Switzerland and WT/TPR/S/77
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Two sectors play a major role in the Swiss and Liechtenstein economies:  services, at the core
of which are financial services;  and manufacturing, highly capital-intensive and producing high-
technology goods.  In Switzerland, the services sector accounts for nearly two thirds of real GDP and
about three fourths of total employment.  Switzerland is a net exporter of services.  The sectorcontributes to one half of total employment in Liechtenstein.  Both Switzerland and Liechtenstein
have substantially liberalized their services sector in recent years.  Their commitments under the
GATS largely reflect the current state of competition in the sector, albeit limited in certain branches
(e.g. fire, natural damage, and workplace insurance;  rail and air transport;  and postal services, mainly
in the case of Switzerland) by monopolies or exclusive rights held by public or private companies.Switzerland and Liechtenstein have maintained MFN exemptions under Article II of the GATS for
various considerations.
2. The manufacturing sector is export-oriented:  it accounts for around 96% of the total value of
merchandise exports from Switzerland and almost 100% in the case of Liechtenstein.  The sector
accounts for about one third of real GDP and 18% of total employment in Switzerland, and 46% oftotal employment in Liechtenstein.
1  Apart from incentives schemes, which are largely oriented
towards the processing of agricultural products, Switzerland and Liechtenstein do not have policies
specific to manufacturing.  With the exception of products such as chemicals, pressure vessels,
invitro-diagnostica, civil explosives, "recreational crafts" and cable cars, standards and technical
regulations that had limited imports of manufactured goods have been substantially harmonized with
those of the EC.  Nevertheless, non-tariff measures remain the major barrier to imports of motor
vehicles (e.g. limitation of the number of motor vehicles imported by non-commercial importers to
one per make per year), although these goods are not produced on a commercial scale in the customs
union.  Following Liechtenstein's membership in the EEA, such barriers to its trade with the other
EEA members have been eliminated.  With an average AVE of 2.3% on non-agricultural products
(Chapter III(2)(ii)(b), customs tariffs on these products are generally lower than on other imports.
3. Agriculture accounts for about 2% of real GDP, 4% of total employment and less than 4% of
the value of merchandise exports from Switzerland, and 1% of total employment in Liechtenstein.
Switzerland formulates the agricultural policy of the customs union.  Agriculture is the most protected
sector.  The simple average AVE of MFN tariffs on agricultural imports is 33.5% (well above the
overall average of 8.9%), with a maximum of 678%.  Imports of agricultural products are also subject
to licensing for health, sanitary, phytosanitary, compulsory-reserve stock, and tariff-quotamanagement considerations, and to specified labelling requirements.  The "prise en charge" system,
under which the allocation of tariff quota is contingent upon local purchase, still applies to imports of
some agricultural products.  Exports of dairy pr oducts, cattle, horses, fruit, potatoes, and specified
processed agricultural products are subsidized.  According to the Liechtenstein authorities, a few
Liechtenstein companies may participate in the export subsidies system for processed agriculturalproducts.
4. The reforms launched in 1993 have reduced the government involvement in the agricultural
sector.  As a consequence of the reforms, public contributions to farm income (through direct
payments) are mostly based on environmental considerations.  However, the reforms have not
substantially reduced government support to agriculture, which still represents nearly three fourths of
gross farm receipts.  The impact of the reforms on prices has been limited by:  the lack of competition
                                                     
1 More precisely, the figure corresponds to the shar e of the secondary sector in total employment in
Liechtenstein.WT/TPR/S/77 Trade Policy Review
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in branches such as sugar and edible oils;  the upholding of price-based schemes such as the threshold
price, the indicative value, and the Price Compensation Scheme, and the introduction of target prices
for dairy products despite the ongoing dismantling of the guaranteed price system;  and the
replacement of marketing boards with institutions commissioned by the State.  Domestic prices of
agricultural products have remained high by international comparison.
5. High prices of agricultural products (mainly f ood products), together with high energy prices
resulting from state or private monopolies or exclusive rights over the supply of gas and electricity,
have delayed the normal development of branches such as tourism.  The partial liberalization of the
Swiss energy sector is being scheduled.
(2) AGRICULTURE AND RELATED ACTIVITIES
(i) Main features
6. Identical climate, relief, soil, topography, and structure of production, together with a
common policy formulated by Switzerland for the customs union, have enhanced the similarities
between the Liechtenstein and Swiss agriculture sectors, which are dominated by small farms.
Indeed, the overall average size of farms is about 9 ha in Liechtenstein and around 15 ha in
Switzerland.  The prices of agricultural prod ucts are broadly the same in Switzerland and
Liechtenstein, as are the main suppliers of these goods.  There are comparable professional
organizations in Liechtenstein and Switzerland.
7. Around two thirds of the Swiss land area of 41,285 km2 are suitable for agriculture, including
forestry.  Cultivated land represents about one third of the total, i.e half of the surface area suitable for
agriculture, of which mountainous areas account for slightly above one third.  About three fifths of the
surface area suitable for agriculture are appropriate for animal grazing.  Agriculture accounts for
about 2% of real GDP and employs some 4% of the active population, down from around 10% in
1960.2  The economic crisis of the 1990s and the related upsurge of unemployment have helped to
contain massive migration from rural areas observed up to the end of the 1980s.
8. In Liechtenstein, around 75% of the total land area of 160 km2 is used for agriculture
(including forestry)3, with mountain pasture accounting for some 16%, cultivated land 24% and
forestry 35% of the total4;  the area used for animal grazing (including mountain areas) also accounts
for around one quarter.  The reduction of the total number of farms over some years (through mergers
and liquidations) has led to an increase in the number of farms of over 20 ha, and thus to the increase
in the average size.  Some 80% of the farmland is under lease.5  Agriculture employs around 1%
(1.3% in 1998) of the active workforce.
9. The major crops of Switzerland and Liechtenstein include cereals (wheat, maize, barley,
oats), tubers (particularly potatoes), oilseeds, and fruit (e.g. apples, pears, plums, grapes).  Livestock
comprises cattle, pigs, horses, sheep, goats, and poultry;  and animal products include meat, milk,
cheese, and eggs (Table IV.1). Sugar beet is also grown in Switzerland.  Agricultural exports
                                                     
2 The cantons of Appenzell Innerrhoden, Obwalden, Lucern and Uri rank top in terms of the ratio of
agricultural employment to total active population, while Basel Stadt, Geneva, and Ticino have the lowest ratios.
3 The remainder (25% of the total) comprises unproductive land and built-up areas.
4 Office of National Economy (1999).
5 Press and Information Office of the Principality of Liechtenstein (1998).Switzerland and WT/TPR/S/77
Liechtenstein Page 63
comprise, inter alia , animals and animal products (including meat and cheese), and wine, mostly from
Switzerland.  Forestry and fishing are not developed.6
Table IV.1
Final production per agricultural branch, Switzerland, 1991-99
(Sw F million)
Branch Value
1991 1993 1995 1996 1997 1998a1999a
Vegetable production
CerealsPotatoesSugar beetVegetablesFruitsWineOther844
212133390304618216824
228147373337515169800
216129418318562152796
208167424363610128639
183162467303489136659
163155422373510144508
155137403307529114
Total of vegetable production 2,717 2,593 2,595 2,696 2,379 2,426 2,153
Animal production
MilkBeef and vealPig-meat
Poultry
Other3,256
1,6031,636
384
1903385
15601345
385
1773,154
1,3251,099
360
2072,842
952
1,152
364
1342,806
955
1,202
364
1412,807
948
1,075
355
1642,581
998961
343
144
Total of animal production 7,339 6,852 6,145 5,444 5,468 5,349 5,027
Salaries paid 52 57 69 75 84 88 90
Total final production 10,108 9,502 8,809 8,215 7,931 7,862 7,270
a Provisional figures.
Source: Information provided by the Swiss Authorities.
10. Switzerland (and through it Liechtenstein) ranks top among the OECD countries in terms of
government support to agriculture.  In 1999, it provided aid to farmers equivalent to 73% of grossreceipts from agricultural products (the share has remained broadly unchanged since the mid 1980s);
this is well above the average of 40% for OECD countries.
7  The Swiss Government budget for
agriculture is some Sw F 4 billion in 2000 (a 4.5% reduction with respect to 1999), and represented
8.5% of the total, down from 9.1% in 1999:  57.4% of the budget for agriculture is for direct
payments;  28% for promotion of sales;  6.6% for improvement of production bases;  and theremainder for other purposes.  In 2000, the budget of the Government of Liechtenstein for agriculture
is some Sw F 13 million (1.8% of the total publ ic budget up from 1.6% in 1999).  The 2000 budget
for agriculture is being spent on:  direct payments (68.8%);  structural improvement (13.4%);  support
for milk production (9.7%);  and other purposes (8%).
11. Costs related to strict environmental protection requirements, high cultivation costs of the
high proportion of hill and mountain regions, s ub-optimal use of farm equipment and production
inputs owing to the small size of the holdings, and high input costs – local supplies of the inputs are
highly protected and wages are high by international comparison – has contributed to high domestic
                                                     
6 Bans on destruction and compulsory replanting of trees to replace felling have conserved the overall
forest area.
7 OECD (1999).WT/TPR/S/77 Trade Policy Review
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prices of agricultural products supported by high tariff protection.8  The importance of cross-border
purchases of mainly food products (e.g. meat, alcoholic beverages, dairy products, and vegetable oils)
reflects the difference in price between the customs territory and its neighbouring countries.
12. The agriculture sector is adjusting to the new environment created by the reforms launched in
1993.  Farm holdings have accordingly merged or diversified their production.  The reforms have
stabilized agricultural incomes, albeit at a relativel y lower level than before.  Self-sufficiency has so
far been met for only few products (Table IV.2).  In 1998, environment-friendly requirements
(ecological production methods) were already met by a large number of holdings (e.g. for some 84%
of the land area suitable for agriculture in Switzerland and 89% in Liechtenstein).  The use of
ecological requirements as the basic eligibility criterion for direct payments may further increase
production costs if the related effects are not fully offset by the payments.  Moreover, the impact ofthe reforms on domestic prices has been limited by the lack of competition in certain agriculture
branches, such as sugar and edible oils (section (iii)).
Table IV.2
Self-sufficiency in basic food products, Switzerland, 1991-98(Per cent)
Product 1991 1992 1993 1994 1995 1996 1997 1998
In digestible calories:
Cereals for bread 126 115 115 120 134 138 108 120
C e r e a l s  f o r  f o d d e r 6 26 16 97 07 57 47 27 3
T o t a l  o f  c e r e a l s 6 56 36 86 96 87 16 76 9
E d i b l e  p o t a t o e s 1 0 7 9 59 99 29 99 99 4 1 0 0
S u g a r 4 44 44 94 04 26 46 26 0
Fat and vegetable oils 24 22 24 15 20 19 23 21
Fruits 60 78 78 69 71 79 71 86
Vegetables 53 56 57 52 55 60 56 54
M i l k  f o r  c o n s u m p t i o n 9 79 79 79 79 79 79 79 7
Butter 91 88 86 90 93 89 89 92
Cheese 137 135 134 134 129 128 129 126
Milk and dairy products 110 108 108 109 110 109 110 110
Veal 99 98 97 97 97 99 99 98
Beef 94 94 93 89 92 105 98 92
Pig-meat 99 98 98 98 98 89 90 93
Sheep 44 48 46 45 46 39 42 43
P o u l t r y 4 64 94 84 85 13 74 13 9
Total of meat 80 80 79 77 79 72 71 71
E g g s  a n d  p r o d u c t s  t h e r e o f 4 44 54 64 64 54 84 94 9
In digestible energy:
V e g e t a b l e  p r o d u c t s 4 24 34 54 14 24 74 44 7
A n i m a l  p r o d u c t s ,  g r o s s 9 79 69 59 49 69 59 59 5
T o t a l  p r o d u c t s ,  g r o s s 6 26 26 35 96 16 46 26 4
T o t a l  p r o d u c t s ,  n e t 5 85 96 05 65 76 05 45 6
In value:
Total of food products 72 72 73 71 71 69 66 65
Source: Information provided by the Swiss Authorities.
                                                     
