Bridges Weekly Trade News Digest • Volume 12 • Number 43 • 17th December 2008
WTO Criticises High Farm Support in Switzerland, Liechtenstein
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Switzerland and Liechtenstein, two of the world’s wealthiest countries, have enjoyed solid economic growth over the past four years but should cut their subsidies and tariffs in the agriculture sector to further benefit consumers, a WTO review of the countries’ trade policies concluded this week.
External trade is the lifeblood of both economies: their ratios of external trade to gross domestic product (GDP) exceed 100 percent. The services sector, namely financial services, forms the backbone of the economies in both countries. In merchandise trade, the countries’ primary imports include machinery, transportation equipment, and electronics, while their main exports consist of chemicals, electronics, watches, and high-tech construction products. The EU is the largest trading partner of both of the countries, followed by the US.
With regard to agriculture – a sector that makes only a “marginal” contribution to employment and GDP in the two countries – the report found that farmer protections were still “high by international comparison”: agricultural tariffs stand at an average 22.7 percent, and tariff quotas exist for 26 tariff lines. The report recommended that the countries take advantage of high world food prices to cut payments to farmers and reduce tariffs on agricultural goods.
The report also criticised the countries’ competition policies, saying that competition remains limited in agriculture, healthcare, and public transport – a fact that has helped keep consumer prices high, the report concluded. But some progress has been made on this front. In 2003, the countries enacted a Cartels Law, which strengthened the competition regime, in particular by introducing direct sanctions against the most serious infringements.
Switzerland and Liechtenstein have had a common monetary policy since the enactment of the Monetary Union Arrangement in 1980. Under the countries’ Customs Union Treaty, signed in 1923, Switzerland acts on behalf of its smaller neighbour to the east in customs union issues, which include import and agricultural policies.
The WTO secretariat conducts periodic trade policy reviews (or TPRs) of each of its Members. Switzerland and Liechtenstein’s last TPR was in 2004.
ICTSD reporting.
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