A fine romance – Switzerland’s relationship with the European Union

By Felix Egli and Wu Fan, VISCHER
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We take pride in partnering with China Business Law Journal to regularly provide indepth insights into those features of the Swiss legal and tax system that make Switzerland a prime location for foreign direct investment in Europe. In our first contribution we feature the legal framework that provides the Swiss export industry with non-discriminatory access to the markets of the European Union.

Felix Egli, Senior Partner, VISCHER, Zurich
Felix Egli
Senior Partner
VISCHER
Zurich

Swiss/EU trade

Let us share a rather sad experience we had earlier this year at the 2012 Global Outbound Investment Summit in Beijing. After we had presented to the Chinese audience why Switzerland is a prosperous island in Europe’s stormy sea of sovereign debt, and why this should make it a preferred location for Chinese direct investment in Europe, a representative from an EU member nation took the floor and expressed the view that Swiss exports risk being discriminated against in the EU, as Switzerland is not an EU member state. Although such fears are ill-founded, we learned that they have made some Chinese entrepreneurs reluctant to evaluate Switzerland as their European test market or direct investment location. Therefore, it is time to set matters straight.

Switzerland is indeed not an EU member state, but this does not adversely affect trade between Switzerland and the EU. The Swiss/EU trade relationship resembles a marriage without sex – sharing board (markets), but not bed (sovereignty). How come?

Free trade

On 1 January 1973, the Swiss/EU free trade agreement (FTA) for industrial products came into force. As a result, industrial products of Swiss origin are exempt from customs when exported to the EU. Hence, Chinese investors evaluating the acquisition of a Swiss manufacturer should know that Swiss industrial products enjoy free trade access to the EU, as if they had been manufactured in an EU member state. On top of the Swiss/EU FTA, Switzerland also has free trade agreements with European Free Trade Association (EFTA) members Norway, Iceland and Liechtenstein, and more than 30 non-European countries and jurisdictions including Hong Kong (in force since 1 October 2012).

Mutual recognition

On 1 June 2002, the mutual recognition agreement between Switzerland and the EU (MRA) on dismantling technical barriers to trade came into force. It applies to most industrial products and provides for mutual recognition of conformity tests required for market admission under applicable safety standards. The same rules also apply with respect to the EFTA members Norway, Iceland and Liechtenstein.

Wu Fan Counsel VISCHER Zurich
Wu Fan
Counsel
VISCHER
Zurich

Technically, the Swiss/EU MRA identifies the product categories for which Swiss and EU safety standards are considered equivalent so that in each case a single conformity certificate is sufficient for both Switzerland and the EU. The Swiss/EU MRA covers most industrial products incuding machinery, personal protective equipment, toys, medical devices, gas appliances and boilers, pressure vessels, telecommunications terminal equipment, equipment and protective systems intended for use in potentially explosive atmospheres, electrical equipment and electromagnetic compatibility, construction plant and equipment, measuring instruments and prepackaging, motor vehicles, agricultural and forestry tractors, good laboratory practice, medicinal products, building products, elevators, biocidal products and cable cars.

As a result, any relevant product passing the Swiss conformity test may be exported to the EU without double testing or further checks under the relevant EU safety standards. Only a few products within the above categories lack equality of standards (e.g. gas-fired heating boilers and certain products in the category “measuring instruments and pre-packagings”) but also, with respect to these, the relevant Swiss admission authority is allowed to act as one-stop shop, to certify conformity under Swiss and EU standards.

The elimination of the need for double conformity tests removed technical barriers to Swiss/EU trade. Chinese investors evaluating the acquisition of Swiss manufacturers should know that, as a rule, Swiss industrial products enjoy non-discriminatory EU market access.

Finally, it is noteworthy that the benefits of the Swiss/EU MRA are independent of product origin. Accordingly, for Chinese manufacturers launching industrial quality products in Europe, Switzerland may be an attractive European test market: Small, xenophilous and made up of German, French and Italian-speaking parts, it is almost Europe in miniature – and Swiss admission of industrial products includes, as a rule, EU admission.

Public procurement

On 1 June 2002 the agreement between Switzerland and the EU on public procurement came into force. It extended between Switzerland and the EU the obligations under the World Trade Organisation’s public procurement conventions of 1979/87 and 1994 by requiring international public tender invitations not only for significant central government procurement projects, but also for significant procurement projects of regional and municipal authorities, government-owned telecoms operators, railway operators, entities active in the field of energy other than electricity (such as gas and heating supplies) and privately held licensed providers of public utilities such as drinking water, electricity supply, urban transport, airports, river and sea transport.

Hence, the agreement considerably extended transparent and non-discriminatory access to these additional EU procurement markets (worth billions) for Swiss suppliers and service providers, and made them even more competitive. Chinese investors evaluating the acquisiti-on of a Swiss manufacturer should know that Swiss companies enjoy non-discriminatory access to the most important EU procurement markets.

Conclusion

The Swiss/EU FTA, the Swiss/EU MRA and the Swiss/EU agreement on public procurement ensure that Switzerland’s non-membership to the EU does not adversely affect its exports to the EU, and make Switzerland an attractive European test market for China’s industrial quality products.

Our next column will feature the reasons for Switzerland’s healthy public finance and avoidance of debt crisis.

Felix Egli is a senior partner and Wu Fan is a counsel at the Swiss law firm VISCHER in Zurich

VISCHER

Schützengasse 1

Postfach 1230

8021 Zürich

电话 Tel: +41 58 211 34 00

传真 Fax: +41 58 211 34 10

Felix Egli

电话 Tel: +41 58 211 34 90

电子邮件 E-mail: fegli@vischer.com

吴帆 Wu Fan

电话 Tel: +41 58 211 36 45

电子邮件 E-mail: fwu@vischer.com

www.vischer.com

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