8 According to OECD (1999), domestic prices of agricultural products in Switzerland are two and a
half as high as world prices and about double the price level in the EU.Switzerland and WT/TPR/S/77
Liechtenstein Page 65
13. In 1999, Switzerland and the EU concluded a bi lateral agreement on trade in agricultural
products.  Subject to ratification by the EU members, this will provide for reciprocal preferential
treatment (including tariff concessions) on, inter alia , cheese and some  other dairy products, fruit and
vegetables, and meat specialities (Chapter II(5)(ii)).  The agreement will not apply to Liechtenstein;
its extension to Liechtenstein is envisaged by way of an additional protocol between Switzerland, the
EU, and Liechtenstein.
(ii) Policy objectives and instruments
14. Coincident with internal economic and environmental constraints, and with the end of the
Cold War and the related risk of supply shortages, allegedly for food self-sufficiency policies, the
Uruguay Round offered Switzerland and Liechtenstein an opportunity to redirect their agricultural
policy.9  The process of farm policy reorientation comprises two steps.  The first phase, promulgated
in the Swiss Federal Council's Seventh Report on Agriculture in 1992, and further strengthened
through the 1995 Uruguay Round implementing legislation, emphasized the gradual reorientation of
farm assistance from price measures towards direct payments.  The focus was on price reduction,
separation of price policy from income policy, direct payments (partly based on ecological criteria) to
compensate for income reduction, and reorganization of border protection.10
15. The subsequent "Agricultural Policy 2002" (A P 2002) initiative, released for political
consultation in October 1995 and adopted by the Swiss Parliament in April 1998, is aimed at,
inter alia , enhancing the sector's competitiveness and further promoting "environmental
sustainability", through structural improvements, cost cutting, promotion of efficient structures,
liberalization of markets, and state assistance predominantly through direct payments.  The
implementation of the AP 2002 (effective since 1999) required the amendment of the Swiss Federal
Constitution in June 1996 and the introduction, in April 1998, of a new Federal Law on Agriculture,which came into force on 1 January 1999.
11  Both the Constitution (Article 104) and the Law
(Article 1) provide the general framework for the implementation of the AP 2002 by confirming its
objectives, i.e. sustainable and market-oriented agricultural production that should contribute
substantially to a safe supply of food, the preservation of natural resources, the maintenance of the
rural landscape, and a decentralized use of land.
16. Under the AP 2002, the direct-payment system has been restructured:  ecological production
conditions were introduced as eligibility criteria, and the general direct payment and the payment for
integrated production were merged into area payments as from 1999 (Table IV.3).  In addition to
programme specific criteria12, the production methods used by farmers eligible for direct payments
must comply with "integrated farming" techniques,  i.e. specified basic environmental standards and
animal friendly conditions.13  The basic integrated farming practices are not currently required for
summer pasturing, non-silage premiums, and price supplement for milk.  The direct payments are
cumulative.  Direct payments provided by the Liechtenstein Government amounted to some
Sw F 7.8 million in 1998 and Sw F 8.6 million in 1999, of which ecological payments represented
                                                     
9 The food self-sufficiency objective had supported the policy of independence and neutrality of both
Switzerland and Liechtenstein.
10 See WTO (1996) for details.
11 Specified provisions on dairy products came into force on 1 May 1999 and those on the liberalization
of the wheat market are scheduled for 1 January 2001.
12 Direct payments are generally based on surface area or number of animals, ecological and production
conditions, and social considerations.
13 Articles 70 and 71 of the Federal Law on Agriculture.  The prerequisite requirements (applicable to
all programmes) will be the only eligibility criteria after the transition period of five years, i.e. from 2004.WT/TPR/S/77 Trade Policy Review
Page 66
around 45% in 1998 and 42% in 1999;  and complementary direct payments were around 39% in
1998 and 44% in 1999.
Table IV.3
Outlays for direct payments, Switzerland, 1998-99
1998 1999dChange in
Sw F price
1998-99d Type of payment
Sw F million US$ million Sw F million US$ million %
Complementary direct paymentsa 825.0 569.1 n.a. n.a. n.a.
of which:
Base farm payment 151.7 104.6 n.a. n.a. n.a.
Supplementary farm payments 135.7 93.6 n.a. n.a. n.a.
Base area payment 371.0 255.9 n.a. n.a. n.a.
Supplementary area payment for meadows 166.6 114.9 n.a. n.a. n.a.
Payments for farming in difficult production
locations (till 1998)
General direct payments (since 1999)354.1 244.3 1,845.9 1,228.3 n.a.
of which:
       Area paymentsb n.a. n.a. 1,234.0 821.1 n.a.
Holding of livestock in mountainous areasa 259.1 178.7 n.a. n.a. n.a.
Holding of livestock under difficult
conditionsbn.a. n.a. 254.3 169.2 n.a.
Holding of roughage eating animalsb n.a. n.a. 252.1 167.8 n.a.
Farming on steep slopes 95.0 65.5 96.2 64.0 1.3
Wine cultivation on steep slopesb n.a. n.a. 9.3 6.2 n.a.
Ecological payments 811.7 559.9 344.0 228.9 -57.6
of which:
Ecological compensation 115.2 79.5 127.2 84.7 100.4
Integrated productiona 460.0 317.3 n.a. n.a. n.a.
Organic farming 44.1 30.4 16.7 11.1 -62.1
Coralling of animals in the open aira 56.4 38.9 n.a. n.a. n.a.
Regularly keeping animals outdoorsb n.a. n.a. 63.3 42.1 n.a.
Animal welfare through housing systems 12.6 8.7 23.0 15.3 82.5
Extensive cereal and rapeseed farming 45.7 31.5 34.9 23.2 -23.6
Extensive farming on dryland and litter areas 10.8 7.5 11.0 7.3 1.9
Summer pasturing 66.9 46.1 67.6 45.0 -1.0
       Water preservationb 0.3 0.2 n.a.
Production directing payments 381.4 262.8 250.6 166.8 - 34.3
of which
Crop cultivationb n.a. n.a. 61.9 41.2 n.a.
Acreage premiums for coarse grainsa 53.0 36.6 n.a. n.a. n.a.
Green fallowa 13.3 9.2 n.a. n.a. n.a.
Production of renewable raw material 5.4 3.7 3.4 2.3 -37.0
Holding of cows whose milk is not marketeda 92.0 63.5 n.a. n.a. n.a.
Non-silage premium 64.4 44.1 25.5 17.0 -60.2
Price supplement for milk for cheese
production153.3 105.7 159.8 106.3 4.2
Social paymentsc 141.1 97.3 141.7 94.3 0.4
of which:
Child allowance for farmers 114.4 78.9 118.5 78.9 3.6
Child and household allowances for farm
workers26.7 18.4 23.2 15.4 -13.1
Total 2,513.3 1,733.4 2,582.2 1,716.3 2.7
n.a. Not applicable.
a This measure was discontinued in 1999.
b This measure was introduced in 1999.c Excluding administrative costs.
d Provisional.
Source : Federal Office for Agriculture.Switzerland and WT/TPR/S/77
Liechtenstein Page 67
17. Financial contributions and concessionary credits are also granted by the Swiss Government
to farmers for various purposes.14  For instance, concessionary credits (interest-free loans of a
maximum duration of 20 years) may be granted by the Government to farmers who improve
conditions for animal welfare.  Financial contributions are subject to the granting of assistance by the
regional authorities. (e.g. authorities of the canton where the farm is located).  The contributions may
be up to 40%, and even 50% in exceptional cases (in mountainous areas), of the total cost of realestate.  Moreover, the Swiss Government finances research stations (Chapter III(4)(ii)), training and
education of agricultural staff.  The Liechtenstein Government provides financial contributions for
soil amelioration and alpine buildings, and subsidizes (through interest-free credits, for example)
construction and renovation of farms.
18. The Price Compensation Scheme is maintained for agri-industries.  The scheme is aimed at
compensating for the cost disadvantages (high domestic prices – by international comparison – of
locally produced raw materials used as inputs by domestic agri-industries) resulting from agricultural
policy measures.  It consists of sufficient tariff protection (on a continual basis) for locally processed
agricultural products and refunds of customs duties paid on raw materials used in the production of
processed agricultural goods for exports.  On imports from countries eligible for preferential tarifftreatment under bilateral trade agreements covering processed agricultural products, the scheme
consists in periodical determination of the customs duties on specified processed agricultural products
(on the basis of a standard recipe for each group of products within a tariff heading).  This preferential
component of the duty, called the "agricultural elemen t", is designed to offset the difference between
the domestic and world prices (generally the EU's) of the agricultural raw materials incorporated in
the production of the processed goods.  The MFN customs duty on the processed products comprises
this agricultural element (the preferential tariff) and an industrial element fixed by the Swiss FederalCouncil for the customs territory.  The tariff bound at the WTO applies if the calculated duty (the sum
of the agricultural and industrial elements) is higher.  The list of processed agricultural products
eligible for this type of tariff protection comprise s:  yoghurt containing cocoa (HS chapter 4);  frozen
sweet corn (HS chapter 7);  sugar confectionery (HS chapter 17);  chocolate and other food
preparations containing cocoa (HS chapter 18);  pastrycooks' products and preparations of cereals,flour, starch, or milk (HS chapter 19);  other food preparations (HS chapter 21);  and mannitol
(HS chapter 29).  The raw materials are those used as inputs in the production of these goods;  raw
materials that cannot be produced in the customs territory, such as rice, coffee and cocoa, are
excluded.
19. For exports, the scheme consists in refunds of customs duties paid on raw materials used as
inputs.  The refund is calculated on the basis of the difference between the domestic and world prices
of the raw materials actually used for the production of the processed agricultural goods.
15  T h e
eligible raw materials are those used in the production of processed agricultural goods of
HS chapters 15 to 22.  The following products are excluded:  mixtures of raw materials;  raw
materials filled in retail packings;  raw materials processed into unusual foodstuffs;  and importedmixtures not falling under HS chapters 4 and 11.  There is no exhaustive list of processed agricultural
products eligible for this component of the scheme.
20. Switzerland and Liechtenstein subsidize exports of dairy products, cattle, horses, fruit,
potatoes, and certain processed agricultural products (section (iii)).   According to the Liechtenstein
authorities, few Liechtenstein companies benefit from the export subsidy scheme.  Customs duties are
refunded on specified goods, including agricultural products, depending on their final use, and under
the Processing Traffic Scheme (Chapter III(2)(ii)(e)).
                                                     
