Sino-Swiss Free Trade Agreement: effective now!

By Richard Hoffmann, ECOVIS Beijing China

The 1st of July 2014 marks a major milestone in the relations between China and Switzerland as the Sino-Swiss Free Trade Agreement (FTA) officially came into force. After starting talks as early as 2007 and holding numerous negotiation rounds, both countries eventually agreed on major trade facilitations to be effective as of July 1st 2014.

China and Switzerland have further strengthened their already strong bilateral ties by establishing this preferential trade relationship for goods and services.

Generally speaking, the agreement guarantees significant customs duty improvements and associated possibilities for savings for all parties involved from both countries. 99.7% of Chinese exports to Switzerland will be exempted from tariffs. At the same time, 84.2% of Swiss exports to PRC will enjoy zero tariffs.

According to the Ministry of Commerce of the People’s Republic of China (MOFCOM) and State Secretariat for Economic Affairs Switzerland (SECO), the agreement aims at improving mutual market access for Chinese and Swiss companies, enhancing general bilateral economic relations, protecting intellectual property rights and strengthening sustainable development and cooperation between the Alpine country and the said-to-be largest economy in the world.

In fact, the FTA comprises numerous provisions for different areas of application. Amongst others, the key provisions include improvements in trade of goods and services, promotion of investment and general settlements of agreement disputes. Officials from both sides agree that the FTA will encourage win-win trade and economicexchange.

However, besides significant improvements for both involved countries, the Swiss Free Trade Agreement with China does also imply changes and opportunities for other countries in Europe, including Germany. Those impacts will not be direct and significant in nature as the agreement aims to strictly prevent trilateral trade. Yet, the impacts of the Sino-Swiss FTA will be felt indirectly in the EU.

For instance, given the preferential regulations, the Free Trade Agreement with China will attract an increasing number of Chinese companies and related investment into the Alpine country. By using Switzerland as the platform for their European operations, Chinese companies can leverage the advantages of the geographical proximity to the EU and the open policies of the Confederation and might set up their European headquarters in one of the Swiss Cantons.

This in turn will influence businesses in the EU, and Germany in particular, as relations and trade between the EU and Switzerland are well established and facilitated due to both sides being member of the European Free Trade Association (EFTA). Additionally, international trade experts share the opinion that the FTA will grant China new exposure to the larger market of the EU.

Moreover, given the geographical location of the Alpine country in the heart of Europe, the agreement has the potential to incite transformation in the EU’s perception of trade with Beijing. This again might lead to a resumption of talks about a possible FTA between the People’s Republic and the EU as a whole.

All in all the Swiss Free Trade Agreement with China highlights Beijing’s decisiveness to stimulate its trade and operations in continental Europe, even through indirect actions.

For further information on the FTA and its implications, please contact us.

	Richard Hoffmann is a Partner at ECOVIS Beijing China. Richard obtained an honor’s degree in law and worked in Germany, America and China for various prestigious law firms prior to joining ECOVIS. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV. Contact: richard.hoffmann@ecovis.com
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