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Free trade agreement CETA: Consequences for Swiss exporters?

On October 30, 2016, Canada and the EU signed the CETA, the Canada-European Union Comprehensive Economic and Trade Agreement in Brussels. The agreement will result in the removal of customs duties and other trade restrictions between Canada and the EU; however it will only come into effect when all national parliaments in the EU have agreed.
Skyline of Montreal.
Skyline and high-rises of Montreal, Canada.

Switzerland is currently one step ahead as it has had a free trade agreement (FTA) with Canada since 2009 within the framework of the EFTA. This affects mainly the trade of goods and processed agricultural products: The agreement eliminated customs duties on industrial products and processed agricultural products to a great extent. Moreover, within the framework of a bilateral agricultural agreement, customs concessions were concluded for selected agricultural basic products.

FTA: Customs savings must be actively realized

In 2012, a research project at the University of Zurich financed by Switzerland Global Enterprise (S-GE) evaluated the practical benefit of the free trade agreement to Canadian and Swiss companies (three years after coming into force). Alfonso Orlando, Head of ExportHelp at S-GE, said regarding the FTA, that: “Contrary to a widely held assumption, customs savings are not accrued automatically by the FTA, they have to be actively realized by the companies themselves. The effort involved can be significant, especially with regards to the proof of origin. Furthermore, if the potential customs savings are small, it is sometimes not worth making use of the FTA. In addition to this, specific product groups such as certain pharmaceutical products can be traded duty-free without the FTA, thanks to international agreements.”

Swiss Business Hub Canada – the local contact partner

Markus Reubi is head of the Swiss Business Hub Canada in Montreal. In a small team and with selected experts, he supports inquiries from Swiss SMEs concerning all of Canada, depending on the industry sector, regional focus and the nature of the inquiry. In this way, Swiss Business Hub Canada is in a position to provide local support to companies regarding entry into the Canadian market.

Markus Reubi, what does the agreement means for Swiss exporters?

No immediate direct effects can be expected for Swiss exporters. Until CETA is ratified, Swiss companies actually have a small head start due to the EFTA Canada Agreement in 2009. This head start will be relativized to the extent that a large part of the CETA provisions will now become temporarily effective. Whether this configuration will have consequences for Swiss exporters and indeed what those consequences might be, remain open questions at this time, which depend both on the implementation of CETA as well as exploratory discussions for modernization and expansion of the EFTA Canada Agreement.

Do Swiss SMEs profit enough from free trade with Canada?

The EFTA Canada Agreement is a success story and its influence on the growth of trade and investment volume, which has been observed in past few years, should not be underestimated. However, even in Canada it is currently not very well known. There is also a large potential for further savings: Between 2009 and 2012, only around 15% of Canadian exports (by value) arrived in Switzerland duty-free under the FTA. This indicates that there is room for further savings. This affects, for example, trade with vehicles and other physically heavy goods, where the Swiss idiosyncrasy of customs by weight plays a role.

How high is the FTA utilization rate with Swiss exporters?

In 2011, Swiss exporters realized 68% of possible savings. In the sectors where the FTA is used regularly, Swiss companies achieve annual savings of around 18 million francs. There is an indication of potential for further savings in all sectors, but mainly in the chemical, electrical machine and vehicle sectors, in clocks as well as with plastic and rubber products.

What other factors should be taken into consideration for exports to Canada?

Better utilization of the FTA is part of the answer to the question of how the market potential of Swiss exports to Canada can be better exploited. Moreover, we observe, for example that there is potential for optimization in the selection process of suitable local partners. They should be familiar with the local conditions and especially the cultural diversity in the country. Swiss Business Hub Canada can assist Swiss companies in identifying and selecting the right partners in an independent manner.

Main Swiss exports to Canada: Chemicals, pharmaceuticals, machines, clocks and instruments

In 2015, Swiss companies exported goods to Canada with a total value of more than 3.5 billion Swiss francs. The most significant are chemical and pharmaceutical products, followed by machines, clocks and instruments. The FTA is a success story for Swiss exporters, mainly in the textile and metals sectors as well as with clocks and instruments that can regularly be exported duty-free up to 50% lower under the FTA. The analysis also shows that in the export of processed agricultural products, Swiss companies very effectively utilize the customs savings potential of the FTA. In fact, more than 50% of the total savings are achieved in this sector.

Country consultation days for Canada and USA

Would you like know more about exports to Canada and the USA? Sign up for our free country consultation days on:

Event Cleantech / Sustainable Buildings

Participate on December 1 in Yverdon-les-Bains in the S-GE Impulse Session: Sustainable Buildings and find out more about the business opportunities in this sector in Canada and North America. Our Cleantech expert, David Avery would be pleased to answer your questions.

More information about CETA

More information about EFTA Canada

Switzerland has more than 28 free trade agreements worldwide

In addition to the EFTA Convention and the Free Trade Agreement with the European Union (EU), Switzerland currently has a network of 28 free trade agreements with 38 partners outside the EU. The agreements are usually completed within the framework of the European Free Trade Association (EFTA). However, Switzerland has the opportunity to complete free trade agreements outside of the EFTA, as in the case of Japan or China, for example. Today, Canada is the most significant free trade partner of the EFTA after the EU and Japan.

More information about free trade agreements

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