14 Federal Law on Agriculture, Articles 78 to 112.
15 The refunds are calculated on the quantities of raw materials actually used in the manufacture of the
goods, while the agricultural element of the customs duties on imports is fixed according to a standard recipe.WT/TPR/S/77 Trade Policy Review
Page 68
21. On average, direct payments account for about one quarter of gross agricultural earnings.  In
1998, the share of direct payments in gross agricultural earnings by farms of about 20 ha ranged
between 14% and 22% in the plains and between 22% and 50% in the mountain areas of
Switzerland.16  The total financial assistance by the Swiss Confederation and the cantons amounted to
Sw F 104 million;  concessionary credits of Sw F 195 million were also granted to rural projects and
Sw F 20 million to the cantons, for similar purposes.  Total domestic support granted by Switzerlandand Liechtenstein has been declining since 1995 due to reductions of current total aggregate
measurement of support (AMS);  nevertheless, th e share of green-box support increased from some
38% of total domestic support in 1995 to nearly 50% in 1998 (Table IV.4).  The total budget for
government support for agriculture (i.e. around 90% of the total public budget for the sector) amounts
to some Sw F 14 billion for the period 2000-03;  the annual amounts are to be reduced gradually(Table IV.5).  In particular, government support for trade promotion, exportation, milk, meat, and
vegetable production must be reduced by one third of its 1998 level, i.e. from Sw F 1.2 billion to
0.8 billion in 2004.
17
Table IV.4
Usage of domestic support categories, export subsidies and export credits, Switzerland and Liechtenstein, 1995-99
(US$ million)
1995 1996 1997 1998 1999b
Total domestic support 5,924.4 5,365.7 4,501.3 4,448.0 -
Green box 2,229.4 2,403.6 2,127.5 2,190.4 2,300
S&D box n.a. n.a. n.a. n.a. n.a.
B l u e  b o x 0000 0
D e  m i n i m i s 0000 0
Current total AMSa3,625.0 2,962.1 2,373.8 2,257.6 1,924.1
Total export subsidies 446.7 368.6 295.3 292.0 291
E x p o r t  c r e d i t s 0000 0
n.a. Not applicable.
a Aggregate measurement of support.
b Provisional.  The figures are converted into U.S. dollars on the basis of  US$1=Sw F 1.5.
Source : WTO document G/AG/NG/S/12, 15 June 2000;  and the Swiss Authorities.
Table IV.5
Framework plan for government support, Switzerland, 2000-03
(Sw F million)
2000 2001 2002 2003
ItemFramework plan
Infrastructure 221 272 272 272
Production and marketing 994 889 820 787
Direct paymentsa2,321 2,366 2,396 2,419
Total 3,536 3,527 3,488 3,478
a Some of the payments are included under production and marketing.
Source : Federal Office for Agriculture.
                                                     
16 Office fédéral de l'agriculture (1999b).
17 The policy measures in the areas will be evaluated five years after the entry into force of the law, at
the latest in 2004 (Federal Law on Agriculture, Article 187).Switzerland and WT/TPR/S/77
Liechtenstein Page 69
22. Imports of agricultural products are subject to licensing requirements for health, sanitary,
phytosanitary, compulsory reserve stock or tariff quota management considerations
(Chapter III(2)(viii)(b) and (2)(x)). Imports of live bovines, and certain types of meat and animal flour
of British origin are prohibited.  Imports of bovines, goats, and sheep are allowed only from countries
where the use of animal flour in ruminant f eeding is banned.  Likewise, imports of products
containing beef are allowed only from countries where the use of, inter alia , brains, eyes, spinal cords,
and spleens of bovines is prohibited (unless particular guarantees are provided).  Under Article 18 of
the Federal Law on Agriculture, the Swiss Federal Council prescribes the provisions for declaration of
goods produced in a manner prohibited in Switzerland, and increases the customs duties on their
import into the customs territory.  The production methods banned are those not complying with the
protection of life or health of persons, animals or plants, or with the protection of the environment.Accordingly, imports of meat produced using hormones, antibiotics, and other antimicrobial
substances as performance stimulators (i.e. not for therapeutical purposes), and of eggs laid by
domestic fowl in battery cages must be labelled as such.  Moreover, specified labelling requirements
apply to genetically modified organisms in food and feedstuffs (Chapter III(2)(viii)(c)).  The only
temporary exception is made for rape and soybean oilseeds, on which the legislation is to be replacedby the end of the year 2000.
23. With the introduction of AP 2002, government involvement in the marketing of agricultural
products has been reduced:  the marketing board in charge of butter imports (BUTYRA) was
liquidated in April 1999 and the Swiss Cheese Union (in charge of cheese exports) was abolished in
January 2000.  The Confederation has commissioned private companies for the marketing of products
such as meat and sugar.  The scope of the guaranteed price and margin systems has been reduced
substantially (sections (iii)(a) and (b)). The Price Control Authority was revoked on31 December 1998 and a Market Observation Authority was established to keep up with the market
situation of "sensitive" agricultural products.
18  The new Authority regularly records the prices of
agricultural products at various levels of trade and processing.  The following goods are currently
under observation:  meat and meat products, milk and dairy products, eggs and poultry, fruit and
vegetables.  Except for beverages, a downward trend in producer prices has been recorded for mostagricultural products since 1995 (Chart IV.1).  In th e long run, the reforms are aimed at bringing food
prices into line with (closer to) those of neighbouring countries, with an expected reduction by one
half of the excess over the agricultural prices in the EU by the end of the second stage of the reforms,
i.e. in 2002.
19
24. The "threshold-price" system is maintained on imports of certain agricultural products,
currently fodder products (Table IV.6).  It is a duty-inclusive import price projected and used by the
Federal Council to set variable tariffs on imports of "groups" of products.  Accordingly, the threshold
price comprises an "estimated" c.i.f. import price and the customs duty to bring the latter into line
with the local price of the good.20  On the basis of the threshold price of the groups of products, the
Federal Department of Economy also determines indicative prices for "similar" products(Table AIV 1) and a permissible bracket for fluctuations of the actual duty-inclusive import prices of
the two categories of goods around the threshold or the indicative prices.
21  Adjustments of the
customs duties on the given products are undertaken to maintain their actual duty-inclusive import
prices within the price brackets.  The current permissible limit of fluctuations is Sw F 3 per 100 kg.,
i.e. no adjustment of tariffs is undertaken when the duty-inclusive import prices fluctuate by up to
Sw F 3 per 100 kg. above or below the set prices.
                                                     
18 The Market Observation Authority is part of the Federal Office for Agriculture, although it has an
independent status.
19 The exception will be prices of goods produced by farm holdings in mountain regions (Burger 1999).
20 The method for estimating the import price is determined by the Federal Council.
21 Federal Law on Agriculture, Article 20.WT/TPR/S/77 Trade Policy Review
Page 70
708090100110
1995 1996 1997 1998 1999Animal productsVegetable productsTotal
708090100110
1995 1996 1997 1998 1999Fodder productsMilk and dairy 
productsTotal
Meat and meat 
productsBeveragesChart IV.1
Producer price indices for selected products, 1995-99
Source : Office Fédéral de la statisti que, section des prix et de la consommation. Index May 1993=100
25. The simple average ad valorem  equivalent (AVE) of MFN tariffs on agricultural products at
early January 2000 was nearly four times the overall tariff average of 8.9%, rates range to a maximum
of 678%, on out-of-tariff-quota imports of meat and edible offal (Chapter III(2)(ii)(b)).  In the
Uruguay Round, like other WTO Members, Switzerla nd and Liechtenstein have bound import duties
on all agricultural products (WTO definition);  as at 1 January 2000, the bound duties had been
progressively reduced to their Uruguay Round final levels.  The quarterly modifications of the applied
duties on fodder products and seeds, on the basis of fluctuations of world prices, raise concerns about
the predictability of applied tariffs;  ceiling bindings on most agricultural products, with AVEsranging up to 770%, leave considerable margins for increases in applied duties
(Chapter III(2)(ii)(b)).
22  Moreover, Switzerland and Liechtenstein have retained the right to invoke
the special safeguard clause under Article 5 of the WTO Agreement on Agriculture for all imports on
which they tariffied their former non-tariff measures.  A safeguard duty was accordingly collected on
imports of pig meat and its by-products from 1 May to 31 December 1999 (Chapter III(2)(v)).Agricultural products are subject to the value-added tax at the reduced rate of 2.3%.
                                                     
