Missing link: The case of free trade between Switzerland and Taiwan

In the years after the conclusion of the Economic Cooperation Framework Agreement (ECFA) between Taiwan and the People's Republic of China (PRC) in 2010, it became possible for countries that recognize the PRC to negotiate FTA-like economic agreements with Taiwan. Singapore and New Zealand took the lead in demonstrating that "effective economic representation" is possible "without touching upon sovereignty issues." The Taiwanese new administration, led by Tsai Ing-wen, has confirmed its determination to make proactive use of this foreign economic policy instrument. For Switzerland, Taiwan is an economically significant missing link in its chain of FTAs in East Asia. This study assesses the potential benefits of mutual tariff abolition as part of a possible bilateral economic agreement between the WTO members Switzerland and Taiwan, taking into account the impact of the recently extended Information Technology Agreement (ITA). Taiwanese companies could envisage significant duty savings (of CHF9 million annually) in their exports to Switzerland, especially for metal goods, machinery, bicycles and motorcycles. Swiss exporters could profit even more, by up to US$47 million annually, especially for wrist watches (over $20 million), machinery and processed agricultural goods. Based on interviews with political actors, diplomats and civil servants in Taipei, the study concludes that there is a window of opportunity for Switzerland to complete its chain of FTAs in East Asia and to put an end to the (unintended) trade policy discrimination against Taiwan. There is a convergence of interests among all actors involved and there are no major obstacles for swift bilateral negotiations for the time being. Switzerland is well advised to take this chance to realize preferential market access for its companies before their main competitors in the Asia-Pacific area do the same.