FTAs: Interview with Economiesuisse

Alliance Sud News: With the Doha Round at an impasse, Switzerland has been negotiating bilateral free trade agreements with countries in the South for some years now. For Alliance Sud, however, they pose developmental problems. What is a «good agreement» for the Swiss economy and what, in your view, are the limits to the concessions that Switzerland should grant?

Pascal Gentinetta: A good agreement is one that is made in the interest of the two parties. Generally speaking, considering that the WTO Doha Round of negotiations is making no headway, it is wise to concentrate efforts on bilateral agreements that complement it. The central issues are reducing customs tariffs as well as non-tariff barriers and quotas, simplifying some provisions, protecting intellectual property, market access for investment and access to government procurement tenders. And let us not forget the predictability of the legal framework. This is what inspires our guideline, which prioritises the quality of agreements rather than their number.

Protection is not really a factor in Swiss economic circles as our economy is already very open, except perhaps for agricultural tariff barriers.

To Alliance Sud, quality means precisely that these agreements should contribute to sustainable development and the promotion and protection of human rights. In 2010, the European Free Trade Association (EFTA) adopted model provisions on the environment and  labour rights, which although insufficient, are an important first step. We urge Switzerland to take them seriously and implement them in future agreements.

Protecting human rights and labour and environmental standards is very important. But the question is which institutional instrument is best suited for addressing those issues. On that our position is clear. Free Trade Agreements (FTAs) are strictly commercial instruments and we should be careful not to confuse them with other social issues that are in themselves also important. The issues you raise should be approached with the seriousness that they merit in specific bodies like the International Labour Organization and the United Nations.

It should also be pointed out that Switzerland cannot set itself up as a sermonizer to the whole world and unilaterally impose the topics to be discussed with countries that are seeking an agreement with it. We must bear this in mind. And not forget that in most cases, sound economic development induced by the development of trade generally leads to improved social and environmental conditions as well as human rights.

That link is not automatic, as illustrated by the case of China. For Alliance Sud the central question is not only coherence between the various instruments, but also within them. Together with other NGOs, we have asked for human rights provisions to be included in the agreement with China. We believe that Switzerland is trying to score a cheap advantage over its main competitor the European Union, which is placing strong emphasis on this aspect.

The EU has a different political weight from Switzerland. And I do not believe that the EU is refusing to launch negotiations with Peking on account of greater human rights demands, but rather owing to internal EU economic disparities and the difficulty of negotiating as a group of 27.

The negotiations with China promise to be arduous, all the more so as both countries export largely the same industrial products and the Asian giant is dragging its feet on intellectual property issues. What do you expect from this agreement?

Switzerland has a priority interest in developing FTAs with major countries with strong growth. China is growing at over 10 per cent per annum, despite the persisting major disparities and the concomitant social and environmental challenges.

Admittedly, the Chinese know what they want, and Chinese tariff barriers are still quite high – 10% on average. There are also numerous non-tariff obstacles and extremely complex regulations in the pharmaceutical and banking industries. Intellectual property protection is also a thorny issue, as is the guarantee of legal  security. But we are highly optimistic that both sides will be pragmatic for the sake of a shared interest. Our export sectors are complementary. To underline my optimism I would cite the example of the agreement with Hong Kong, which is making good progress.

Besides, let us remember what interests us, namely access for investments. Swiss investors are already welcome in China. We are doing no more than forging ahead with something we have already begun. Our companies are very active and their environmental and labour standards are much higher than the average for local companies. That is our contribution to China's development.

The other major agreement now being negotiated is that with India. Small and medium enterprises (SME) in India are refusing to lower customs tariffs in the agri-food, chemical, machine and watchmaking industries, which have a strong presence in the informal sector and are highly labour-intensive. It is essential for a country like India to have sufficient policy space to protect its infant industries.

India is an emerging country with very strong growth dynamics. It has numerous highly competitive industries, from chemicals to IT, to textiles and high-tech. We think that the markets are complementary and in our view, Indian SMEs are not competing directly with Swiss firms.

India also wants to maintain a flexible intellectual property regime under which it can continue to produce enough generic drugs and still act as «pharmacy  of the South». This is crucial to enabling developing countries to combat pandemics such as Aids. What concessions are you willing to accept?

The protection of intellectual property is crucial to developing new medicines and thereby combating diseases. That applies as much to Switzerland as to India. The latter is producing more and more medicines and has an interest in effective intellectual property protection. Perhaps we should allow the matter some time.

India is demanding free circulation for its qualified workers, something that Switzerland opposes. Yet if on the one hand we are asking for concessions, we must in turn be willing to make concessions.

There is no doubt that Switzerland is restricted by its general domestic legislation. Nevertheless, for certain advanced sectors such as IT, which are finding it difficult to recruit qualified and highly specialised personnel locally, greater flexibility on quotas would be a good thing.

Interview: Isolda Agazzi, Alliance Sud

Published in: Alliance Sud News No. 68, Summer 2011