22 Like the applied tariff, the bound duties on agricultural products are all specific.Switzerland and WT/TPR/S/77
Liechtenstein Page 71
Table IV.6
Threshold prices for groups of fodder products and seeds, Switzerland and Liechtenstein (since 1 January 1999)
Heading No. Description"Threshold"
price
(Sw F/100kg)Also applicable to:
0713 Dried leguminous vegetables, shelled, whether or not skinned
or split:
0713 1011 For animal feeding 53.00 0708.9010-0813.5092
excluding 0709.9091,0712.9070
1003 Barley:
1003 0010 Seed 100.00 1001.1011, 9011, 1002.001,
1003.0010, 1004.0010,
1005.1000, 1008.9013
1003.0070 For animal feeding 51.00 0709.9091, 0712.9070 and
1001.1021-1008.9071
1201 Soya beans, whether or not broken:
1201.0010 For animal feeding, excluding beans for the production of
oil66.00 1201.0010-1208.9010 and
2103.3011
1214 Swedes, mangolds, fodder roots, hay, lucerne (alfalfa), clover,
sainfoin, forage kale, lupines, vetches and similar forage
products, whether or not in the form of pellets:
1214.1010 For animal feeding 41.00 0901.9011, 1209.1110-
1404.9010 and 1802.0010,
2038.1010-9028
1501 Pig fat (including lard) and poultry fat, other than that of
heading No. 0209 or 1503:
1501.0012 Raw pig fat (including lard) for animal feeding 77.00 1501.0012-1518.0098,
3823.1110-1910
1702 Other sugars, including chemically pure lactose, maltose,
glucose and fructose, in solid form;  sugar syrups notcontaining added flavouring or colouring matter;  artificial
honey, whether or not mixed with natural honey;  caramel:
1702.3021 For animal feeding 54.00 1702.3021-1703.9091
2102 Yeasts (active or inactive);  other single-cell micro-organisms,
dead (but not including vaccines of heading No. 3002);prepared baking powders:
2102.2011 For animal feeding 66.00 2102.1091-2102.2021
2303 Residues of starch manufacture or similar residues, beet-pulp,
bagasse and other waste of sugar manufacture, brewing or
distilling dregs and waste, whether or not in the form of
pellets:
2303.1011 For animal feeding 83.00 0505.9011-0511.9910,
2301.1011-2010,
2303.1011-3010 and2309.9011-9089
2304 Oil-cake and other sold residues, whether or not ground or in
the form of pellets, resulting from the extraction of soya-beanoil:
2304.0010 For animal feeding 58.00 2304.0010-2306.9010
3505 Dextrins and other modified starches (for example,
pregelatinized or esterified starches);  glues based on starches,
or on dextrins other than modified starches:
3505.1010 For animal feeding 55.00 1101.0012-1108-2020,
1905.9021, 2302.1010-
5010, 3505.1010-
3809.1010, 3824.1010-9091
Source : Conseil Fédéral Suisse, Ordonnance générale sur l'importation des produits agricoles, 7 Décembre 1998 (Etat le 
26 Octobre 1999).WT/TPR/S/77 Trade Policy Review
Page 72
26. As part of the tariffication exercise and in compliance with the minimum market access
requirements, tariff quotas apply to certain agricultural products, a total of 283 tariff lines at the
HS eight-digit level.  Most of the tariff quotas are administered by means of a non-automatic licensing
system (Chapter III(2)(iii)(a)).  The tariff quota allocation mechanisms are based on the "prise en
charge" system, traders' past imports, auction pro cedures, the first-come-first-served principle, the
order of customs clearance, or pro-rata principle (Table IV.7).  A combination of mechanisms is usedfor certain products.  The "prise en charge" system makes tariff quota allocation conditional on the
purchase of similar local products.  Table IV.8 presents the products for which in-quota imports fell
short of tariff-quota quantities in 1998;  imports generally exceed tariff-quota quantities for products
subject to the "prise en charge" system (quota allocation conditional upon the purchase of local
goods).  Specified quantities of the tariff quotas on wine, meat, and dairy products are reserved forindividual supplying countries claiming "historical rights".
23
Table IV.7
Market-access commitments via tariff quotas, Switzerland and Liechtenstein, 2000
Product Tariff quotaBeneficiaries/eligibility
requirementsAllocation procedure
Live horses, asses, mules 3,322 animals No limitation Auction
Live bovines 20 animals
Live swine 50 animals
Live goats and sheep 187 animalsBreedersFirst-come-first-served, with a
maximum of 5% of the total to
each individual importer
Meat (beef, sheep, goat, horse)22,500 tonnesEstablished butchers, meat
producers and tradersPast importsa; prise en charge;
auction
Other meat (pork and poultry) 54,482 tonnes No limitation Prise en chargeb;  auction
Dairy products (milk equivalent)527,000 tonnesProducers and manufacturers Prise en charge; first-come-first
served
Casein 697 tonnes No limitation Unlimited
Eggs in shell 33,735 tonnesPrise en charge; first-come-first
served
Dried egg products 977 tonnes
Other egg products 6,866 tonnesCompanies involved in
wholesale trade andtransformation Unlimited
Bull sperm 20,000 doses Recognized breeders First-come-first-served
Cut flowers 4,590 tonnes Past imports; prise en charge
Potatoes and products 22,250 tonnes Prise en charge; auction
Vegetables 166,076 tonnes
Apples, pears, quinces, fresh 15,800 tonnesPast imports; prise en charge; pro
ratac
Frozen vegetables 4,500 tonnes Prise en charge; past imports
Apricots, cherries, etc. fresh 16,340 tonnes
Other fruit, fresh 13,360 tonnesPast importsa; prise en charge;
pro rata
Fruit for cider production 172 tonnes
Products from fruit with pips 244 tonnesNo limitation
Auction
Grapes for pressing and grape juice 100,000 hl Unlimited
White wine in bottles 45,000 hl Auction
Red wine 1,620,000 hl First-come-first served
White wine in bulk 30,600 hlLicensed wine traders
Auction
Durum wheat, undenatured 110,000 tonnes Unlimited
Bread cereals and other cereals for human
consumption70,000 tonnes Prise en charge
Coarse grain 70,000 tonnesMembers of the Swiss Cereal
and Fodder Co-operative
Unlimited
a Past imports:  quota shares allocated as a function of commercial activity, purchases or imports during the preceding year.
b Prise en charge:  quota shares contingent upon purchases of local goods.
c Pro rata:  quota allocation depending on the quantities requested by the individual importer.
Source : Government of Switzerland;  and WTO Secretariat.
                                                     
23 See WTO document G/AG/N/CHE/13/Add. 1, 29 June 1999 for details on quantities of the products
reserved for Benelux, France, Italy, the United States, and the European Communities as an entity.Switzerland and WT/TPR/S/77
Liechtenstein Page 73
Table IV.8
Partially filled tariff quotas, Switzerland and Liechtenstein, 1998
Product descriptionaTariff item number(s)a Tariff quota
quantityaIn-quota
imports
Live horses, asses, mules and hinnies 0101.1100 0101.1991 0101.2091 3,322 (units) 2,700
(units)
Live swine 0103.1010 0103.9110 0103.9210 50 (units) 23 (units)
Dairy products, in milk equivalent 0401.1010
0401.2010
0401.3010
0401.30200402.1000
0402.2111
0402.21200402.2911
0402.2920
0402.91100402.9120
0402.9910
0402.99200403.1020
0403.1091
0403.90310403.9039
0403.90410403.9051
0403.9061
0403.9069
0403.90710403.9091
0404.1000
0404.90110404.9019
0404.9081
0404.90990405.1011
0405.1091
0405.20100405.9010
0406.1010
0406.10200406.1090
0406.20100406.2090
0406.3010
0406.3090
0406.40100406.4021
0406.4029
0406.40810406.4089
0406.9011
0406.90190406.9021
0406.9031
0406.90390406.9051
0406.9059
0406.90600406.9091
0406.9099527,000
(tonnes)508,949
(tonnes)
Casein 3501.1010 3501.9010 697
(tonnes)180
(tonnes)
Birds' eggs, in shell 0407.0010 33,735
(gross
tonnes)24,170
(gross
tonnes)
Fresh apricots, cherries, plums and sloes 0809.1011
0809.10180809.1091
0809.10980809.2010
0809.20110809.4012
0809.40130809.4015
0809.40920809.4093
0809.409516,340
(tonnes)13,435
(tonnes)
Other fresh fruit 0810.1010
0810.1011
0810.2010
0810.20110810.2020
0810.2021
0810.2030
0810.30100810.3011
0810.302013,360
(tonnes)12,236
(tonnes)
Fruit for cider 0808.1011 ex0808.2011 172
(tonnes)160
(tonnes)
White wine 2204.2121 2204.2921 2204.2922 170,000
(hectolitres)166,455
(hectolitre
s)
Red wine, other than industrial wine 2204.2131
2204.21412204.2931
2204.29321,530,000
(hectolitres)1,479,078
(hectolitre
s)
Durum wheat, undenatured 1001.1031 110,000
(tonnes)86,142
(tonnes)
Coarse grains for human consumption 1003.0061 1004.0031 1005.9021 70,000
(tonnes)47,313
(tonnes)
a From Section I-B (or I-A) of Part I of the WTO Schedule LIX – Switzerland and Liechtenstein.
Source : WTO document G/AG/N/CHE/21, 28 June 1999.WT/TPR/S/77 Trade Policy Review
Page 74
(iii) Policy by type of product
(a) Livestock and related products
27. Livestock and related products constitute the major branch of the agricultural sector in both
Switzerland and Liechtenstein, where animal breeding and dairy husbandry are traditional rural
activities.  The branch accounts for around three fourths of final agricultural output in value, with
animal production (including meat, eggs, and poultry) accounting for about two fifths, and milk anddairy products one third (about two thirds in Liechtenstein) of the total.
28. In Switzerland, about half of the production of milk is processed into cheese by some 1,000
local cheese factories;  butter is produced from 13% of the total quantity of marketed milk.
Government guarantees for prices and quantity (in the past) have contributed to surpluses of milk and
dairy products (with a self-sufficiency ratio of around 110%), which have given rise to subsidizedexports.  Around 50% of the cheese produced in Switzerland is exported, mostly to the European
Union (EU).  In Liechtenstein, 100 farmers produc ed 13,500 tonnes of milk in 1999;  around 42% of
the production was processed into butter, 2% into cheese, 30% into fresh dairy products, and 27%
sold as raw milk.  According to the Liechtenstein authorities, their country does not export milk and
dairy products outside the Swiss-Liechtenstein customs territory.  Exports of live bovines and beefhave been stopped because of import and transit bans maintained by neighbouring countries, which
still consider Switzerland and Liechtenstein as risk countries with regard to bovine spongiform
encephalopathy (BSE).  The self-sufficiency ratios are around:  90% for beef, veal, and pigmeat;  45%
for poultry and sheep meat;  15% for horse meat;  and 45% for eggs and egg products.
24
29. Following the liquidation of the Swiss Cheese Union and the Swiss Butter Supply Board
(BUTYRA), the producers of these goods created the Butter Interprofession (BOB) and the Swiss
Cheese Organization (OFS), which represent the sub-branches and defend their interests.25  However,
the livestock and related products branch is still strictly regulated.  Indeed, for extensive farming
purposes, the Swiss Federal Council fixes the maximum number of sows, piglets, fattening pigs,
poultry, and fattening calves per farm;  farms not comp lying with this limit are liable to an annual tax
set at rates high enough to make the excess number of animals non-profitable.26  For quota control and
statistical purposes, each manufacturer must inform the relevant authority of the quantities of milkbought from producers and their end-use.  These regulations do not apply to Liechtenstein farmers in
the branch;  the latter are members of the Liechtenstein Milk-Producers Union.
30. In May 1999, a "target-price" system replaced the previous guaranteed-price and margin
systems for milk and dairy products.  It is a projected price used to, inter alia , determine production
aids granted to producers in the branch;  the target price does not include the production aids.  Thetarget price is currently set by the Swiss Federal Council at 77 centimes per kg. of milk,
i.e 7.7 centimes below the 1998 guaranteed price.  Production quotas on milk are maintained;  the
quota shares have become transferable.  In Liechtenstein, the quotas are set by the Government with a
view to limiting local production of milk to the self-sufficiency level (13,000 to 13,500 tonnes per
year).  According to the authorities, the quota system helps to avoid subsidization by Switzerland ofLiechtenstein exports of milk and dairy products, given that Liechtenstein does not subsidize its
exports of these products.  In Switzerland, the quotas are set by the Federal Council on the basis of
historical deliveries of milk.  Producers who exceed their quota shares are liable to a tax of up to 85%
of the target price.
                                                     
