Ohmynews | 14 May 2007
Japan, Switzerland Launch FTA talks
Analysis : Switzerland is expected to be Japan’s first European FTA partner
Japan and Switzerland have kick off their first round of negotiations on concluding a free-trade agreement (FTA) to eliminate import tariffs on almost all goods.
In the first round of FTA negotiations to be held for five days starting on Monday in Tokyo, the Japanese side will include Jun Yokota, ambassador for international trade and economic affairs, and other officials from relevant ministries. The Swiss team will be led by Luzius Wasescha, ambassador, permanent representative of Switzerland to the World Trade Organization (WTO) and state secretariat for economic affairs.
The first round of FTA negotiations comes about four months after Japanese Prime Minister Shinzo Abe and Swiss President Micheline Calmy-Rey agreed in a telephone meeting in January to launch negotiations as soon as possible. The two countries aim to conclude the accord by the end of the year.
Switzerland is the first European country with which Japan negotiates an FTA. Japan is Switzerland’s third-largest trading partner, after the 27-nation European Union (EU) and the United States, and its largest trading partner in Asia.
According to Japanese trade statistics, Japan’s exports to Switzerland totaled US$2.17 billion in 2005, while Japan’s imports from Switzerland amounted to US$5.06 billion. Generally, the goods are high-value products. The volume of trade in agricultural products is small. There are relatively few major trade disagreements between them, so it may be fairly easy to negotiate.
In the first round, "major areas of negotiations, such as trade in goods, trade in services, investment and intellectual property rights, will be discussed," the Japanese Foreign Ministry said in a statement.
It was Switzerland that first floated the idea of striking an FTA, in the late 1990s. The formal agreement to launch FTA negotiations followed the completion of a joint study between the two governments on the idea, which had been conducted since October 2005.
Switzerland is a member of the European Free Trade Association (EFTA), which was established in 1960 as an alternative for European countries that were not allowed or did not wish to join the European Community, the EU’s predecessor. The other current EFTA members are Iceland, Norway and Liechtenstein.
Separately from the EFTA, Switzerland concluded an FTA with the then European Community in 1972 and has since signed additional sector-specific agreements with the EU to complement the 1972 pact. Switzerland has built a network of 17 FTAs, covering 80 percent of its overall foreign trade. The country is negotiating or considering FTAs with many other trading partners.
The FTAs Japan has negotiated or will negotiate with trading partners are formally called economic partnership agreements, or EPAs, because they cover not only goods but also many other areas, including investment, services and intellectual property rights.
The FTA, if realized, will significantly benefit Japan because more than 70 percent of Japanese goods shipped to Switzerland are subject to import tariffs. As for Swiss products imported into Japan, only around 20 percent of them are taxed.
The main Japanese export items to Switzerland are vehicles and related transport equipment, machines, and chemical and pharmaceutical products. The main Swiss export items to Japan are chemical and pharmaceutical products, watches and jewelry as well as machines and instruments.
Since the mid-1990s, the trade balance has been turning increasingly favorable for Switzerland. Japan is seeking to export more electronic goods to Switzerland, among others, while Swiss pharmaceutical and watch-making companies have been looking to boost shipments to Japan.
The FTA would also give a boost to trade in services and investment as well.
On trade in services, as of the end of 2005, Switzerland ranked 15th in the list of Japan’s major trading partners, according to Japanese balance-of-payment figures. In 2005, Japanese providers sold services of 129.3 billion yen (a little over US$1 billion) to Swiss consumers and Swiss providers sold services of 243.7 billion yen (abut US$2 billion) to Japanese consumers.
On investment, as of the end of 2005, Switzerland ranked 8th among foreign direct investors in Japan with 265.9 billion yen (a little over US$2 billion) of investment, after the U.S., the Netherlands, France, Germany, Canada, Britain and Hong Kong. Meanwhile, Japanese companies invested 102.1 billion yen (about US$850 million) in Switzerland, according to Japanese investment statistics.
Hisane Masaki is a Tokyo-based journalist, commentator and scholar on international politics and economy.