AFP | 01 Jul 2014
Swiss-Chinese free trade agreement takes effect
A watershed free-trade deal between China and Switzerland came into force on Tuesday, the first such accord between the Asian giant and a mainland European economy.
Senior Swiss and Chinese officials were scheduled to mark the debut of the Free Trade Agreement (FTA) at a ceremony in the northern city of Basel, a highly symbolic location given its historical status as a hub for commerce along the River Rhine.
The FTA was finally signed in Beijing July 2013, capping two years of talks between China and Switzerland.
The two sides had inked a preliminary agreement two months earlier in Switzerland, during Chinese Premier Li Keqiang’s first visit to Europe since taking the helm in a once-in-a-decade power transfer in March 2013.
The deal with the Swiss is China’s second with a European country, with Beijing having signed an FTA with economic crisis casualty Iceland in April 2013.
Neither Iceland nor Switzerland — whose prosperous economy emerged relatively unscathed by the crisis — is a member of the European Union.
Beijing has been pressing Brussels for a similar FTA, but efforts on that front are more complicated because China would need to find agreement with the entire 28-nation bloc, and the two sides are locked in a series of tit-for-tat trade disputes.
Trade links between EU, China
The European and Chinese economies are tightly linked.
The EU is China’s top export market, while China is second to the United States as a destination for EU exports.
But the balance is heavily in China’s favour.
While EU exports to China reached a record 148.1 billion euros ($191.8 billion) in 2013, Chinese exports to the EU were worth 279.9 billion euros ($382.4 billion).
EU powerhouse Germany is China’s top individual trade partner, with its exports to China worth 67 billion euros ($91.5 billion) last year, while Chinese imports in Germany reached 73.4 billion euros ($100.2 billion).
In contrast, Switzerland is one of the rare Western countries with a relatively narrow trade deficit with China, its third-ranked partner after the EU and the United States.
In 2013, its exports to China were worth 8.8 billion Swiss francs (7.2 billion euros, $9.9 billion), while Chinese imports in the Alpine country reached 11.4 billion francs (9.38 billion euros, $12.8 billion).
Switzerland’s top exports to China are watches, pharmaceuticals and chemicals, and machinery, while textiles and machinery head the list of imported Chinese goods.
The relatively low deficit goes a long way to explaining its business sector’s positive stance on the FTA, but the Alpine country also sees it as a way to get the edge on competitors.
With the strong Swiss franc and high labour costs making it hard to beat rivals on price, Swiss firms have long made quality their selling point.
FTAs, including a planned EU-US accord and a proposed trans-Pacific agreement, are solidly in focus as the 160-nation World Trade Organization struggles to craft a global treaty on liberalizing international commerce, a process launched in 2001.