2024-03-11 17:35:08
Switzerland buys a free trade agreement for 100 billion
The engineering industry is cheering about the removal of tariffs – but what will the Indians actually get out of it? Everything you need to know about closing negotiations.
Signing show: Guy Parmelin (2nd from left) on Sunday in Delhi, to his left the Liechtenstein Foreign Minister Dominique Hasler, to his right the Indian Trade Minister Piyush Goyal.
Photo: AFP
Guy Parmelin succeeded where his predecessors Johann Schneider-Ammann and Doris Leuthard failed: he brought to an end the negotiations with India on a free trade agreement that were initiated 16 years ago.
The Swiss Economics Minister signed the 70-page paper in Delhi on Sunday. The responsible ministers of the other countries of the European Free Trade Association (EFTA), namely Norway, Iceland and Liechtenstein, and India, on the other hand, also signed. On Monday morning, Parmelin presented the contract to the media together with business representatives in Bern. Here are the most important questions and answers.
What are the key points of the contract?
India is committed to either eliminating or significantly reducing import tariffs on over 95 percent of all industrial products from the EFTA countries over the next few years. So far these are between 8 and 22 percent. Swiss products, which are expensive in international comparison due to the strong franc, are up to a fifth cheaper in India.
At less than two billion francs per year, exports to India now account for less than one percent of all Swiss exports; that is an eighth of exports to China. Since India, with its population of 1.4 billion, is considered the market of the future, this value is expected to rise significantly in the next few years.
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What’s in it for India?
Because Switzerland abolished its industrial tariffs for all trading partners at the beginning of this year, it was unable to offer India any improvement in this regard. Instead, it offers India money or investments from private individuals: within 15 years, $100 billion will flow from the Efta countries into the Indian economy, creating one million jobs.
This is a very ambitious goal: Today, direct investments from the Efta countries in India amount to a good ten billion francs. Swiss investors are responsible for eight of them – they are also likely to raise the lion’s share of the targeted 100 billion.
The hope is that, similar to previous agreements, a reduction in tariffs will be followed by the establishment of own production in the country. If the goals are not achieved, India can, in extreme cases, reinstate trade restrictions.
In addition, family reunification for Indian management employees in Switzerland will be made easier, among other things. Switzerland also guarantees the protection of intellectual property, for example for certain types of rice, and waives customs duties on certain fruits and vegetables for Indian exporters. With these exceptions, the agreement does not directly affect Swiss consumers.
Who are the winners and losers in Switzerland?
The machinery industry in particular is happy about duty-free trade. It exports more to India than any other industry, namely goods worth almost a billion francs every year. “The agreement is a welcome boost for Swiss manufacturers of machine tools, electrical systems and precision instruments, for example,” said Martin Hirzel, President of the Tech Industry Association Swissmem, on Monday morning. His industry is not doing well at the moment due to the global economic slowdown; The agreement that has now been negotiated is a ray of hope.
However, the pharmaceutical industry, which is the most important Swiss export sector in trade with most other countries, is less enthusiastic. She would have liked stronger intellectual property protection for her products; The Swiss negotiators only partially achieved this goal. India is one of the most important production locations for generic drugs, i.e. copycat drugs; In the past there had been repeated patent disputes between Swiss manufacturers and Indian generic drug companies.
For Swiss farmers, on the other hand, little will change despite the above-mentioned import relief for Indian agricultural products: The contract with India does not go beyond existing free trade agreements in this regard, for example it does not affect border protection for meat and milk or vegetables and fruits within the growing period at. In contrast, India is lowering tariffs for certain Swiss products, including wine.
Why did the negotiations take so long?
Previous attempts have failed due to different ideas regarding intellectual property, which is particularly crucial for the pharmaceutical but also the watch industry. In recent years, however, there has been a rethink in India in this regard: In addition to generics, India also wants to produce innovative products itself in the future – for this a high level of patent protection is crucial. The fact that Parmelin and not his predecessors were allowed to sign the agreement was primarily due to external circumstances.
With their signatures on Sunday, Switzerland and the other Efta states have beaten out heavyweight competitors: the United Kingdom and the EU have also been negotiating with India for years. In the last two years, however, the Efta negotiating delegation – led by Switzerland – overtook them: apparently they were able to convince the Indians that the smaller and economically less complex Efta is better suited as the first free trade partner in the West.
Sustainability was the most important issue in the 2021 referendum on the agreement with Indonesia. And now?
“Back then it was all about palm oil,” said Swiss negotiator Markus Schlagenhof in an interview. “From five-year-old boys to 95-year-old adults, everyone in Switzerland had an opinion about it.” In fact, the question of whether the measures integrated in the agreement were sufficient for sustainable palm oil trade dominated the debate at the time.
Schlagenhof said he sees no such disputes in the agreement with India. The contract also contains a legally binding chapter on the topic of sustainability. Among other things, according to this, the parties must not weaken the protection of working conditions and the environment in order to improve their conditions in international trade.
The non-governmental organization Public Eye is not convinced: Unlike the rest of the agreement, the parties have not incorporated a dispute resolution mechanism for this chapter. This means that if this is not observed, the contractual partner cannot insist on implementation.
Public Eye writes that no requirements regarding human rights and environmental standards have been defined for the targeted 100 billion direct investments. The federal government also did not investigate the effects of the agreement on human rights.
What could go wrong now?
After the governments have signed the free trade agreement, it still has to be ratified in the respective countries. If one of the countries involved in the agreement does not put the agreement into force, it also fails for all the others.
In India, Norway, Iceland and Liechtenstein, confirmation by parliaments is likely to be a formality. Parliament in Switzerland is also likely to approve the agreement – although, as in the case of Indonesia, this could face resistance from the population. Public Eye says it is considering taking part in the referendum together with other organizations.
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