negotiated.
Most of the Swiss agreements are concluded within the context of the European Free Trade Association (EFTA). In addition, Switzerland is also entitled to negotiate free trade agreements without the involvement of EFTA, as was the case, for example, with China, Japan and the Faroe Islands.
A current overview of the network of Swiss free trade agreements can be found in the section www.seco.admin.ch.
Content of the agreements
The essential component of every agreement is trade in merchandise (in particular the reduction of customs duties and other trade restrictions). These regulate trade in industrial products (HS Chapter 25-97), fish and processed agricultural products. Trade in unprocessed agricultural products tends to be regulated in separate bilateral agricultural agreements.
In addition to trade in merchandise, other aspects which are often covered in new agreements include the protection of intellectual property rights, trade in services, investments, public procurement and technical regulations. These are the so-called «second-generation agreements».
Benefits of the agreements
In 2013 agreements concluded with free trade partners, with the exception of the FTA with the EU, cover 22.6% of Switzerland’s total exports. This corresponds to 51% of Switzerland’s exports to markets outside the EU. Free trade agreements promote in particular the growth, added value and competitiveness of Switzerland as a business location.
Free trade agreements have reduced the price of products for Swiss consumers and have increased the range of products available. At the same time, Swiss producers benefit from more advantageous prices for semi-finished goods and raw materials.
Application within the SME field
It is often the case that not enough attention is paid to the topics of free trade agreements and declarations of origin by export companies. When determining the country of origin, coordination between company management, the export department, procurement, quality assurance, logistics and finances is required. If, for example, the purchasing department switches suppliers on the grounds of lower prices (previous country of origin Switzerland; new country of origin China/third country), then the export department also needs to be informed, because this could cause the country of origin to change. Price and production changes or exchange rate fluctuations can also have effects on the assessment of the country of origin. As a consequence, if the calculations are not checked regularly and if incorrect declarations are made as a result, this can lead to the retrospective payment of customs duties and substantial fines being imposed on companies.
The responsible export managers or export administrators should at least be familiar with the basic principles underpinning the application of free trade agreements, and need to know which rules are applicable. Further information about country of origin rules and country of origin products is to be found in the Country of origin.