In addition to the EFTA Convention and the Free Trade Agreement with the European Union (EU) of 1972, Switzerland has a network consisting of many free trade agreements (FTAs) with numerous partners. Switzerland normally concludes its FTAs together with its partners Norway, Iceland and Liechtenstein, in the framework of the European Free Trade Association (EFTA). Nevertheless, Switzerland has the possibility to enter into FTAs outside the EFTA framework as well, as it has been the case of Japan and China.
Switzerland is a country that is strongly integrated into the global economy and whose economy is characterised by a pronounced international orientation. Although the Swiss market, home to some 8.5 million people, is undoubtedly important, its size is ultimately limited. Much of our prosperity thus depends on the international trade in goods and services as well as on cross-border investment activities. Without the ability to sell to foreign markets, Swiss companies’ potential for growth would be limited. Continuously improving access to foreign markets is therefore an important objective of Switzerland’s foreign economic policy.
A worldwide liberalisation and simplification of trade is the best way to achieve this goal. Switzerland pursues this approach multilaterally within the framework of the World Trade Organisation (WTO). The WTO sets the basic rules for cross-border trade, which many countries supplement by signing bi- or plurilateral, regional or supraregional free trade agreements. Switzerland is also pursuing a very active free trade policy. By entering into free trade agreements, Switzerland aims to provide its companies with a level of access to international markets that is at least equivalent to those enjoyed by its most important foreign competitors (such as the EU, the USA and Japan), which are also expanding their networks of free trade agreements. Free trade agreements are therefore an important instrument in maintaining and strengthening Switzerland’s competitiveness as a place to do business.
As part of a coherent foreign policy, it is important that sustainable development goals are reflected in foreign economic policy as well. The Federal Council is aiming for a “win-win” situation that is designed to facilitate growth consistent with these goals in both Switzerland and its partner countries. Switzerland therefore makes legally binding provisions on environmental and labor protection an integral part of its free trade agreements.
The Federal Council’s foreign economic strategy stipulates four criteria for selecting potential free trade partners:
- The current and potential economic importance of a prospective partner;
- The extent of existing or potential discrimination resulting from free trade agreements between the prospective partner and major competitors of Switzerland;
- The willingness of the prospective partner to enter into negotiations and the corresponding prospects for success;
- Other considerations, such as how a free trade agreement is likely to contribute towards the economic stabilisation and development of a prospective partner or its general compatibility with Swiss foreign policy objectives.