24 Conseil Fédéral Suisse (1996).
25 The Swiss Cheese Union and the Swiss Butter Supply Board (BUTYRA) were state-trading
companies in charge of the marketing of products in their respective areas.  WTO (1996).
26 Federal Law on Agriculture, Articles 46 and 47.Switzerland and WT/TPR/S/77
Liechtenstein Page 75
31. Imports of live animals and related products, including meat, dairy products, and eggs are
subject to tariff quotas (Table IV.7).27  The Swiss Federal Council determines the period during which
in-quota imports to the customs territory are allowed.  The branch is the most tariff protected:  the
AVEs of customs tariffs on imports range up to 578% on meat and edible offal of poultry, with an
average of around 105%;  tariffs on dairy products range up to 523%, with an average of 70%.  A
special safeguard duty was imposed on imports of pig meat and its by-products from 1 May to31 December 1999;  Switzerland and Liechtenstein are considering a systematic implementation of
safeguard actions under Article 5(1)(b) of the WTO Agreement on Agriculture (Chapter III(2)(v)).
32. Since 1 January 2000, Proviande, a private cooperative of producers', butchers' and traders'
organizations, has been commissioned by the Federal Office for Agriculture (for a period of four
years) to:  price live animals and meat in domestic markets
28;  monitor the live animals markets;  and
register and control applications for tariff quotas on live animals and meat.  Under the "prise en
charge" system, Proviande also allocates (at prices fixed on the basis of the prevailing market
conditions) excess supplies of local live animals (cattle and sheep) and meat to importers eligible for
tariff quota shares.  The cost of the services provided by Proviande (about Sw F 7.5 million per year)
is financed under the Meat Fund (formerly called  the Meat Reserve Fund) made up with part of therevenue from the customs duties collected on imports of live animals, meat, and preparations
thereof.
29  The Fund also finances, inter alia , the costs (some Sw F 8.5 million) related to stocking of
beef, veal and pig meat by producers in case of excess supply.30  Similarly, a Compensation Fund is
aimed at improving the competitiveness of the eggs and egg products sub-branch.  The Fund is made
up with part of the revenue from the customs duties collected on similar imported products (up to
4 centimes per egg or unit of egg content).
33. Switzerland and Liechtenstein subsidize exports of dairy and processed food products, and
cattle and horses.  Dairy products accounted for 63% of notified use of export subsidies by
Switzerland and Liechtenstein in 1998 (Table IV.9).31  Dairy and other specified preparations of
animal products are eligible for the Price Compensation Scheme  (section (ii)).32  Domestic support
for livestock and related products represents around three fourths of the total.33  T h e  S w i s s
Government grants a non-silage premium of 4 centimes per kg. of milk processed into cheese, a pricesupplement currently amounting to 20 centimes per kg. of milk processed into cheese, as well as
price compensation for dairy products used as inputs.  Financial support, granted to promote sales of
butter and whole milk powder in the domestic market s, ranges from:  Sw F 1.27 to Sw F 7.92 per kg.
for butter (depending on its quality and use);  Sw F 0.40 to Sw F 1.25 per kg. for whole milk powder
(depending on the value of powder imported by manuf acturers of chocolate or similar products).  The
Government of Liechtenstein subsidizes the production of butter:  the subsidies amounted to around
Sw F 648 million in 1999, down from Sw F 1,082 million in 1995.  Furthermore, the Liechtenstein
                                                     
27 With the introduction of the AP 2002, the tariff-quota shares on dairy products have become
transferable.
28 The pricing of products subject to the "prise en charge" system will be transferred from a cooperative
(Coopérative suisse pour l'approvisionnement en bétail de boucherie et en viande - CBV) to Proviande as from
1 January 2001.
29 On a given product, the share (set by the Federal Council) corresponds to the equivalent of up to 10%
of the domestic price of a similar locally produced good.
30 Voluntary reserve stocking is encouraged by the Government to avoid falls in prices that might result
from excess supplies.
31 According to the Liechtenstein authorities, their country does not subsidize exports of milk and dairy
products given that it does not export them (outside the customs union).
32 A major change introduced by the AP 2002 is that dairy products (mainly cheese) are eligible for the
scheme throughout the year and not only during the winter, as under the former system.  The scheme applies tothe whole quantity of milk processed into dairy products.
33 WTO document G/AG/NG/S/1, 13 April 2000.WT/TPR/S/77 Trade Policy Review
Page 76
Government provides financial contributions to local milk-collecting cooperatives and supports the
transportation costs of milk (a total amount of some Sw F 442 million in 1999, broadly the same
amount in 1995) (Chapter III(4)(i)).  Production quotas and tariff quotas on imports, together with the
various incentives, aim to meet the target price set by the Federal Council for milk and dairy products.
Table IV.9
Export subsidies, Switzerland and Liechtenstein, 1995-99
Dairy products Cattle and horses FruitbPotatoesb Other processed food
products Year
CN RaCN RaCN RaCN RaCN Ra
Budgetary outlay commitments
Sw F million % Sw F million % Sw F million % Sw F
million% Sw F
million%
1995 417.1 338.0 81 32.9 30.9 94.0 24.6 16.1 65 3.4 0.9 26 168.8 142.3 84
1996 390.5 305.0 78 30.8 17.1 56.0 23.1 .. .. 3.2 .. .. 158.0 133.5 84
1997 364.0 294.2 81 28.7 0.1 0.3 33.8 4.4 13 4.7 2.0 43 147.3 127.8 87
1998 337.4 265.8 79 26.6 0.3 1.0 20.7 18.9 91 2.9 1.6 55 136.5 136.8 100
1999 310.6 266.3 86 24.5 0.9 3.7 19.1 37.9 206 2.7 1.3 48 125.7 130.1 103.5c
Volume commitments
Tonnes Units Tonnes Tonnes
1995 75,931.0 65,644.0 86 13,806.0 15,312 111.0 11,580.0 9,712.0 84 10,306.0 4,300.0 42 .. .. ..
1996 73,177.0 60,021.0 82 13,306 10,654 80.0 11,160.0 .. .. 9,932.0 .. .. .. .. ..
1997 70,423.0 57,562.0 82 12,806 104 1.0 16,530.0 1,743.0 11 14,711.0 6,357.0 43 .. .. ..
1998 67,669.0 53,916.0 80 12,306 494 4.0 10,530.0 7,377.0 70 9,371.0 6,372.0 68 .. .. ..
1999 64,915.0 73,660.0 113c11,803.7 601 5.1 10,110.0 18,663.0 184.6c8,997.0 6,577.0 73.1 .. .. ..
C  =  Commitment; N  =  Notified use; R  =  Ratio.
.. Not available.
a Ratio of notified use to commitment.
b 1 July to 31 December.c The figures also include previously unused quantities or budgets.
Source : WTO document G/AG/NG/S/5, 11 May 2000.
(b) Other products
Cereals and oilseeds
34. The Organization of the Swiss Branch of Cereal s and Oilseeds (OBSCO), an interprofessional
association grouping farmers, traders, and manufacturers, is the forum for negotiation between these
groups on production, processing, and marketing of cereals and oilseeds, and products thereof.34
Production quotas on oilseeds were abolished in 1999.  Two private oil refineries are still operating.Imports of cereals are subject to customs duties with AVEs reaching 298%, and averaging around
43%.  Products of the milling industry bear an average AVE of around 43%.  The average AVE of
customs duties on oilseeds is about 14%, with a maximum of 166%.
35. The tariff quotas on bread cereals are allocated on the basis of the "prise en charge" method
(Table IV.7).  Producer prices are still guarante ed for cereals for bread, while the threshold-price
system still applies to fodder products.  Under the "prise en charge" and guaranteed price systems, the
Swiss Confederation has committed itself to purchase some 390,000 tonnes (per year) of locallygrown cereals for bread;  in case of excess supply, producers pay the difference between the
guaranteed price and the price of the excess auctioned by the Confederation as fodder cereals.  The
                                                     
34 Before being sold in the customs territory, seeds must be officially certified and their varieties
recorded in a national catalogue. Th e certification and recording costs are borne by the owner and thereby
increase the final price of the seeds.Switzerland and WT/TPR/S/77
Liechtenstein Page 77
"prise en charge" (with purchases of at least 85% of local production) and guaranteed-price systems
are to apply to cereals for bread until the end of the 2000 harvest.  The systems are to be terminated
for oilseeds as from the 2000 harvest, and for cereals as from 1 July 2001.
36. Farmers of vegetable crops (including cereals and oilseeds) are eligible for direct payments
(Table IV.3).  As from the 2000 harvest, the area payments (of Sw F 1,500 per ha) are to be granted to
producers of rape, soyabean and sunflower;  area payments to farmers of fodder cereals have beenreduced from Sw F 770 to Sw F 400 per ha and are to be abolished in 2001.
Alcoholic beverages
37. The Swiss Confederation has held exclusive rights over production, redistilling and
importation of alcoholic beverages to the customs territory.  It has exercised the rights through the
Federal Alcohol Board, which has commissioned private firms for specified tasks.  The Board hasfixed the annual quantity of alcoholic beverages it would buy from producers;  it has also purchased
the excess supplies of specified locally produced alcoholic beverages.  The Federal Department of
Finances has set the prices at which the Board has bought and sold the beverages.  According to the
authorities, the alcoholic beverages branch has been liberalized since 1 February 1997;  producers
have since been allowed to commercialize their products at market prices.  Sales by producers to theBoard are also set at market prices.
38. The control of vintage is under the responsibility of the cantons in Switzerland and the Office
of Foodstuff Control and Veterinary Affairs in Liec htenstein;  it is financed at between 60% and 80%
(depending on the financial capability of each canton) by the Swiss Confederation, and at 100% by
the Liechtenstein Government.  The Confederation also controls the indications of origin and ensures
compliance by producers with oenological regulations.  The Federal Office for Agriculture (FOFA) is
responsible for certification of the quality of beverages made from grape (including grape juice andwine).
35  The Wine Fund, made up with part of the revenue from customs duties on imports of grape
beverages (the equivalent of up to 10% of the price of similar Swiss products), finances direct
payments to producers, as well as promotion and marketing (including exports and certification) of
wine and related products.  Imports of wine are subject to tariff quotas, which are allocated to licensed
traders (Table IV.7);  retailers, such as supermarkets, are excluded.
39. An excise duty is collected on beverages containing more than 1.2% of alcohol per volume.
Alcoholic beverages produced only through fermenta tion (e.g. wine, beer, cide r) and with an alcohol
content not exceeding 15% per volume are not subject to the duty.  As from 1 July 1999, the rates of
the duty have been harmonized to Sw F 29 per litre of pure alcohol content for both imports and
locally produced beverages;  on imports, it is still called "monopoly" duty.  Specified wines, ("vinnaturel") containing more than 15% and up to 22% of alcohol per volume, are subject to half of the
normal duty.  Exports of alcoholic beverages are eligible for full refund of the duty.  The AVEs of
customs tariffs on beverages, spirits and vinegar average 11%, with a maximum of around 43%.
Fruit and vegetables
40. The former tasks of the Federal Alcohol Board concerning fruit and potatoes were transferred
to the FOFA in 1997.  The FOFA fixes the period for imports of  fruit and vegetables within tariff
quotas.  In 1998, administered prices for fruit for cider were eliminated.  Budgetary payments to the
fruit sub-branch have been reduced from Sw F 40 million to Sw F 21 million in 2000.  Consumer
subsidies of Sw F 0.3 million are granted for sales of fruit (cherries and plums) at reduced prices to
people in need (people in mountain areas and with low incomes).  Imports of specified fruits are
                                                     
