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Strengthening competitiveness.

What is the importance of EFTA free trade agreements for Swiss business operators and consumers? Do they provide a satisfactory alternative to progress under the multilateral framework of the World Trade Organization?

Switzerland's free trade policy is aimed at improving the general framework for conducting economic relations with relevant economic partners and at providing Swiss companies with legally secure, unobstructed, predictable and non-discriminatory market access.

Switzerland is closely' integrated in the world economy. As the country's economic structure is outward-oriented, its prosperity largely depends on international trade in goods and services as well as on cross-border investment activities. The continuous improvement of market access conditions therefore represents a core objective of Swiss foreign economic policy. The best way to achieve this objective is through the multilateral framework of the WTO. Nevertheless, most countries have started to enter into bilateral/plurilateral, regional or supra-regional FTAs. This is seen as a way to complement multilateral trade liberalisation efforts, which are currently facing difficulties.

For Switzerland, FTAs represent an opportunity for providing business operators with better market access at conditions equivalent to those enjoyed by their most important foreign competitors (such as operators from the European Union, the United States and Japan). In cases where others do not have FTAs yet, our agreements provide a competitive advantage to Swiss-based operators and contribute to the diversification of our foreign economic relations. For their part, Swiss consumers and producers benefit from economic growth in the Swiss marketplace and enjoy a greater variety of higher-quality goods and services at lower prices. FTAs are therefore an important instrument for maintaining and strengthening Switzerland's competitiveness and prosperity.

The EFTA Convention does not oblige the EFTA States to negotiate and conclude FTAs as a group. While Switzerland has concluded 36 FTAs under the EFTA umbrella (12 of which with countries that have in the meantime become members of the European Union), it recently entered into bilateral FTAs with Japan and China. For what reasons does Switzerland seek preferential trade relations through EFTA, and why was a different route chosen with Japan and China?

Switzerland favours the conclusion of preferential trade agreements within the EFTA framework. The EFTA States are in many respects like-minded and carry more economic and political weight as a group, making them more attractive to trading partners. Nevertheless, Switzerland and the other EFTA States also retain the possibility of concluding FTAs bilaterally.

Switzerland and Japan initiated regular bilateral economic consultations in 1995, in which both countries explored the possibility of deepening economic relations through an FTA. Negotiations with EFTA as a group were considered, hut ruled out early on by Japan due to differences between Japan's trade structure and that of individual EFTA States.

As for China, while the EFTA States were willing to negotiate as a group. China made it clear from the outset that it would prefer individual bilateral negotiations with each EFTA State. So far, Iceland and Switzerland have signed bilateral FTAs with China (in April and July 2013, respectively).

What are the main challenges in negotiating FTAs with a large developing partner country such as India? The offensive and defensive interests of large emerging economies and the highly developed economies of the EFTA countries may differ substantially, despite the existence of economic complementarities. Furthermore, because of the size of their domestic markets, large emerging economies are less dependent on opportunities abroad. At the same time, given their growth potential. they are well aware of their attractiveness as FTA partners.

Switzerland's main offensive interests are in the areas of trade in industrial goods, trade in services, intellectual property rights, government procurement, and trade and sustainable development. Emerging economies may have both offensive and defensive interests in these areas and are often not ready to open up sectors in which they wish to develop their own industries first.

Some prospective partners do not consider human rights, as well as labour and environmental standards, as trade-related issues, and fear the existence of a hidden protectionist agenda. The latter is certainly not a motivation for the EFTA States. However, given the absence of international models for incorporating these issues into trade agreements. a lot of work is needed in order to convince partners of our approach.

These are some of the challenges that Switzerland and the other EFTA States have to face in expanding our FTA network to important emerging economies.

Marie-Gabrielle Ineichen-Fleisch, Switzerland

State Secretary arid Director of the State Secretariat for Economic Affairs (SECO)
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Author:Ineichen-Fleisch, Marie-Gabrielle
Publication:EFTA Bulletin (Switzerland)
Geographic Code:4EXSI
Date:Dec 1, 2013
Words:740
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