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Free Trade Agreements

Hurdles for Small and Medium-Sized Enterprises in Switzerland to use this Strategic Advantage

Written by S. Shalaby

Paper category

Master Thesis


Business Administration>Management




Master Thesis: Global trade in recent years In its "World Trade Statistics Review", the WTO reported that the value of global trade in goods and commercial services in 2015 was almost twice that of 2005 (WTO, 2016a). They explained that during this period, North America, Europe and Asia accounted for 88% of the total merchandise trade of WTO members. They added that the share of commodity exports from developing economies has risen from 33% to 42%. In 2015, the total merchandise exports of WTO members were 16.2 trillion U.S. dollars, and the total commercial service exports of WTO members were 4.68 trillion U.S. dollars (WTO, 2016a). 1.2. Swiss international trade in the context of global trade is considered to be a key driver of economic growth for a small resource-poor country like Switzerland (Müller & Nussbaumer, 2016). WTO data (2016a) shows that in 2015, Switzerland ranked 16th among 195 economies in terms of merchandise exports and 17th in terms of merchandise imports. Excluding intra-EU trade, Switzerland's merchandise imports and exports rank 11th. In terms of business services, data from the World Trade Organization (2016a) shows that Switzerland ranks 13th in exports and 15th in imports. Excluding trade in commercial services within the EU, Switzerland ranks 7th in exports and 9th in imports. 1.3. Free trade agreements as a promoter of free trade The Swiss government believes that free trade between countries can improve economic relations with important economic partners (Staatssekretariat für Wirtschaft [SECO], n.d.). Therefore, compared with competitors in other countries, this should provide Swiss companies with stable and barrier-free access to foreign markets and a competitive advantage (SECO, n.d.). The Swiss State Secretariat for Economic Affairs (German: Staatssekretariat für WirtschaftSECO) regards the Free Trade Agreement (FTA) as a means to achieve this goal (SECO, undated). FTA is an international treaty signed by two parties (individual countries or multinational groups) to ensure and promote free trade (SECO, n.d.). SECO believes that they improve business relationships by removing trade barriers such as tariff and non-tariff barriers (such as import quotas, packaging and labeling regulations, or technical regulations). Provisions for important components of regional trade agreements for industrial products, processed agricultural products and fish (SECO, undated). SECO added that the so-called second-generation agreement includes provisions on intellectual property, investment, public procurement, and increasingly important trade in services. 1.4. Swiss Free Trade Agreement Switzerland currently has a network of 30 FTA partners (SECO, n.d.). SECO (n.d.) explained that of the 30 FTAs, 28 are agreements with 38 countries outside the European Union (EU). The other two are agreements with the European Union and the European Free Trade Association (EFTA) conventions, which include Switzerland, Liechtenstein, Norway, and Iceland. They added that in addition to these final agreements, Switzerland has also signed two other free trade agreements that have not yet entered into force and is currently negotiating with eight potential free trade partners. Switzerland usually signs FTA with EFTA partners Liechtenstein, Norway and Iceland (Swiss Global Enterprise [S-GE], undated) within the framework of the EFTA agreement. These agreements are labeled as multilateral FTA. However, the country is able to conclude a free trade agreement (S-GE, undated) outside of the EFTA framework. These agreements are called bilateral free trade agreements because they are signed directly between Switzerland and a partner country, as in the case of Japan or China (S-GE, undated). The selection of potential free trade partners in Switzerland based on the following main criteria (SECO, nd):-the current or future economic importance of the partners-the competition that Switzerland can achieve by concluding free trade agreements with future free trade agreements against important competitors Superior level of partners-willingness of potential partners to participate in negotiations and the corresponding prospects for success-other foreign policy-related considerations, such as compatibility with Swiss foreign policy objectives in Switzerland, first and second generation agreements (SECO, nd) . The first generation of agreements mainly included provisions on trade in commodities, covering industrial products, processed agricultural products, and fish trade (SECO, n.d.). This includes agreements with partners in the Euro-Mediterranean region, Southern African Customs Union (SACU) and Canada (SECO, n.d.). The second-generation agreement also covers the provisions on commodity trade in the first-generation agreement, but usually includes further provisions on intellectual property, investment, public procurement, and increasingly important service trade (S-GE, undated). This includes agreements with partners Bosnia-Herzegovina, Central American countries, Chile, Colombia, Gulf Cooperation Council, Mexico, Montenegro, Singapore, South Korea, Peru, Ukraine and bilateral agreements between Japan and China (SECO, nd) SECO ( 2016) explained that the Swiss Free Trade Agreement aims to increase foreign trade by reducing trade barriers. Read Less