In a forthcoming vote, Switzerland recently added Indonesia to its portfolio of free trade partners. But what is the extent of the network interconnection between the Swiss Confederation in terms of trade in general and how does it compare to the large trading blocs in China, the United States of America and the European Union? An analysis by Avenir Suisse provides information.
If you take China, the USA and the European Union as standard, then one thing is immediately noticed: these trade blocs have much fewer agreements than Switzerland, in percentage and nominal terms. The United States – which was once a staunch advocate of free trade – ensures access to just under 25% of global trade through free trade agreements. “On the one hand, the size of the internal market plays a decisive role. On the other hand, the failed negotiations on the Transatlantic Free Trade Agreement and the Trans-Pacific Partnership are a good example of the growing unwillingness of large economies to open up to free trade,” says Mario Bonato of Avenir Swiss. In the European Union, too, new agreements must overcome mounting domestic political obstacles. In both the recently ratified Ceta Agreement with Canada and in negotiations with Mercosur, there has been and continues to be significant resistance from globalization critics and environmental activists in individual member states.
The “big” names are still missing from the Swiss list
As a small economy (0.81% of global economic output, 2019), Bonato thinks Switzerland has taken a different path. In the past two decades in particular, it has doubled the number of its free trade agreements, to currently 77 (bilateral or jointly with the European Free Trade Association). But it covers only 55% of the global market. In fact, many agreements have been concluded with very small partners, such as North Macedonia (GDP: 34 billion USD), Albania (GDP: 40 billion USD) or Georgia (GDP: 56 billion USD). .
It is important that even small countries are not forgotten – even more so when a large portion of the diaspora lives in that country. However, the commercial forces should not be overlooked, according to Bonato. “Big” names like the USA, India or the Russian-influenced Eurasian Customs Union (EAEU) are still missing from the Swiss list. With all three degrees, a degree seems a long way off. With the United States, the resumption of formal negotiations in 2019, which stalled in 2006, failed mainly due to resistance from the Swiss agricultural lobby.
A question mark in Swiss free trade
As Avenir Suisse expert explains, other small states do not always succeed in collaborating with larger partners according to the textbook. With only 19 partners, New Zealand’s free trade network covers one-third of the global market. Of the major economies, only China has managed to strike a deal. But New Zealand’s basic requirements for future deals remain intact, because, unlike Switzerland, there is no agricultural lobby block on the leg of free trade.
The situation in Singapore is different again. With far fewer partners (36), the city-state has achieved much greater coverage of world trade through free trade agreements. There are contracts with the USA, but also with China and India.
Bounato says the economy shaken by the Corona crisis in particular urgently needs fresh air and fresh promotion. Promoting free trade would be the right medicine here. In general, Switzerland has so far weaved a large network of free trade agreements and built a reputation for itself as a reliable free trader.
It also opened free trade agreements and streamlined trade with China and the European Union. “However: the future looks less rosy. The most prominent example is the uncertainty about the framework agreement with the European Union. But the Mercosur agreement is also suspended due to environmental concerns. Even the current trade relations do not face increasing pressure from environmental activists and critics of a secure globalization,” Bonato concludes in section The first of his analysis of the Swiss free trade network in an international comparison.