35 The certification concerns only wine destined for export (from both Switzerland and Liechtenstein).WT/TPR/S/77 Trade Policy Review
Page 78
subject to tariff quotas (Table IV.7). The AVEs of customs tariffs on live trees and cut flowers
average some 60%, with a maximum of around 526%.  The average on edible fruit is about 13%, with
a maximum of around 200%.
Potatoes
41. Swisspatat, an interprofessional organization grouping producers, traders, and manufacturers,
is commissioned by the FOFA to balance the domesti c market by using potatoes as feed for animals,
by stocking or processing excess supplies of potatoes and seed potatoes into fodder products.  The
Confederation pays Swisspatat Sw F 18 milli on for the monitoring of potato markets and
Sw F 2.6 million for seed potatoes.  Processed potato products are eligible for the Price Compensation
Scheme.  Subsidies of some Sw F 1.5 million per year are granted for exports of potato products and
of Sw F 800,000 for seed potatoes, to compensate for the difference between local and world prices(the average EU price) of the goods.  The Swiss A ssociation of Seed Producers (SASP) is in charge of
the selection of seed potatoes.  Liechtenstein farmers are not members of Swisspatat and SASP.
Import prohibitions are maintained (on phytosanitary grounds) on potatoes and seed potatoes from
countries that are not members of the European and Mediterranean Plant Protection Organization
(Chapter III(2)(viii)(b)).  Edible vegetables, roots and tubers are subject to customs tariffs with AVEsaveraging some 60% and ranging up to some 480%.
Sugar
42. Sugar is produced from beet grown in Switzerland.  Production quotas are maintained on
sugar:  Swiss sugar refineries (the Aarberg and Frauenfeld Sugar Refineries) are commissioned by the
Federal Council to supply between 120,000 and 185,000 tonnes of sugar per year to the customs
territory.
36  The refineries annually negotiate with farmers' associations the necessary quantity of beet,
its distribution among producers, and its price.  The refineries are required to sell their sugar and otherby-products of beet at market prices.  In return, the Confederation grants the refineries financial
assistance amounting to Sw F 45 million per year to support production costs.  In addition, if the c.i.f
import price of sugar is inferior to Sw F 35 or supe rior to Sw F 45 per quintal, the difference between
this and local prices is taken into consideration for the determination of the Confederation's financial
contribution for the following period. An advance is granted in case of substantial losses by therefineries.  The prices of molasses and other by-products of beet for animal feeding are subject to the
threshold price system.  The average AVE of customs tariffs on sugar and confectionery is about
17%, with a maximum of 102%.
(3) M
ANUFACTURING AND ENERGY
(i) Manufacturing
43. High production costs (including wages), together with a low level of taxation, well
developed infrastructure, research facilities, and low interest rates that reflect the relatively high
liquidity of the banking system, have favoured the specialization of both Switzerland and
Liechtenstein in the production of capital-intensive goods.  Several multinational companies are
operating in the sector, although the tendency in recent years has been to transfer production tocountries with lower production costs.  Manufacturing is currently largely assured by small and
medium-sized enterprises.  The most important production branches are: machinery and electronics;
scientific instruments;  medical devices;  chemicals (including pharmaceuticals);  metal industry;
food products;  and footwear, textiles and clothing.  Switzerland also produces watches, clocks and
jewellery.  The manufacturing sector is export-oriented in both Switzerland and Liechtenstein.
                                                     
36 Before the reforms, the maximum quantity was set at 175,000 tonnes.Switzerland and WT/TPR/S/77
Liechtenstein Page 79
Because of the nature of the products (short-run, high-technology goods), the sensitivity (price-
elasticity) of their demand to price changes (including  exchange rate fluctuations) is low.  Shortages
of skilled labour remain the major constraint to the further development of the sector.
44. In Switzerland, the manufacturing sector contributes around 18% to total employment, one
third to real GDP and 96% to the total value of merchandise exports;  each of the two largest
branches, machinery and electronics, and chemicals, accounts for around 30% of this value.  Thesector has, in recent years, experienced structural changes in favour of branches such as
biotechnology and medical equipment.  It was seriously affected by the early 1990s economic crisis
and the Asian financial crisis of 1997-99.  The poorest performance was recorded in 1995 and 1996.
The branches most negatively affected where the metal industry, footwear, textiles and clothing
(demand in the European markets declined)
37, and watches (demand in the East-Asian markets fell);
machinery and equipment industries resisted.  Since 1997, most industries have generally been
performing well and their exports have been growing (Table IV.10).
45. In Liechtenstein, manufacturing accounts for around 46% of total employment;  some 1,700
enterprises are operating.38  Almost all the production is exported (about half to the EU):  the sector is
virtually the only source of revenue from merchandise exports.  Metal-working, vacuum engineering,precision tools, food products, electronic systems, and articifial teeth and dentistry are the most
important branches.
46. Except for policy instruments designed to promote processing of agricultural products
(sections 2(ii) and (iii)), and reductions and refunds of customs duties on imports of specified inputs
(e.g. textiles and clothing, aluminium and articles thereof), or under the Processing Traffic Scheme,
Switzerland and Liechtenstein do not have policies specific to manufacturing.  They have not resorted
to quantitative restrictions on imports of textiles, clothing and footwear.  However, they retain theright to use the transitional safeguard mechanism of Article 6 of the WTO Agreement on Textiles and
Clothing (Chapter III(2)(v)).  Both the Swiss and Liechtenstein Governments finance or participate in
the financing of research programmes in areas presenting significant interests for the development of
their economies (Chapter III(4)(ii));  these are, inter alia , medical technology and software programs
for the Swiss economy.
39  In addition, the Government of Switzerland provides financial support to
manufacturing companies and services companies with activities closely linked to manufacturing
processes, and which invest in areas under economic renewal (Chapter III(4)(i)).  An incentive
scheme is also available for the development of environmental technologies.  Under this scheme, the
Swiss Government provided financial support of Sw  F 2 million in 1997 and some Sw F 4 million in
2000.
                                                     
37 The textiles and clothing branch, dominated by small enterprises producing high-quality yarns,
fabrics and silk products, industrial textiles, and luxu ry clothing, has for decades experienced strong pressures.
The economic crisis of the early 1990s and the Asian financial crisis also played a role.  In 1999, the value ofSwiss exports of textiles, clothing, and footwear, at some Sw F 3.8 billion, was 24% below its 1990 level.  For
the clothing industry, the value of outward processing traffic (some 10% of total sales) increased from around
Sw F 44 million in 1986 to a peak of about Sw F 109 million in 1993, and declined to some Sw F 84 million in1996.  The branch has benefited from pan-European cumulation of origin (Nell, 1998).
38 The figures correspond to the secondary sector as a whole.
39 The chemical industry is a research-intensive branch of the manufacturing sector.WT/TPR/S/77 Trade Policy Review
Page 80
Table IV.10
Exports by major Swiss industries, 1994-99
(Percentage changes of nominal values)
Manufacturing sectors 1994 1995 1996 1997 1998 1999 1994/99
Food and beverages 6.0 -2.2 0.2 7.3 -2.1 5.2 14.8
Food 0.8 0.5 -0.2 8.3 3.2 4.7 18.3
Beverages 18.2 -13.5 4.2 32.3 -2.6 15.8 59.0
Tobacco 22.3 -5.9 2.2 -2.5 -20.5 0.6 -8.3
Textiles and clothing -0.9 -7.9 -7.1 7.1 0.9 -4.6 -12.6
Textiles 0.2 -6.8 -9.2 5.4 1.0 -5.7 -14.9
Clothing -1.2 -7.0 1.5 14.0 3.2 1.0 10.8
Footwear -10.3 -21.8 -14.2 -0.7 -10.7 -19.8 -57.2
Paper and printing 8.7 7.7 -2.0 14.2 6.5 6.5 48.6
Leather and plastics 6.7 0.3 -5.5 9.9 6.3 6.1 25.4
Leather products 16.9 -12.1 -8.5 5.6 -0.2 5.8 4.8
Plastics products 5.7 2.2 -4.9 10.9 7.5 6.6 30.6
Chemical products 5.1 2.4 8.0 14.2 5.6 8.6 52.2
Pharmaceuticals 4.5 5.4 13.8 18.4 9.8 14.7 86.9
Agrochemical products -2.0 10.2 5.0 -4.2 3.4 -17.0 -6.8
Metals and metal products 4.9 7.3 -1.9 10.7 5.4 -0.9 27.7
Iron and steel -4.5 4.9 -19.1 26.8 2.4 -7.5 -2.7
Metal products 5.0 6.8 0.5 7.8 7.2 -0.3 29.8
Machinery and equipment 5.3 4.9 2.4 10.1 3.4 2.3 31.7
Non-electric engines -6.1 1.2 17.9 9.8 1.0 9.8 36.4
Machinery 7.1 6.0 -0.9 10.9 1.8 -1.1 25.6
Electrical and electronic parts 6.6 7.2 5.7 10.4 6.0 1.6 43.6
Vehicles -4.6 12.4 26.3 3.3 10.9 12.8 75.0
Road vehicles 2.0 -10.7 3.9 14.7 18.9 4.6 35.0
Spare parts 8.3 6.2 8.6 10.0 26.5 10.2 91.5
Instruments 2.4 0.9 3.2 11.9 6.5 9.9 39.7
Watches 4.9 -3.6 -1.6 10.1 1.3 6.9 18.6
Furniture -3.6 3.7 0.9 4.6 12.9 10.5 31.6
Total, merchandise exports 4.1 2.0 2.4 11.6 3.8 4.9 32.1
Source : Information provided by the Swiss authorities.
47. Standards and technical regulations that had constituted important barriers to trade, including
in manufactured products, have been substantially harmonized with those of the major tradingpartners, the European Communities (EC) in particular (Chapter III(2)(viii)).  Subject to ratification
by the EU Member States, the mutual recognition agreement (in relation to conformity assessment)
between Switzerland and the EU is expected to further improve market access.  Regulations are still
different in areas such as pressure vessels, invitro-diagnostica, civil explosives, "recreational crafts",
cable cars, and chemicals (Chapter III(2)(viii)).  For instance, before being submitted for sale,
chemicals (substances and chemical products) must be registered as toxic substances with the Federal
Office for Public Health, the full composition of chemical products must be submitted;  the personregistering the products must have his place of busi ness in Switzerland.  In the case of Liechtenstein,
such barriers to its trade with the other members of the European Economic Area have been
eliminated since its membership and the establishment of the Market Control and Surveillance
Mechanism for the purpose of parallel marketability of products (Chapter II(5)(iii)(b)).  Regarding
parallel imports of patented products (including manufactured goods such as drugs), the Swiss Federal
Tribunal recently upheld the principle of national exhaustion (Chapter III(4)(iv)(b)).  Furthermore,
parallel imports of drugs are not allowed in Switzerland.  Drugs can only be substituted by generics
once the patent protection has elapsed.  Parallel imports of patented products (including drugs) fromSwitzerland and WT/TPR/S/77
Liechtenstein Page 81
the other EEA member countries to Liechtenstein are made through the MCSM (Chapters II(5)(iii)(b)
and III(4)(iv)(b)).
48. Imports of motor vehicles are limited mainly by non-tariff barriers although Switzerland and
Liechtenstein do not produce motor vehicles on a commercial scale.  Indeed, distribution contracts
with foreign manufacturers normally prohibit parallel imports.  Motor vehicles must be imported
through "official" channels, by either representatives with exclusive rights conferred bymanufacturers
40, or by foreign dealers or distributors.  Garages are obliged to purchase all supplies
through "official" channels and must only use parts labelled as "original" by the manufacturer.  This
may include parts such as airbags, which are produced in Switzerland, exported, packed and labelled,
and re-imported.  Garages are normally obliged by manufacturers or importers to keep a specified
range and level of stock.41  In accordance with a 1997 decision by Comco, dealer contracts in the
automobile branch are compatible with the provisions  of the LCart if they conform with either a 1994
Code of Conduct on the shape of brand dealer contracts (for distribution of motor vehicles and repair
parts) issued by the former Cartel Commissi on and published in 1996, or with Block Exemption
Regulation 1475/95 of the EU.42
49. Under the Ordinance on Type Approval of Road Vehicles, each resident in the customs union
can import only one motor vehicle per type of make per year.  Commercial importers (i.e. persons
importing more than one vehicle per type of make per year) are subject to a licensing fee of Sw F 5.50
for each imported motor vehicle.  Moreover, all vehicles and specified parts must be homologated.
Inspection by the local Cantonal Automobile Office (after completion of customs clearance for the
motor vehicle) addresses, inter alia , pollutant emission, noise, brakes, lights and lighting,
speedometer and tachometer readings, and make of tires.  The inspection fee of around Sw F 50 to
Sw F 80 (according to cantonal decrees) and, if necessary, costs incurred to bring the vehicle intocompliance with the local regulations are borne by the owner.  The Swiss regulations on motor
vehicles do not apply to imports from the other EEA member countries to Liechtenstein (following its
membership in the EEA).
50. The level of tariff protection in the manufacturing sector has remained relatively low.  The
Information Technology Agreement, the Pharmaceuti cal Initiative and the Plurilateral Agreement on
Trade in Civil Aircraft have contributed to the further liberalization of the sector.  The simple average
of the ad valorem  equivalents (AVEs) of customs tariffs on manufactures is well below the overall
average of 8.9% Chapter III(2)(ii)(b).
43  However, owing to the imposition of specific duties, tariff
dispersion is more pronounced in manufacturing than the other sectors since the value of
manufactured goods (mainly high-technology products in the present case) is not generally linked totheir weights.  Positive tariff escalation is present in branches such as food products, textiles, leather
                                                     
