The Sino-Swiss Free Trade Agreement –2023 Academic Evaluation Report (10th Anniversary Edition)

Zurich: Seismo, 2023. https://doi.org/10.33058/seismo.30885

81 Pages Posted: 11 Oct 2023

See all articles by Tomas Casas

Tomas Casas

University of St. Gallen - SoM: School of Management

Z C

Independent

Xinquan Tu

University of International Business and Economics (UIBE)

P Ziltener

Independent

Date Written: October 5, 2023

Abstract

The Sino-Swiss Free Trade Agreement (SSFTA) 10 Years On: Benefits for Swiss and Chinese Exporters still have Room for Improvement

The impact of any free trade agreement is evidenced by its utilization rates. The analysis of the utilization rates and deficits of the SSFTA constitutes the core of this report (in Part II). Chapter 2.1 details the methodology to calculate SSFTA utilization rates which has been further perfected by the contributing Chinese and Swiss researchers.

Part III of the report supplies an extended analysis of the Swiss-Sino economic relationship and looks at new developments and novel areas of inquiry that are relevant to both practitioners and policymakers such as the trade in services and FDI.

A major finding of the 2023 report is that an increasing number of Swiss exporters use the SSFTA (see Chapter 2.3). The overall SSFTA utilization rate has increased by 13%, from 58% to 71% over the last five years. As a result, Swiss firms have saved USD 220 million in 2022 (up from USD 70 million in 2018). The remaining savings potential is contingent on many factors including the growth of bilateral trade in the coming years, but it might be estimated to be as high as USD 200 million.

Chapter 2.2 finds that for Chinese exporters, the SSFTA utilization rate has slightly decreased over the last five years with a fall in the overall rate of almost 3%, from 42.2% to 39.3%. The reasons for this non-utilization, as well as some of the success stories, constitute Chapters 2.4-2.7 of the report. The various analyses hold normative implications for firms and practitioners.

One reason for the low SSFTA utilization rates by Chinese exporters is that key items such as computers, smartphones, and other IT goods are already tariff-free and so there is no incentive to use the Sino-Swiss agreement. However, all major export positions show lower SSFTA utilization rates than five years ago, including machinery, chemical products, and textiles. Consequently, Chinese exporters and the Swiss importers of Chinese goods still pay more than CHF 400 million in annual customs duties, which is more than CHF 100 million more than were paid five years ago. At the same time and due to a significant increase in trade volume, SSFTA savings have increased despite a lower utilization rate, from CHF 147.8 million to CHF 212.9 million.

When looking in more detail at the breakdown of Swiss exports to China, one finds that a total of USD 4 billion, or 25.1% of total exports including medicines and medical devices or IT goods, are already tariff free. Other sectors such as machinery and instruments have contributed to increasing the SSFTA utilization rate by more than 10%, while the significant amount of watch exports have an extremely high utilization rate of 93% (up from 91% in 2018). Interestingly, Swiss exports with comparatively lower trade volumes also benefit significantly from the SSFTA, e.g., coffee, dairy products, sugar confectionery, metal products, vehicle parts, and certain textiles. As a consequence of increased trade volumes, it could be tentatively extrapolated that Swiss exporters and the Chinese importers of Swiss goods pay close to USD 200 million in annual customs duties, about USD 100 million more than five years ago.

The importance of the SSFTA to the two countries is self-evident. This report provides evidence that the SSFTA has achieved remarkable results in the past 10 years. Many Swiss and Chinese enterprises have seized the new opportunities brought by the SSFTA and continuously expanded the scale of trade and investment that has resulted from the solid economic cooperation between the two countries. Chapter 3.1 describes how exporters in Switzerland and other nations are poised to benefit from China’s unilateral measures on trade and investment. In Chapter 3.2, it is shown that the fast-growing potential of China’s service sector might take center stage in the bilateral relationship given Switzerland’s competitiveness in the trade in services, currently supporting a surplus of CHF 1.7 billion. Since trade and investment often go hand in hand, Chapter 3.3 provides readers with a global analysis of China’s FTA investment provisions, providing unique insights into China’s policy-making strategies. Finally, Chapter 3.4 hones in on the ‘learning-by-exporting’ assumption where trade is the basis for firm internationalization.

The Chinese contributors to the SSFTA report emphasize their country’s commitment to measures that promote high-level opening up, which will inject further impetus into SSFTA cooperation. Here, the report connects the Sino-Swiss commercial relationship with the big economic picture. At present, globalization is at an important crossroads between re-globalization and de-globalization. Geopolitics, post-pandemic economic recovery, income inequality, and climate change are just some of the grand challenges that the countries of the world are facing. Dr Ngozi Okonjo-Iweala, Director-General of the WTO, writes in her Foreword to the World Trade Report 2023 that: “Solving today's challenges actually requires more global openness, integration and cooperation, not less”.

Note:

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords: China, Switzerland, trade, FTA, international relations, trade in services, trade policy

JEL Classification: F13, F15

Suggested Citation

Casas, Tomas and Cui, Zhikun and Tu, Xinquan and Ziltener, Patrick, The Sino-Swiss Free Trade Agreement –2023 Academic Evaluation Report (10th Anniversary Edition) (October 5, 2023). Zurich: Seismo, 2023. https://doi.org/10.33058/seismo.30885, Available at SSRN: https://ssrn.com/abstract=4593483

Tomas Casas (Contact Author)

University of St. Gallen - SoM: School of Management ( email )

Dufourstrasse 40a
St. Gallen, CH-9000
Switzerland

Zhikun Cui

Independent

Xinquan Tu

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

Patrick Ziltener

Independent

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