Swiss-China trade deal a symbol amid spats with EU

BERNE (AFP) - Applauded by Switzerland's business sector, the country's free-trade deal with China is heavy with symbolism, coming as Beijing locks horns with the European Union in a raft of commercial disputes.

The staunchly non-EU Swiss inked a preliminary accord on Friday during Chinese Premier Li Keqiang's first visit to Europe since taking the helm in March's once-in-a-decade power transfer.

The final Free Trade Agreement (FTA) is set to be signed in July, capping two years of talks.

"This has huge meaning for global free trade," Mr Li said in Switzerland, explaining that it sends the world "a strong signal about the fight against trade and investment protectionism, as well as the liberalisation and facilitation of trade".

Swiss Economy Minister Johann Schneider-Ammann echoed that.

"The FTA will not only further develop and deepen our bilateral relationship, but it will also contribute to much needed progress towards global liberalisation of trade and to curbing protectionism," he said.

In Switzerland, Mr Li took the opportunity to launch a broadside against the EU, challenging its punitive import duties on Chinese-made solar panels, as well as moves against the mobile telecommunications sector.

The EU argues that such Chinese products are being dumped on its market, hurting European firms, but China's Xinhua news agency quoted Mr Li as saying the moves "harm others without benefiting oneself".

The economies of China and the 27-nation EU are tightly linked.

The EU is China's top export market, while China is second to the United States for EU exports.

But the balance is largely in China's favour, with Chinese exports to the EU worth US$375 billion (S$474 billion) in 2012, and EU exports to China, US$186 billion.

In contrast, Switzerland is one of the rare Western countries with a positive trade balance with China, its third-ranked partner after the EU and the United States.

Swiss-Chinese bilateral trade totalled US$26.3 billion in 2012, with US$22.8 billion of that in Switzerland's favour.

Its top exports to China are watches, pharmaceuticals and chemicals, and machinery, while textiles and machinery head the list of imported Chinese goods.

The Swiss upper hand goes a long way to explaining its business sector's positive stance on the FTA, but the Alpine country also sees it as a way to get the edge on competitors.

With the strong Swiss franc and high labour costs making it hard to beat rivals on price, Swiss firms have long made quality their selling point.

"This free-trade agreement is an important step into the right direction. It will facilitate the access to the Chinese market and will strengthen the competitivity of Swiss industry's products. And it will also provide advantages compared to international competitors, especially from the EU," Ivo Zimmermann of the Swissmem engineering federation told AFP.

He said he could not comment in detail until the FTA was signed, but that he expected "substantial facilitations" for exports, even if Chinese tariffs may not be reduced on all goods.

Even the country's solar power body, Swissolar, sees no threat.

"In the Swissolar perspective the free-trade deal with China has to be judged positively," said its head David Stickelberger, noting that Swiss manufacturers focus on niche markets and that cutting duties on Chinese panels would lower end-user prices in Switzerland.

Jean-Daniel Pasche, head of Switzerland's FHS watchmaking federation, also gave the thumbs up.

"It will give a legal framework to our cooperation," he explained.

He said his industry was hoping to see a fall in Chinese import duties on watches - currently at 12 to 16 percent - as well as better safeguards against counterfeiting.

Besides inking the FTA plan, the two countries also signed a deal boosting financial sector ties, amid reforms of the Chinese sector.

"Emerging markets such as China are attractive because there's a huge variety of activities ongoing at the same time," said Riccardo Moretto of Zurich Insurance Group.

"Populations are large and demographics are favourable, with a high proportion of young people. There is also growing GDP," he told AFP.

During his Swiss visit, Mr Li underlined that the Swiss FTA was the first with one of the globe's 20 leading economies.

China signed its first European FTA last month with non-EU Iceland, and Beijing has been pressing the EU for a similar accord.

Despite the China-EU spats, Brussels said on Thursday that it aimed to negotiate an investment protection agreement with Beijing, which would be the first step on the FTA path.

Such deals, including a planned EU-US accord and a proposed trans-Pacific agreement, are sharply in focus as the 159-nation World Trade Organization struggles to craft a global treaty on liberalising international commerce, a process launched in 2001.

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