[ Nippon Keidanren ] [ Policy ]
tentative translation

Call for the Earliest Conclusion of a Japan-Switzerland
Economic Partnership Agreement

February 20, 2007
Nippon Keidanren

Call for the Earliest Conclusion of a Japan-Switzerland
Economic Partnership Agreement
(Chart) <PDF>


Nippon Keidanren issued a policy proposal titled "Toward a Closer and Stronger Economic Partnership between Japan and Europe: Nippon Keidanren's Observations and Views on European Integration and the Japan-Europe Business Relations" in April 2006. In the proposal, Nippon Keidanren presented its view that Economic Partnership Agreements (EPAs) could become an effective tool for fastening Japan-Europe economic ties. In addition, it compiled another policy proposal called "Towards Broader and Deeper Economic Partnership Agreements" in October 2006 calling for the promotion of comprehensive and high-quality EPAs. In response to these proposals, the Japanese government has been actively engaged in EPA negotiations with other countries.

At present, however, Japan's trade value with the countries where EPAs have already been concluded or agreements have been reached in principle accounts for only about 14% of its total trade value. Even if the countries with which Japan has started and has agreed to start EPA negotiations are included in the calculation, the percentage is still as low as one third of the total. Therefore, the further promotion of EPAs continues to be an important issue in order to encourage greater liberalization of trade and investment. Identification of and discussions on the following issues for the purpose of facilitating the conclusion of EPAs will contribute to closer economic relations between Japan and other countries: trade in goods, trade in services, investment, business environment, and intellectual property rights.

From the perspective outlined above, Nippon Keidanren highly appreciates the fact that an agreement was reached on the start of the EPA negotiations between Japan and Switzerland, as recommended by the report of the joint governmental study group established by both governments. Considering the importance of strengthening economic partnerships and the possible benefits from the EPA, the Japanese government should move forward with the negotiations swiftly and steadily to realize the earliest conclusion of a comprehensive and high-quality EPA with Switzerland, which would be commensurate with one between highly developed countries.

1. Importance of strengthening economic partnerships between Japan and Switzerland

Japan is Switzerland's third most important trade partner after the European Union and the United States. Switzerland enjoys a significant surplus from its trade with Japan, and its exports to Japan, particularly in the area of precision machinery and other equipment, have been growing in recent years. Under such circumstances, Switzerland is interested in strengthening its economic ties with Japan. The largest Swiss business organization, economiesuisse, has released a statement calling for an EPA with Japan. #1 At the same time, the strengthening of economic ties with Switzerland is important to Japan in terms of not only the expansion of bilateral relations in trade and investment but also the following two points.

#1 economiesuisse released the "economiesuisse Call for Opening Negotiations on a bilateral Economic Partnership Agreement (EPA) between Switzerland and Japan" in November 2006

(1) Switzerland as an important partner in formulating international rules

Japan and Switzerland have closely cooperated in formulating international rules through multilateral forums such as the WTO and the OECD. Japan's partnership with Switzerland is especially important for ongoing negotiations of the WTO Doha Round, which are at the crossroads between success and failure. The enhancement of economic partnership with Switzerland will contribute to having Japan's views reflected in international rules.

(2) Switzerland as one of the leading countries in the field of FTAs

Switzerland is one of the members of the European Free Trade Association (EFTA), which was established in 1960. In 1972, the country concluded a Free Trade Agreement (FTA) with the EU. Including these agreements, more than 80% of its foreign trade is now covered by FTAs. The percentage will increase further when Switzerland's currently ongoing FTA negotiations with other countries are concluded. Under these circumstances, the realization of a comprehensive and high-quality EPA with Switzerland, which is one of the leading countries in the field of FTAs, will not only enable Japan to avoid being placed in a disadvantageous position in foreign trade but also offer benefits to Japan in negotiating with other countries or regions to expand and deepen its EPAs.

2. Benefits expected from the EPA between Japan and Switzerland

(1) Liberalization of trade in goods and services

Over 70% of goods exported from Japan to Switzerland are subject to customs duties. If the tariffs on goods including specific duties imposed on passenger cars, motorcycles, TV sets, and video tape recorders, which represent a high share of Japan's total exports to Switzerland, are eliminated, the export of Japanese products to Switzerland can be expanded. At present these Japanese goods are in a disadvantageous position in comparison with products made in the EU which are imported to Switzerland without any duties thanks to the EU-Switzerland FTA.

A high level of liberalization in services trade should be realized through a negative list approach to the extent where it exceeds the level of the current Schedule of Commitment in the WTO. Liberalization is important especially in such sectors as computer-related, telecommunications, and audio-visual services.

(2) Introduction of the user-friendly system of rules of origin

The introduction of a system of rules of origin which is easy to understand and use is essential to enjoying the benefits of the promotion of trade under the EPA to the fullest extent possible. The joint governmental study group noted that the assessment of the Swiss system would be a good model for Japan's with a view to introducing a more simplified system of rules of origin. European countries including Switzerland have adopted a system of approved exporters, comprising a declaration of origin by approved exporters in an invoice for consignments, which enables their companies to substantially reduce costs related to proving origin. Switzerland has also introduced a system of self-declaration under EFTA's EPA with Korea. By referring to these systems as a model, Japan should introduce a user-friendly system of proving origin under the EPA with the country. Based on the assessment of the merits of the system, Japan should consider introducing similar systems under the EPAs with other countries or regions.

(3) Improvement of investment and business environment

The direct investment of Japanese companies in Switzerland remains lower than those coming from EU countries and the United States. It is also lower than the direct investment of Swiss companies in Japan. Under such circumstances, the investment environment is expected to improve, resulting in further promotion of direct investment from Japan to Switzerland, if Japanese companies are exempted from the following regulations:

  1. The nationality and residential requirements for board members of Swiss-registered companies (based on Article 708 of the Code of Obligations which stipulates that the majority of board members must be Swiss citizens with domicile in Switzerland)
  2. The limit on the number of residence permits in Switzerland.

In addition, simplification and acceleration of the process of obtaining work and residence permits to be issued in Switzerland (such as relaxation of certification requirements) need to be implemented.

(4) Protection of intellectual property rights

Both Japan and Switzerland have cutting-edge technological capabilities, and intellectual property rights play an essential role in the economies of the two countries. In addition, a large number of their companies own globally recognizable brands. Therefore, stronger intellectual property rights protection is beneficial for companies in the two countries. Until now, the EPAs have contained only stipulations concerning matters such as effective application and enforcement of a system to protect intellectual property rights. It is hoped, however, that the EPA between Japan and Switzerland will include provisions regarding high-quality protection of intellectual property rights, such as cooperation in taking measures against counterfeits and pirated goods in third countries, which can be applied to other EPAs as a model.

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