Overview and position on free trade and international market access

The success of the Swiss chemical-pharmaceutical industry is based mostly on the global marketing of its innovative products. Around 90 percent of its products are exported; for many companies, this figure is even higher than 98 percent. The chemical-pharmaceutical industry contributes with over 50 percent to Switzerland's total exports and, as Switzerland's largest export industry, is therefore dependent on access to the international market, strong and enforceable protection of intellectual property, and effective protection of foreign direct investments. The member companies of scienceindustries have globally oriented supply chains and maintain production and research sites worldwide that are closely interlinked.

In view of this situation, scienceindustries advocates unobstructed market access worldwide. Unimpeded access to foreign markets allows the industry to exploit its innovative edge 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 harmonized internationally or mutually recognized. Market access should be legally protected and should be better or at least non-discriminatory compared to competitors from third countries.

Instruments for achieving global, barrier-free market access

Various instruments are available to foreign trade to achieve global market access for Swiss companies: multilateral and plurilateral agreements within the framework of the WTO, comprehensive free trade agreements or bilateral sectoral agreements. scienceindustries is in favour of the use of multilateral instruments. Bilateral negotiations should be used to achieve a reciprocal improvement in market access and in the protection of intellectual property rights that goes beyond the multilateral agreement. Bilateral instruments cannot replace multilateral negotiations because their scope is conceptually defined by rules of origin, compliance with and control of which incur substantial administrative costs. Bilateral instruments are therefore not to be seen as substitutes for, but as complementary to, multilateral mechanisms.

scienceindustries supports the efforts of the Swiss authorities to create a network of free trade agreements (FTA) – within the EFTA association or bilaterally as Switzerland. For each individual FTA, the procedures for determining and verifying origin should be as simple and standardized as possible. The level of protection of intellectual property should correspond to the Swiss standard. The industry's specific demands are set out in the position paper “Free Trade Agreements (FTA): Objectives of scienceindustries”.

Free Trade Agreements: The quality of the agreements is important

In addition to the EFTA Convention and the Free Trade Agreement with the European Union (EU), Switzerland currently has a network of 33 free trade agreements with 43 partners. The agreements are usually concluded within the framework of the European Free Trade Association (EFTA). Nevertheless, Switzerland also has the option of concluding free trade agreements outside the EFTA, as was the case with Japan and China. The free trade agreements that have entered into force cover around 71 percent of exports. These two agreements open up additional business opportunities for Swiss companies.

The agreements with the European Union (EU) and the European Free Trade Association (EFTA), which facilitate trade and reduce customs duties, are particularly significant. The priority list for new agreements focuses on the USA, Australia and the Mercosur states. A solution to the outstanding issues with the Mercosur states is expected soon.

scienceindustries is committed to the continuation and expansion of comprehensive free trade agreements. In doing so, it is important to prioritise the quality of the agreements over the speed of their conclusion. For the agreements concluded to be useful, comprehensive market access, modern and easy-to-apply rules of origin and the protection of intellectual property must be guaranteed. Agreements from previous generations that have entered into force must be adapted to today's realities and modernized in order to maintain their relevance.

EFTA-Mercosur: current status and significance for our members

The Mercosur countries represent a market of 260 million people with growth potential. The EFTA-Mercosur agreement, which would facilitate trade between EFTA countries and the South American countries of the Mercosur alliance (Argentina, Brazil, Paraguay and Uruguay), would be an important international trade agreement. The last outstanding issues must now be resolved, taking into account the areas relevant to the chemical, pharmaceutical and life sciences industries: IPR (protection of intellectual property, including sufficient patent protection and RDP test data), market access and rules/regulations of origin. This agreement offers opportunities for Swiss chemical, pharmaceutical and life sciences industries, particularly with regard to access to important markets in South America – Brazil as the most important export destination in Latin America, ranks 12th in the country ranking of the most important export destinations.

The member companies of scienceindustries already export goods worth around CHF 3.2 billion per year to the Mercosur countries. In the medium term, the agreement should see over 96 percent of Switzerland's total exports benefit from tariff concessions, with around 95 percent enjoying full exemption from customs duties. In view of the high customs duties in the Mercosur states (Brazil: average customs duty for chemical products according to WTO: 5.3 percent), the free trade agreement, with almost CHF 170 million, enables considerable customs savings per year. After the agreements with the EU and China, this has the greatest potential for customs savings of all Swiss free trade agreements.

Outlook: future developments and challenges

In the coming years, the Swiss chemical-pharmaceutical industry will face a number of challenges. International competition is intensifying, while regulatory requirements and protectionist tendencies are increasing worldwide. The design of customs policy and access to international markets will be crucial for the future. Securing optimal framework conditions at home will enable companies in Switzerland to hold their own in the global competition.

It remains to be seen how geopolitical developments and the increasing protectionism will impact global supply chains. Diversification of the supply chains and the markets seems advisable to be able to meet the challenges in the future as well and to safeguard Switzerland as a location for business, production and employment.