Position Paper on the Foreign Economic Strategy 2024-2028

1. objective

The success of the Swiss chemical-pharmaceutical industry is largely based on the global marketing of its innovative products. More than 98% of its products are exported. The chemical-pharmaceutical industry accounts for about 50% of Switzerland's total exports and, as Switzerland's largest export industry, is therefore dependent worldwide on market access, on strong and enforceable protection of intellectual property and on effective protection of its direct investments.

This position paper

• is scienceindustries' contribution to the strategic direction of Swiss foreign economic policy;

• shows in particular how Switzerland can secure and strengthen the sustainable success of its chemical and pharmaceutical industry through foreign trade policy instruments, and

• forms the basis for supplementary scienceindustries position papers on special issues of foreign economic policy (e.g. European policy, WTO negotiations, free trade agreements, biodiversity, etc.).

2. Foreign trade policy from the perspective of the chemical/pharmaceutical/life sciences industries

2.1 Goal: Support and strengthen the innovation strategy of our companies

The Swiss chemical/pharmaceutical industry pursues a consistent specialisation and innovation strategy. This requires companies to make sustained high investments in research and development. For this reason, the chemical-pharmaceutical industry will spend a total of CHF 6.6 billion on in-house research and development in Switzerland in 2021, which corresponds to an increase of 46% compared to 2006. This means that the chemical-pharmaceutical industry will contribute 40% of the total expenditure for research and development in Switzerland.

Such long-term investments can only be economically justified in an environment with worldwide non-discriminatory market access and strong and enforceable protection of intellectual property rights and direct investments. In the view of scienceindustries, the state should therefore consistently use its foreign economic policy to support and strengthen this entrepreneurial innovation strategy. To this end, Switzerland's strengths abroad should be fully exploited.

2.2 Demands of the chemical-pharmaceutical industry

Worldwide market access. Access to foreign markets that is as unhindered as possible enables the industry to exploit its innovative advantage and the cost-reducing economies of scale in production in Switzerland. Where products have to meet regulatory requirements when crossing borders, these should either be harmonised internationally or mutually recognised. Market access should be legally secured and better or at least non-discriminatory compared to competitors from third countries.

Worldwide recognition of innovation performance. One's own innovation achievements are to be recognised through strong and, as far as possible, globally uniform and enforceable protection of intellectual property rights in all their forms. This allows industry to take the high entrepreneurial risks that experience has shown to be associated with investments in research and development.

Global protection of investments. Enforceable legal protection of investments against measures that restrict ownership (e.g. expropriation) is an important prerequisite for a strong presence in international growth markets.

Supporting sustainable development. The Swiss chemical-pharmaceutical industry is committed to sustainable development in its three dimensions (economic, ecological and social). The freeest possible trade exchange between countries best promotes sustainable development through its wealth-enhancing effects.

3. Instruments of foreign economic policy

3.1 Multilateral instruments

For the Swiss chemical and pharmaceutical industry, multilateral agreements, particularly within the framework of the WTO, are the most efficient instrument for the mutual reduction of tariffs, the simplification of trade procedures and the guarantee of strong and uniform protection of intellectual property rights. scienceindustries is therefore in favour of the use of multilateral instruments.

WTO negotiations. The Swiss chemical-pharmaceutical industry is consistently committed to improving global market access and strengthening the multilateral WTO system. The following goals should be brought to an economically relevant conclusion:

1. the rapid elimination or reduction of all tariffs in Chapters 28 to 39.14 (preferably through a zero-tariff chemicals sector initiative),
2. at least maintaining the existing level of TRIPS protection, and
3. the prevention of new trade restrictions.

Furthermore, the international standardisation of regulations and registrations is to be promoted.

WTO pharmaceutical zero tariff agreement. The WTO Pharma Zero Duty Agreement is of central economic importance for the chemical-pharmaceutical industry. It regulates the duty-free movement of pharmaceutical products as well as a range of intermediates between the current agreement countries (EU member states, Japan, Canada, Macao, Norway, Switzerland and the USA). The complexity and time required for the revisions of this agreement, have once again demonstrated the need to simplify the update process through an independent regulatory procedure to integrate materials into the agreement. The Swiss chemical-pharmaceutical industry continues to advocate for a simplification of the update procedure for INN substances (active pharmaceutical ingredients). Accordingly, the automatic inclusion of INN substances published by the WHO is to be decided by the participating states.

Health Care Products Initiative (Ottawa Group). The initiative proposed in the Corona pandemic is to be pursued in the WTO framework. In contrast to the original initiative, a Health Care Products Initiative+ should not only be applied in times of a rampant pandemic, but should already have an effect in normal times by improving cooperation among the participating states by strengthening supply chains and thus increasing the resilience of all participating states.

Plurilateral zero tariff agreement for chemicals/pharmaceuticals. As an alternative to the zero-tariff chemicals sector initiative, which the International Council of Chemical Associations (ICCA) proposed years ago, the chemical-pharmaceutical industry continues to support the idea of a plurilateral zero-tariff agreement for chemicals/pharmaceuticals. This agreement would only come about if the most important producing countries (including China, the USA, India, Brazil, the EU) join it. The plurilateral zero tariff agreement on chemicals/pharmaceuticals would also replace the WTO agreement on pharmaceuticals and make the corresponding complicated and time-consuming update procedure superfluous.

