Bilateral trade policy

© How Hwee Young/Keystone
Since the failure of the efforts to liberalise trade policy within the multilateral framework of the WTO, many countries, including Switzerland, are concentrating their efforts on a trade policy that favours the bilateral approach. There are now some 400 bilateral free trade agreements (FTAs) in the world. These agreements govern the protection of intellectual property rights, trade in agricultural and industrial production, services and investments between two countries.

Liberalisation efforts go further in the FTAs than in the multilateral agreements. When an FTA is agreed between an industrialised and a developing country, there is a risk of negative impacts for the latter: increased protection of patents and a more liberal financial sector can come at a very high price to developing countries. Furthermore, removing tariffs on industrial goods deprives countries of resources that are essential in their fight against poverty. Additionally, their policy space and the subsequent possibility to align their economic policy with their needs is even further reduced. The 2007 United Nations Conference on Trade and Development (UNCTAD) report warns:

The gains for developing countries from improved market access through FTAs are not guaranteed, and may be short-lived, but the loss of policy space is certain.

Swiss FTA: neither oriented towards development nor sensitive to human rights

FTAs are the main instrument of Swiss foreign policy. According to the State Secretariat for Economic Affairs, this is to guarantee Swiss companies a non-discriminatory access to foreign markets and favour Swiss competitiveness. FTAs therefore exclusively serve special economic interests, and fail to take development policy needs into consideration.

In accordance with an economic foreign policy that aims to constantly increase access to markets, Swiss trade diplomacy has negotiated a vast network of bilateral agreements, mainly over the course of the last ten years. At least half of the existing 30 FTAs were agreed with developing or emerging countries.

With a few exceptions, the negotiations are conducted within the framework of the Economic Free Trade Association (EFTA). One of the few exceptions to this rule is the agreement with China, which entered into force in 2014.

EFTA negotiations with India have been ongoing since 2008. Efforts are being made to conclude FTAs with the economically attractive Asian countries Indonesia, Malaysia and Thailand. The agreement between EFTA countries and Colombia entered into force in 2011.

Public Eye criticises the lack of focus on development and the failure to take human rights into consideration in Swiss trade policy as implemented through FTAs. Switzerland must forego all conditions that might prove detrimental to countries participating in negotiations, or that might endanger human rights. Together with civil society organisations of the global South and Norway, a Swiss partner in EFTA, Public Eye denounces the lack of transparency and democracy in the negotiation process.

What Public Eye demands from Switzerland

  • A Swiss trade policy that ensures respect for and promotion of human and labour rights in negotiations.
  • The implementation of prior human rights impact assessments for all future bilateral free trade agreements with countries of the South – and the willingness on the part of Switzerland to use the results of such assessments as a basis for FTA negotiations.
  • Robust and binding provisions in FTAs which demand that fundamental labour and human rights be respected.
  • No demands in the field of intellectual property rights that go beyond the WTO’s TRIPS agreement.
  • Broad participation of interested federal agencies in preparing and implementing negotiations on North-South free trade agreements.
  • The creation of mechanisms that enable civil society organisations to participate in formulating bilateral trade policy regarding developing countries.
  • Transparent and up-to-date information for the public and parliament regarding Switzerland’s positions and demands during FTA negotiations.

Public Eye is also critical (german factsheet) of the principle of the bilateral approach itself. Contrary to the official statements made by Switzerland, FTAs do not complement the multilateral approach, but rather compete with it. Bilateral negotiations thus undermine the international trading system. This is why FTAs are called the “termites in the trading system”. This unflattering designation does not originate in any anti-globalisation networks, but is that of Jagdish Bhagwati, professor at Columbia University in New York, a fervent supporter of free trade. He criticises the fact that FTAs undermine the principle of the most favoured nation - according to which the same trade advantages should be granted to all contracting parties - and thus destabilises one of the basic pillars of multilateral trade. The World Trade Organisation (WTO) also expresses its increasing preoccupation with the multiplication of FTAs. As early as 2005, a report commissioned by the WTO showed that the principle of the most favoured nation was no longer the rule, but had become the exception.