Opportunity knocks for Switzerland in the US

US President Donald Trump prefers bilateral agreements to multilateral ones. For Switzerland, this signifies an opportunity – but also uncertainty. This week Switzerland’s top trade diplomat is travelling to Washington to hold talks about a possible free-trade agreement. 

You can’t blame Trump for everything. EU politicians, US journalists and Chinese functionaries happily portray him as digging free trade’s grave – and it’s true that his wildly distributed punitive tariffs certainly make exchanges between countries harder. 

Now, however, the drawbacks of Trump’s import-export dealings are becoming apparent: he agreed to sign a free-trade pact with Mexican President Enrique Peña Nieto in only 90 days, at the same time upending the North American Free Trade Agreement (NAFTA). 

Trump the businessman, it turns out, doesn’t want to be a protectionist. But he has something against supraregional packages. Abbreviations such as NAFTA, WTO or TPP are anathema to him. As a result, his diplomats are hurriedly looking for bilateral trade solutions – with Japan, Britain, the EU. And Switzerland. 

Everyone’s looking for deals 

This scene had already been set before Trump was elected president. The WTO (World Trade Organization) has stagnated over the past decade and the TPP (Trans-Pacific Partnership) was on the ropes during Barack Obama’s time in office. So it’s perfectly possible that the views currently expressed so effectively by the turbulent incumbent of the White House will end up outliving him. 

Bilateral instead of multilateral. For Switzerland the overall picture is now getting clearer. In the world of new bilateral deals, opportunities are growing – but with them uncertainty. 

The opportunities can be seen in the advances from Washington. For a quick win, the Trump administration would certainly be prepared to wave through a slim deal, perhaps with generous transition periods too. 

The uncertainty can be seen in the fact that the US is not the only country on the look-out for deals. In June, the EU launched free-trade talks with Australia and New Zealand; in July the EU signed a free-trade agreement with Japan. At the same time, Trump and Jean-Claude Juncker, president of the European Commission, agreed to reduce barriers to industrial trade. And, sure enough, since then Juncker has declared the EU is prepared to import more US beef. 

Such convergence puts Switzerland in a bind: when two sides agree, it becomes a third country. An example is the current treaty between the EU and Japan, which places Swiss exporters of various goods and agricultural products at a disadvantage compared with European exporters – despite Bern having signed its own pact with Tokyo in 2009. This treaty is now partially out of date. 

What are the Swiss prepared to risk?

Switzerland decided early on to open its industries to the world via free-trade agreements. It is increasingly clear that this process must be constantly restarted and rethought. Back to square one. 

In 2006, the Federal Council broke off talks with the US fearing the farming lobby. The issue has returned and uncertainty rearing its head once again. As is opportunity. And once again Switzerland will have to decide how far it is willing to go to defend Swiss agriculture. 

This article originally appeared in the print edition of the HandelszeitungExternal link. 

Free-trade agreement with the US 

Both the EU and Switzerland want to conclude a free-trade agreement with the US. Switzerland wants to be first, otherwise Swiss exports would no longer be competitive in the American market. The US is Switzerland’s second-most important trading partner: every year, the Swiss economy exports goods worth CHF36 billion ($36.3 billion) to the United States. 

The top Swiss trade diplomat Marie-Gabrielle Ineichen-Fleisch is travelling to Washington this week for exploratory talks. The sticking point is agriculture: agricultural free trade with the US is not sustainable for Swiss farmers, but the Americans would hardly accept a complete exclusion of the agricultural dossier, Ineichen-Fleisch told the Tages-AnzeigerExternal link. 

Switzerland wanted to conclude a free-trade agreement with the US back in 2006, but this failed because of farming.

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(Translated from German by Thomas Stephens)