40 Most international car manufacturers are represen ted in the customs territory;  Opel (GM) and
Volkswagen-Audi are the largest firms.
41 WTO (1996).
42 The 1997 investigations by Comco of the Volkswagen Group, to clarify whether the Group hindered
direct and parallel imports of its motor vehicles to Sw itzerland, concluded that dealer contracts by the Group
had not contained any prohibition of "passive sales" into Switzerland;  the contracts had not generatedsignificant restraints of competition.  Consequently, the case was closed without imposition of remedialmeasures.  Furthermore, a decision is expected by 2001 with regard to an investigation by Comco (on similar
cases of dealer contracts, initiated in November 1998)  against the official distributor of Citröen cars in
Switzerland.
43 The average tariff for imports under HS 25-97 is 2.4%, a grouping that includes mining and
quarrying, but excludes processed agricultural products.   Using ISIC (Revision 2), "manufacturing" as defined
by Major Division 3, the average tariff is 6.8%, a grouping which includes processed agricultural products.WT/TPR/S/77 Trade Policy Review
Page 82
products and chemicals (Chapter III(2)(ii)(b) and Table AIII.2).   Most manufactured products bear the
standard rate of 7.5% of the value-added tax.
51. Except for processed agricultural products, the highest imports duties on manufactured
products apply to:  textiles such as cordage and rope on which the average AVE is 13%, with a
maximum of 39%;  specified non-ferrous basic metal products on which the AVEs range up to 38%;
and certain basic industrial chemicals with AVEs  reaching 43%.  Imports of motor vehicles are
subject to customs tariffs with AVEs averaging about 2% and ranging up to some 12%.  Lower
customs tariffs, with AVEs averaging 0.3%, apply to aircraft, spacecraft, and parts thereof, imports of
some of these products being duty-free under the Pl urilateral Agreement on Trade in Civil Aircraft.
Given that the customs tariffs are specific, their incidence is considerably higher on second-hand and
large-volume (heavy and relatively cheap) vehicles.  In addition, imports of motor vehicles are subjectto an excise tax (the motor vehicle tax) of 4% levied on their customs-duty inclusive c.i.f. value
(Chapter III(2)(ii)(d)).
(ii) Energy
52. Switzerland does not produce fossil fuel.  Therefore, around 81% of the total value of energy
(mostly fossil fuel) consumed in Switzerland in 1999 was imported.  Crude oil accounts for aroundone third of total oil imports, oil products making up the difference.  Crude oil is refined in two plants,
owned by Shell and Tamoil.  Four main companies dominate the retail (distribution) market.  The oil
price is freely set by the companies.  In contrast, the natural gas market is mostly under the monopoly
of cantons and municipalities;  the majority of gas companies are owned by cantons or municipalities,
including the seven largest, which have 50% of the market share.  Swissgas, a privately owned natural
gas transport company, is the major importer (75% of total imports of natural gas to Switzerland).
44
The prices of natural gas are either set or subject to approval by local authorities.
53. Electricity is the major source of energy produced in Switzerland.  The bulk of the production
is from some 350 hydroelectric power plants (about  61% of the production in 1999) and five nuclear
power plants (around 35%).45  Other sources of electricity include waste, biomass (wood in
particular), fossil-fired combined heat and power, and solar and wind energy.  The total production of
electricity was nearly kWh 67 billion in 1999.  The electricity branch employed around20,000 persons in 1997.  Trade in electricity is mostly with neighbouring countries:  imports are
mainly from neighbouring French nuclear power pl ants, and exports are to neighbouring Italy
(Chart IV.2).  Exports are no longer subject to a federal licence.
54. The electricity branch comprises some 1,200 companies of which:  six are vertically
integrated and mainly active in generation, transmission and trade (Chart IV.3);  300 are active inproduction and distribution;  200 are (mostly) joint-owned by other utility companies and are active in
production;  and around 700 companies are mainly dist ributors and operate at municipal levels.  Forty
major firms account for more than 60% of total distribution.  The branch is 72% owned by cantons
and municipalities, (mainly in the field of distribution).  Related generation, transmission, and
distribution activities are still under monopolies.
46  Seven major electricity companies currently own
the electricity grid.  The electricity prices are set either by cantonal or communal authorities, or by
companies, subject to approval by the Price Surveillance Authority (Chapter III(4)(iii)(b)).  Therefore,
the price differs between cantons or municipalities.  This monopolistic situation and various taxes
collected mostly at cantonal and/or communal levels have contributed to relatively high average
                                                     
44 OECD/IEA (1999).
45 Conseil Fédéral Suisse (1999d).
46 Competition is not forbidden by law;  it is prevented in practice by the absence of a third-party
access obligation.Switzerland and WT/TPR/S/77
Liechtenstein Page 83
prices for industry47:  in 1997, the average electricity price to Swiss industry was the second-highest
amongst International Energy Agency member countries.48
30,000 20,000 10,000 0 10,000 20,000 30,000Chart IV.2
Cross-border trade in electricity, Switzerland, 1998
Source : Office Fédéral de l'Ener gie.France
Germany
Other countries
BeneluxItalyAustria
GWhExports from Switzerland
Imports to Switzerland
55. In 1991, the Swiss Federal Council launched the Energy 2000 Action Programme known as
Energy 2000.  The goals of the programme are:  the st abilization of total fossil fuel consumption and
of emissions of carbon dioxide (CO 2) in the year 2000 at the 1990 levels, and subsequently, a
reduction of 10% by 2010 as laid out in the CO 2 law;  continuous reduction of the growth rate of
electricity consumption during the 1990s and stabilization of demand after the year 2000;  renewable
energies are to contribute an additional 0.5% to electricity generation and 3% to heat generation by
the year 2000;  and by 2000, the production of hydro-power is to be increased by 5% and the
generating capacity of existing nuclear power plants by 10%.  The implementation of the programme
is based on:  voluntary measures on energy efficiency and on use of renewable forms of energy;legislative framework on the supply and use of energy (the Federal Energy Law);  and dialogue in
case of dispute.  Energy 2000 involves the Confederation, the cantons, the municipalities, and the
business and private sector.
49
56. The Federal Energy Law came into force on 1 January 1999.  It is aimed at promoting a
rational use of energy and encourages use of local and renewable energies.  The Federal Government
and the cantons may participate by up to 40% (exceptionally 60%) in the incremental cost of related
                                                     
47 Hidden taxes and charges levied on electricity by cantons and municipalities are estimated at some
20% of its final cost.
48 OECD/IEA (1999).
49 See Swiss Federal Department for Environment (1999) for details.WT/TPR/S/77 Trade Policy Review
Page 84
projects.  A follow-up programme called "Energy Suisse" is to replace Energy 2000 as from the
beginning of 2001;  it will be aimed at impl ementing the provisions of the Federal Energy Law.
0 5,000 10,000 15,000 20,000 25,000Chart IV.3
Structure of the electricity market in Switzerland, 1997
Aare-Tessin AG (ATEL) - W
Nordostschweizerische
Kraftwerke (NOK) - E
Elektrizitätsgesellschaft
Laufenburg (EGL) - E
BKW FMB Energie SA (BKW) - W
Energie de l'Ouest Suisse (EOS) - W
Centralscheizerische 
Kraftwerke (CKW) - E
Note:
Source : Total supply
Exports22,591 GWh
20,134 GWh
17,200 GWh
10,315 GWh
7,358 GWh
4,066 GWh
W = West and  E = East
Office Fédéral de l'Ener gie.
57. The Electricity Market Law (EML), to be adopted by the Parliament in 2000, will come into
force in 2001.  The EML will provide for regulated third-party access to the national grid and a
phased opening of the electricity market (21% in 2001, 34% in 2004 and full opening in 2007).
Generation, trade, and related services are to be fully liberalized by the year 2007, and consumers are
to be free to choose their suppliers.50  However, transmission and distribution of electricity will be
subject to a new national monopoly regulation.  A company governed by private law is to be createdthree years (at the latest) after the entry into fo rce of the EML to manage the national transmission
grid (transmission system operator).
51  The company will be required to purchase certain percentages
of its supplies from renewable sources.  The electricity price is to be set by companies according to
the cost-reflective and efficiency-oriented principle.  In the long run, the reforms are expected to
reduce the electricity price in Switzerland to its average level in the EU.  The market openingschedule, the establishment of the grid management company, as well as compensation for stranded
assets of hydroelectric power plants (among others) are still under discussion.
58. In Liechtenstein, the bulk of energy is imported;  oil accounted for more than one quarter of
the total value of energy imports in 1999 (Chart IV.4).  In 1999, domestic production of energy rose
by nearly 10% to GWh 88,951and represented around 6% of total consumption;  imports make up the
                                                     
