Cheese is a problem. Switzerland produces wonderful cheeses and chocolates, but protects its farmers to the max. That’s one of the few hits that Switzerland took in its Trade Policy Review last month in the World Trade Organization. Since Switzerland is the WTO’s home and several Swiss have headed up either the WTO or its predecessor, the GATT, one might think that Switzerland would be the epitome of the open economy. One would be wrong. They are good, but not a shining example.
The review covered both Switzerland and Liechtenstein, since they have a customs agreement, an open border and most foreign trade issues are handled in Berne, not Vaduz. There are a few minor differences, but we’ll get to those. For the most part, just assume that anything said about Switzerland applies to Liechtenstein, too.
The really strange thing – in this world of percentage ad valorem customs duties – is that Switzerland doesn’t use them. At all. The Swiss are the only WTO members to exclusively use specific duties, generally a set number of Swiss francs per weight of the item being imported. This means that the ad valorem equivalent can go up or down, depending on what is happening with exchange rates. Without changing a single customs duty, Switzerland’s average tariff in ad valorem terms climbed from 8.1% in 2008 to 9.2% in 2012 – running against the grain of what has happened in most countries. Those specific duties amounted to only 2.3% for non-agricultural products in 2012, but averaged a whopping 31.9% for agricultural goods. See what I meant amount protecting farmers?
Many tariff items carry zero duty rates, and others are so low that Switzerland has become known for its nuisance duties. More than 40% of its tariff items carry duties that are equivalent to less than 2%. These can’t contribute much to national tax revenues and are surely a nuisance to importers.
Given the technical excellence that Switzerland is known for, I am not surprised that the country has 23,080 product standards. Luckily for traders, 95% of these are recognized international standards that your products are likely to already meet. And, if your product is already cleared for sale in the European Union, Switzerland is likely to permit free sale in its territory under the so-called “Cassis de Dijon principle” without further technical checks.
Liechtenstein belongs to the European Economic Area (the EU, Liechtenstein, Iceland and Norway) and Switzerland does not, so there are a few things that require adjustment between Liechtenstein and Switzerland. A few products (e.g., fish) face different customs duties and others (e.g., some telecom equipment, salt and pharmaceuticals) encounter different non-tariff restrictions.The big issues are that strange reliance on specific duties and going way overboard on protecting farmers and agricultural manufacturers. Equivalent duties on meat and dairy products average over 100%. One of the agricultural duties is the equivalent of 1,676%! There is a super complex tariff quota system for agriculture with 28 tariff quotas divided into 58 sub-quotas and aggregated with 80 bilateral preferential-tariff quotas. Follow that? I didn’t.
Much of the focus of the comments and questions from Members was on agriculture. Clarification was sought … on tariff peaks and complex variable tariffs, the justification of classifying certain measures in the Green Box, the difference between the system of “observed prices” and “administered prices” in price support measures, ending the compulsory levy on milk, and plans for phasing-out export subsidies entirely.
~ Concluding remarks by the TPR Chairperson, 4/25/2013
Switzerland is plagued by agricultural surpluses (small wonder, given how they are protected) and provides export subsidies to get those surpluses down on dairy products, flour and other milled products that go into food products. The subsidies partially compensate food manufacturers, such as Swiss chocolate makers, for the high prices they have to pay for domestic ingredients.