Economy and trade – an essential partnership

 Rhine Harbour
Rhine Harbour © FDFA

Switzerland is one of the main economic partners of the European Union (EU):

  • The EU’s fourth biggest export and import market of EU goods, after the United States, China and the United Kingdom (representing about 8% of the EU’s foreign trade). 69% of Switzerland’s imports originate in the EU and the EU is the destination of 51% of Switzerland’s exports. The European Union is by far the most important market for the export-oriented Swiss industry.
  • Switzerland is the EU’s second most important market for EU services providers. Switzerland was the recipient of 11% of the EU services exports in 2019. 
  • 13% of foreign direct investments (FDI) in the EU originate in Switzerland. 

An active European policy is therefore essential from an economic perspective. In order to facilitate trade, Switzerland and the EU have signed bilateral economic agreements. The 1972 Free Trade Agreement (FTA) paved the way for the development, in several stages, of a rapprochement with the internal market. After the Swiss people refused to join the European Economic Area (EEA) in 1992, Switzerland and the EU signed the Bilateral agreements I (five of the seven agreements are market access agreements) in 1999, in order to facilitate mutual access to markets and to minimise barriers to trade. The Bilateral agreements II (nine agreements, one of which on trade) were signed in 2004. These treaties guarantee to a large extent a reciprocal access to markets and avoid discrimination against Swiss operators in the EU’s internal market, as well as underpinning a tight cooperation in numerous other areas (research, safety, asylum, environment and culture).

The EU’s economic policies may directly impact Switzerland. They influence the economic and political relations between Switzerland and the EU. EU regulations directly affect Swiss exports. Switzerland closely follows the developments occurring in the EU and analyses their consequences for its economic operators.

Economic and monetary context

The European Union is the main economic partner of Switzerland. As a result, the macroeconomic and monetary stability of the EU is essential for Switzerland’s economy. Furthermore, the EU is by far the most important market for the export-oriented Swiss industry. The Bilateral agreements ensure that both parties benefit from the removal of trade barriers: the resulting conditions foster trade and competition, stimulate competitiveness, economic growth and employment. The positive economic effects of these agreements are undisputed: since their introduction, per capita economic growth in Switzerland has increased.

Following the financial crisis in 2008 and the subsequent euro crisis, the EU has taken several measures to strengthen the economic policy framework and the euro area (Economic and Monetary Union, Banking Union, Capital Markets Union). Work on these is still ongoing and is being pursued with increased urgency in the context of the economic impact of the COVID-19 crisis. Structural reforms are necessary and ensuring macroeconomic protection in the event of a crisis is a priority for the EU. Such developments also have an impact on Switzerland, who is closely following the progress of these projects.

The COVID-19 pandemic poses a major challenge to the national economies as well as to trade between Switzerland and the EU. The impact of the COVID crisis on the global, European and Swiss economies is considerable. The EU has responded with a series of measures to support the economy, which include the establishment of a European Recovery Fund ("Next Generation EU") as well as exemptions and greater flexibility in the rules for state aid and for national budget deficits and debt. This exceptional situation will shape the economic and fiscal policy framework in the EU and the Eurozone in the medium term. Although interventions in the economy also raise questions from Switzerland's perspective, for example with regard to competitiveness, a swift recovery in the entire European economic area is clearly in Switzerland's interest.

Trade relations

Various agreements considerably reduce the costs of the import and export of goods, as well as the technical barriers to trade in several industrial sectors. 

The Free Trade Agreement guarantees fair conditions for mutual market access by eliminating tariffs and quantitative restrictions on industrial goods. This agreement is of high importance, given that bilateral trade in goods between Switzerland and the EU amounts to over 1 billion Swiss Francs (CHF) per working day. As a result of the agreement, importers and exporters on both sides save several billion euros each year. Cross-border freight traffic is also facilitated by a customs simplification and security agreement, which allows for the import and export of goods between Switzerland and the EU without additional customs security measures. Furthermore, an agreement on public procurement ensures good cooperation in this area and guarantees the non-discrimination of the Swiss and European economic operators.

The agreement on technical barriers to trade simplifies administrative procedures required to place industrial products on the market in twenty different sectors. The agreement is based on equivalent regulations and mutual recognition. Similar harmonisation also prevails in the agricultural sector (agreement that comprises, inter alia, sanitary regulations or geographic indications). Switzerland’s access to the single market is thus commensurate to its level of harmonisation. The Joint Committees foreseen by the existing agreements are dedicated platforms to solve market access and cooperation issues.

Trade in services is mainly covered by the Agreement on free movement of people (AFMP).