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Free trade agreement with Indonesia signed

On 16 December Federal Councillor Johann N. Schneider-Ammann, the economics minister of Liechtenstein and representatives of Iceland and Norway signed a free trade agreement with Indonesia’s minister for trade, Enggartiasto Lukita. Under the agreement, 98 percent of Swiss exports to Indonesia, the fourth most populous country in the world, will be exempt from customs duties over the coming years.

Indonesia's capital Jakarta has 9 million inhabitants
Indonesia's capital Jakarta has 9 million inhabitants

The agreement reached by the parties in early November will be signed in the presence of economic and political representatives of the EFTA states and Indonesia, and will make the EFTA states collectively Indonesia’s primary free-trade partner in Europe.

Market access and legal certainty will be improved

The agreement with Indonesia is comprehensive in scope. It improves market access and legal certainty for trade in goods (industrial and agricultural products) and services. It also includes provisions on investment, the protection of intellectual property, the reduction of non-tariff barriers to trade, including sanitary and phytosanitary measures, on competition, trade facilitation, public procurement, trade and sustainable development, and economic cooperation.

Key elements of the agreement include free access to the Indonesian market for Swiss industrial products and selected agricultural products and rules on trading Indonesian palm oil. Switzerland grants certain market-compatible tariff rebates for this product, applying quotas so as not to jeopardise domestic production of vegetable oils. The agreement also requires the parties to comply with multilateral conventions, including labour and environmental conventions, and contains a specific provision to ensure the sustainable production of the palm oil traded. In a supplementary agreement on intellectual property, Indonesia undertakes to amend its patent protection legislation to comply with its international obligations.

98% of customs duties to be abolished

A free trade agreement with Indonesia will exempt 98% of Switzerland's exports to Indonesia from customs duties. Customs duties will be phased out over 12 years, depending on the product. On the other hand, it will already be possible to export the majority of Swiss goods to Indonesia duty-free once the agreement comes into force. 

In the agricultural sector, the following concessions deserve special mention:

  • Indonesia will abolish duties on cheese and dairy products, either from the agreement’s entry into force or over five years. A phase-out period of nine years is planned for duties on yoghurt.
  • Customs duties on coffee, chocolate and biscuits will be lifted over 12 years.
  • Customs duties on baby food were abolished upon entry into force.
  • For energy drinks, duties will be abolished within nine years.

The following concessions in the industrial sector  should be highlighted:

  • customs duties will be reduced for practically all chemical and pharmaceutical products, either immediately upon the agreement’s entry into force or with transitional periods of up to nine years.
  • In the textile sector, it was not possible to agree on a comprehensive reduction of customs duties. For Switzerland's main export interests, however, duty-free market access could be agreed after duty reduction periods of five to twelve years.
  • For machinery, customs duties will be completely removed, with a few exceptions. Duties will either be lifted upon entry into force or after transitional periods of five to 12 years.
  • For watches, all customs duties will be abolished upon entry into force or within tariff phase-out periods of five to nine years.

Ratification planned by 2020

Parliament will commence the process of approving the agreement as soon as it is signed, so that Switzerland can ratify it by 2020 at the latest.

Indonesia is Switzerland’s main economic partner in South East Asia, with a trade volume of around CHF 830 million a year (not including precious metals, precious and semi-precious stones, art works and antiques). Direct Swiss capital investment in Indonesia amounted CHF 6.9 billion at the end of 2016, according to the Swiss National Bank.

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