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US/Swiss free trade pact on the horizon? For Switzerland, the USA represents the second-largest export market after Germany. But a free-trade agreement with America has rarely been pursued--until now.

For millenia--from the Egyptians in the Old World to the Mayas, Aztecs, and Incas in the New World, from the mercantilist era to modern globalisation--countries have exploited bilateral commercial treaties to obtain comparative advantage.

Growth and decline of civilisations have been shaped by the environment, technology, warfare, religious beliefs--and free trade. For example, several 17th-century treaties made Portugal a virtual commercial vassal of England. In the past, commercial treaties were customarily imposed after wars. The English found that war, as an instrument of policy, could be both effective and profitable.

Today, the Swiss, as pragmatic free-traders conscious of the power of vested interests, are finding that economic wealth can also be an effective and lucrative instrument of policy.

Last year, Switzerland exported roughly 14 billion CHF in goods to the USA and imported the equivalent of about 6 billion CHF. Trade between the two countries has always been robust, but the concept of formalising a free trade pact never really took off.

'Encouraging'

The Swiss-American Chamber of Commerce currently sees a favourable opportunity for hammering out an agreement between the two countries and is enthusiastically touting the project. The Swiss State Secretariat for Economic Affairs (SECO) has taken the reins and is in the process of negotiating a deal with its US counterpart. Following a recent visit to Washington D.C., SECO State Secretary Jean-Daniel Gerber described the American response to a free-trade agreement as very encouraging.

Key partners

The basis for a formal pact between the USA and Switzerland is centered on the significance of America as one of Switzerland's key economic partners. The financial relationship between is probably closest when it comes to in direct investment. Swiss companies invested roughly 67 billion CHF in the USA in the period 1999 to 2003, while US firms invested around 34 billion CHF in the same period.

For Switzerland, the amount of foreign direct investment in the USA outstrips that of any other country in percentage terms. But even from the perspective of America, the bilateral investment flows are not insignificant. According to the Swiss-American Chamber of Commerce, Switzerland is the sixth-largest foreign investor in the USA, and going the other way, the fourth-largest recipient of export capital from America. These statistics underscore the fact that the conditions for investment are favourable on both sides of the Atlantic.

Moreover, the level of foreign trade in goods and services between the two countries is also robust. Only Germany is ahead of the USA as a destination for exports from Switzerland, with approximately 10 per cent of total foreign trade going to America. On the other hand, Switzerland's imports of goods from the USA account for a much smaller proportion (4.3per cent) of total imports, resulting in a trade surplus with the much larger country.

Advantages

The close trading relationship between the USA and Switzerland will probably now be underpinned by a free-trade agreement, which would abolish the still-existing customs regulations, duties and tariffs. Eliminating such tariffs would give Swiss companies more favourable access to US markets than their European competitors.

Additional advantages of a free-trade pact would be simplified administrative procedures for Swiss nationals entering the United States with regard to stringent domestic security measures, as well as further liberalisation in the area of public-sector contracts. Indirect advantages would include closer cooperation between the two governments in setting standards and establishing technical regulations for consumer and environmental protection, as well as in homeland security measures such as sharing biometric data, combating those who finance terrorism and exchanging airline passenger information.

The ultimate advantage for Switzerland of a direct free-trade agreement with the USA would be a more dynamic foreign trade policy that is not so heavily focused on Europe--especially neighbouring Germany.

Window of opportunity

The prevailing conditions in the USA make this an opportune time for Switzerland to enter into a free-trade pact with its trans-Atlantic trading partner. The Bush administration has recently been pushing for stronger economic ties with certain European countries. On August 6, 2002, President George W. Bush signed the Trade Act of 2002.

The Act gives the president so-called Trade Promotion Authority (TPA), under which future international trade agreements will be subject to an yes or no vote, but not amendment, in Congress. TPA will promote freer trade by giving other countries confidence that the agreements they negotiate with the United States will not be subject to subsequent renegotiation. However, the TPA expires in mid-2007, leaving a two-year window of opportunity for Switzerland to ink an agreement with the USA.

Stumbling blocks

Notwithstanding all the possible advantages of a free-trade agreement between Switzerland and the USA, there could be some obstacles along the way. First, such a pact with America could weaken relations with the European Union and thus endanger the ratification of the Bilateral II accords.

Second, the agricultural sector in Switzerland could view a free-trade agreement in an unfavourable light, fearing further concessions by Swiss farmers.

And third, the prevailing rather negative view of the Bush administration that has been openly expressed in Switzerland could hamper the realisation of such a project at this time.

The sky's the limit

Nevertheless, some political pundits say the time is right to enter into a free-trade agreement with the world's greatest economic power. According to Martin Naville, head of the Swiss-American Chamber of Commerce, Switzerland cannot afford to let such an opportunity slip away.

Indeed, increased trade is a proven strategy for building global prosperity and adding to the momentum of political freedom. Moreover, free trade fuels the engine of economic growth. It uses the power of markets to meet the needs of the people.

History shows that as nations like Switzerland become more prosperous, their citizens can afford--and will demand--a cleaner environment, wider diversity of imported goods and services, as well as access to state-of-the-art foreign technology. Greater freedom for commerce across borders would eventually lead to greater freedom for citizens within their own borders. Free trade gives all nations the hope of sharing in the great economic, social and political progress of our age.
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Title Annotation:Politics
Author:Anderson, Robert
Publication:Swiss News
Date:May 1, 2005
Words:1008
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