WTO-Reform.2] WTO modernisation discussions should develop a new negotiating agenda that reflects the opportunities and challenges of the 21st century and includes emerging economies. Such an agenda should also include improving the WTO dispute settlement process, supporting plurilateral initiatives, increasing stakeholder engagement, and increasing transparency in trade-related measures and full implementation of the WTO TBT Agreement. The latter is of particular importance for the global chemical-pharmaceutical industry.

3.2 Bilateral Instruments

Bilateral negotiations should be used to achieve a mutual improvement in market access or the protection of intellectual property rights that goes beyond the multilateral agreement. They can give Swiss exporters an advantage over their competitors from third countries or at least avoid discrimination if the latter already have a bilateral agreement.

In the negotiations with the EU, scienceindustries advocates a pragmatic policy of bilateral cooperation in selected areas and against an institutional classification of Switzerland (e.g. by joining the EU). The focus is on maintaining or updating the existing agreements and further developing the market access agreements.

The bilateral instruments cannot replace the multilateral negotiations, as their scope is conceptually defined by rules of origin, compliance with which and control of which entail considerable administrative costs.

Free trade agreements (FTAs). scienceindustries supports the efforts of the Swiss authorities to create a network of free trade agreements (within the EFTA group or bilaterally). For each individual FTA, the procedures for determining and checking origin should be as simple and standardised as possible. The level of intellectual property protection should correspond to the Swiss standard. The concrete demands of the industry on FTAs can be found in the paper "Free Trade Agreements (FTA): Objectives of scienceindustries".

It is important that Switzerland and its partner countries stand up for strong patent law. A clear position on the protection of patents and other intellectual property rights should also be taken within the framework of free trade agreements. Strengthening the bilateral provisions on the protection of intellectual property can serve as an international reference framework and enable international harmonisation of standards in the IPR area.

From the point of view of the Swiss chemical, pharmaceutical and life sciences industries, priority FTA candidates are those countries that are of great importance to Switzerland from an economic point of view - whether for reasons of market access or protection of intellectual property. Also relevant are those countries with which important trading partners of Switzerland (in particular the EU) are seeking an FTA or have already concluded one.

The existing network of FTAs lacks important trading partners in Oceania, Eurasia and Africa, as well as in the Americas, such as the USA, Australia, Taiwan, New Zealand, Algeria (negotiations suspended) and Nigeria (with the latter there is a declaration of cooperation). These have current and/or potential economic importance today.

Suspended negotiations (Algeria, Eurasian Customs Union) are to be continued as soon as the conditions for resumption are met. According to these two criteria, the following priorities are to be observed in upcoming negotiations of new free trade agreements:

*Declarations of cooperation/**negotiations

Existing 1st generation FTAs must be modernised and adapted to today's realities. The concrete demands of the industry can be found in the paper "Prioritising the renegotiation of existing FTAs".

Compliance with human rights and social and environmental standards should be addressed in appropriate multilateral and plurilateral forums (e.g. ILO, UN Charter, OECD). SECO's current negotiating approach with the integration of a chapter on "trade and sustainable development" is supported.

Mutual Recognition Agreement (MRA). The Swiss chemical-pharmaceutical industry welcomes the efforts of the Swiss authorities to conclude MRAs with important trading partners that are as comprehensive as possible. These are an efficient instrument for reducing technical barriers to trade due to differing national regulations. Priority MRA candidates are those countries with which an important trading partner of Switzerland (in particular the EU) has already concluded an MRA.

4. Intersections with environmental and social policy: promoting sustainable development.

Foreign economic policy is primarily intended to strengthen economic performance and increase a country's prosperity. It thus creates the conditions for improving social cohesion in the various states and contributes to sustainable development. Foreign economic policy also helps to reduce environmental pollution and resource consumption to a sustainable level.

As a contribution to the discussion on the best possible coherence of the various international regulations, scienceindustries comments below on key issues:

Product Requirement. The progressive international alignment or harmonisation of requirements for products facilitates international trade and should be supported by the authorities. The regulations should be based on scientific evidence and recognised risk-based assessments.

Process and Production Methods PPMs (requirements for production methods). Due to the complexity and diversity of production processes in the chemical-pharmaceutical industry, international harmonisation of production methods is neither possible nor desirable. Such requirements hinder the emergence of new innovative production technologies.

Border Tax Adjustments. The member companies of scienceindustries are committed to sustainability, climate protection and biodiversity, especially in the context of the SDGs. Different production costs in different countries due to different environmental regulations should not be compensated by border tax adjustments. CO2 border adjustment measures, as envisaged in the context of the EU's Green Deal, are viewed extremely critically by scienceindustries in terms of their WTO compatibility and practicability. The correct tariff level could not be determined administratively due to the numerous production methods. In addition, depending on the design of such measures, there is a risk that similar tariffs could be levied at the international level, thus reinforcing protectionism and encouraging trade policy countermeasures. From scienceindustries' point of view, a multilateral or plurilateral solution should be sought.

Trade Measures to Achieve Environmental Objectives. Multilateral environmental agreements should only provide for trade sanctions under limited conditions (e.g. necessary, least trade restrictive, proportionate). These criteria should be defined in advance through an interpretation of Art. XX WTO. Unilateral trade sanctions to achieve environmental policy goals violate international trade rules and must be excluded.

If these key requirements are implemented by 2028, scienceindustries is convinced that Switzerland's chemical, pharmaceutical and life sciences industries will continue to make a substantial contribution to strengthening the Swiss economy and thus to prosperity in the future.