Switzerland and China have agreed on a new trade deal that almost completely opens duty-free access for Swiss exports to China. The agreement also provides for the expansion of access for Swiss investors to the Chinese market.
According to a statement by the Swiss government, the agreement will ensure duty-free access for 99.8% of current Swiss exports to China. The news positively impacted the shares of Swiss companies, particularly Swatch Group and Richemont SA. The blue-chip index SMI recouped previous losses and as of 17:10 Zurich time was trading almost unchanged.
For Switzerland, the agreement was a positive signal amid the risks faced by its export-oriented economy due to U.S. trade policy.
Earlier, the Swiss government reached a preliminary agreement with Washington that provides for a limit on U.S. tariffs on Swiss goods at 15%. At the same time, there remains uncertainty about this agreement, as the U.S. has not yet approved a legally binding document. Last summer, the Donald Trump administration initially set a tariff for Switzerland at 39% — at that time the highest among developed countries.
What the Switzerland-China agreement provides for
Under the new agreement, key Swiss export goods, including watches, pharmaceutical products, and precision instruments, will be able to enter China completely duty-free.
China is Switzerland’s third most important trading partner after the European Union and the USA. Last year, the volume of bilateral trade was about 34 billion Swiss francs (about 43 billion dollars).
China’s Trade Minister Wang Wentao and Swiss President Guy Parmelin agreed on a new treaty on Thursday. It concludes years of negotiations to update the free trade agreement that has been in place since 2014.
The previous agreement provided duty-free access to Switzerland for almost all Chinese exports but covered only about half of Swiss exports to China.
China agreed to new provisions on human rights
According to a statement by the Swiss government, China also agreed to stricter provisions on labor rights and environmental issues in the revised section of the agreement on sustainable development.
The Swiss side also stated that China, for the first time within a free trade agreement, agreed to include a reference to the Universal Declaration of Human Rights.
The formal signing of the new treaty is planned for the end of this year. After that, the document must undergo internal approval procedures in both countries.
Source: Bloomberg