50 New generation capacities are to be subject to authorization under federal and cantonal legislation.
Cross-border supply of electricity to Swiss consumers would be subject to a reciprocity principle.
51 The company must not be involved in generation and distribution, nor hold shares in the capital of
firms involved in such activities.  The transmission price is to be set or approved by the Federal Council.Switzerland and WT/TPR/S/77
Liechtenstein Page 85
difference (94% of total consumption).  Electricity is the major source of energy produced in
Liechtenstein:  the total production of electricity was GWh 73,561 (some 25% of total electricity
consumption).  Electricity is produced by four hydroelectric power stations, 14 solar power stations,
one thermal station using natural gas and another using biogas.
Chart IV.4
Energy imports by product, Liechtenstein, 1998
Electricity
22.3
Wood
1.0
Oil
26.8
Diesel
6.9Gas
21.0Natural gas
22.1Per cent
Source :  Amt für Volkswirtschaft, Liechtenstein.Total:  1,271,906 MWh
59. A 1996 law promotes the rational (including en vironmentally protective) use of energy and
encourages the use of renewable energies.  The Government financially supports, inter alia ,
refurbishment of old buildings and special heating or solar technology.  The financial contributions of
the Government amount to some Sw F 650,000 per year.  Two state-owned companies,Liechtensteinische Kraftwerke (LKW) and Liechtensteinische Gasversorgung (LGV), are operating in
the branch (LKW for production and distribution, and LGV for distribution);  they employ
160 persons.  Liechtenstein is connected to the Swiss grid.  Under certain agreements, LKW imports
electricity exclusively from the north-eastern Swiss supplier, NOK;  it holds exclusive production and
distribution rights (Table AIII.5).  LKW also sets electricity prices;  the highest prices apply tohousehold consumption.  High prices also apply during peak hours of consumption.  Lower prices
apply to large enterprises, which have to establish their own transformer station.  LGV holds
exclusive distribution rights over gas and it sets the price.  Private companies are operating in the
petroleum sub-branch where the prices are market-determined.  Liechtenstein is to liberalize its
electricity and natural gas markets with a view to implementing the relevant EU regulations.  Theelectricity market will probably be liberalized in parallel with the Swiss market since the product is
imported only from Switzerland.
60. The same duties and taxes apply on energy in both Switzerland and Liechtenstein.  The
customs tariffs on the products are relatively low:  imports of electricity, crude petroleum, and natural
gas are duty free;  and the average AVE on petroleum and coal products is 1.8%.  The value-added taxWT/TPR/S/77 Trade Policy Review
Page 86
is collected at the standard rate of 7.5%.  An incentive tax, and a mineral tax and surtax are also levied
(Chapter III(2)(ii)(d)).  Other taxes, such as the energy incentive tax (on non-renewable energies), the
Ecotax, and another tax proposed under the so-called "Solar Initiative" were to be subject to public
vote in September 2000.  The proposed energy taxes are aimed at, inter alia , reducing pollutant
emission, promoting renewable energies and efficient use of energy, and/or supporting accelerated
amortization of existing investment  in hydroelectric power plants.
(4) SERVICES
61. Services are the most important sector of the Swiss economy, accounting for nearly two thirds
of real GDP and contributes around three fourths to total employment.  The sector is relatively
diversified;  financial services represent the most important subsector.  Switzerland is a net exporter
of services.  Likewise, financial services are of great importance to the Liechtenstein economy.  Thedevelopment of this branch has been favoured by, inter alia ,  the monetary union with Switzerland;
Liechtenstein's membership in the EEA has also pl ayed its part since 1995.  The sector accounts for
somewhat more than a half of total employment in Liechtenstein.
62. Switzerland and Liechtenstein each have their own policies on trade in services, and act
independently in international fora, including the WTO.  State intervention in the services sector hasbeen reduced substantially.  However, in both countries, competition remains limited in certain
branches where public or private companies still hold monopolies or exercise exclusive rights
(Table AIII.5).  Commitments made by Switzerland  and Liechtenstein under the GATS largely reflect
the current state of competition in their services br anches.  With the exception of presence of natural
persons (the measures concerned are unbound), Switzerland and Liechtenstein have largely bound
(generally without limitations) measures affecting almost all the other modes of supply of services.
However, the measures affecting commercial presence for the supply of certain services are eitherunbound or the related commitment is qualified (e.g. legal services) while those on cross-border
supply of maintenance and repair of transport equi pment, rental/leasing of ships without operators,
and packaging services are unbound.
52  Financial services commitments are largely qualified.
Switzerland took the opportunity offered by the latest negotiations on financial and
telecommunications services, in which it participated, to further improve its commitments (mainly ontelecommunications services).
63. Switzerland and Liechtenstein have maintained MFN exemptions under Article II of the
GATS on the grounds of:  bilateral or regional agreements;  promotion of common cultural objectives;
immigration regulation;  or protection of the integrity of road infrastructure and the environment (e.g.
supply of road transport services is contingent upon reciprocity under bilateral agreements).Switzerland has also maintained MFN exemptions to regulate transport capacity on inland waterways
(access to transport services on the Rhine is limited to, inter alia , beneficiaries of the Mannheim
Convention).  In the case of Liechtenstein, MFN exemptions are also maintained to ensure "adequate"
market access to local suppliers (the supply of construction and related engineering services is
contingent upon reciprocity).
53
                                                     
52 See WTO documents GATS/SC/83 and GATS/SC/83-A, 15 April 1994 for details of specific
commitments under GATS by Switzerland and Liechtenstein, respectively.
53 See WTO document GATS/EL/83 and GATS/EL/83-A, 15 April 1994 for Final Lists of Article II
(MFN) Exemptions for Switzerland and Liechtenstein, respectively.Switzerland and WT/TPR/S/77
Liechtenstein Page 87
(i) Financial services
(a) Banking and fund management services
Switzerland64. Political and social stability, prudent monetary management, a liberal regime on capital
movements, and a tradition of bank secrecy comprise the key elements of the internationally
integrated banking network developed by Switzerland.  With a market share of 35% in 1999,Switzerland is among the world leaders in cross-border portfolio management.
54  As a result of
increased competition and restructuring efforts through mergers, take-overs, and closures, the total
number of banks in Switzerland fell by more than one third of its 1990 level to 376 by the end of 1998
(Chart IV.5a).  The restructuring efforts helped to nearly double the total assets of banks between
1993 and 1999 (Chart IV.6). Banking and fund ma nagement employs around 144,500 persons (3.7%
of the total employment)55;  and represents 10.9% (based on 1997 data) of total GNP, with asset
management accounting for more than half.  Following the merger of the Union Bank of Switzerland
(UBS) and Swiss Bank Corporation in Decemb er 1998, UBS and Credit Suisse Group, the two
biggest banks, currently account for around two thirds of the total combined balance-sheet
(Table IV.11) and more than half of the Swiss ba nking market.  With assets totalling some US$750
billion, UBS (the biggest Swiss bank) is the world's third and Europe's second largest bank.56
65. Owned by cantonal governments, the 24 cantonal banks account for a quarter of domestic
banking business, and concentrate on credit, deposit business, and mortgages in their local areas.57
Incorporated in 1905, the Swiss National Bank (SNB), an independent Central Bank with capital
shares owned by cantons, cantonal banks, certain public bodies, and Swiss citizens, inter alia ,
formulates and implements monetary policies (including their credit component).  It is a clearing-
house for interbank transfers.  With a network of some 3,600 branches, Swiss Post (the state-owned
postal system) manages some 1.8 million accounts with a total deposit value of some Sw F 18 billionequivalent to 8% of total saving deposits in the banking system.
66. Banking activities in Switzerland are regulated by the 1934 Banking Law, as amended up to
1999, and its Ordinance.  Most banks are universal, and there are few limitations on banks'participation in non-banking commercial activities.
58  The Swiss Federal Banking Commission
(SFBC) is the regulatory authority for all banks in  Switzerland, including cantonal and subsidiaries of
foreign banks.  An authorization from the SFBC is required to open a bank, or branches, subsidiaries
or representative offices of foreign banks in Switzerland.59  For a foreign bank, the prerequisite
conditions for the authorization are:  reciprocity on the part of the foreign country;  and the name ofthe foreign bank must not give the impression that it is a Swiss bank.  In the case of a subsidiary, the
majority of the Board of Directors must have permanent residence in Switzerland.  In addition,
general requirements for the establishment of foreig n companies in Switzerland apply to banks.  The
reciprocity requirement no longer applies in cases covered by international obligations (e.g. foreign
banks domiciled in a WTO Member country).  A minimum capital of Sw F 10 million is required.
                                                     
54 Federal Office for Economic Development and Labour (1999).
55 UBS (2000).
56 EIU (1999).
57 In recent years, the activities of cantonal banks have become more diversified;  they include asset
management, consumer credit, and  export financing. Almo st all the cantonal banks were originally established
by the states (cantons);  and 22 have their liabilities guaranteed by the cantons.
58 See WTO (1996) for details on the limitations.
59 The Federal Council may conclude bilateral treaties to authorize the establishment of branches,
agencies or representative offices, and the provision of cross-border services on the basis of home-countrycontrol and subject to mutual recognition of equivalent standards of control and regulation.WT/TPR/S/77 Trade Policy Review
Page 88
0100200300400500600
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999Branches of foreign banks
Subsidiaries of foreign banks
Swiss banks
020406080100120140160180
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999Chart IV.5
Number of banks and insurance companies in Switzerland, 1990-99
(a) Banks
(b) Insurance companies
Source: Swiss National Bank, 1999 and Swiss insurance association, 2000.Foreign insurance companies
Swiss insurance companiesSwitzerland and WT/TPR/S/77
Liechtenstein Page 89
05001,0001,5002,0002,500
1993 1994 1995 1996 1997 1998 1999Total assets
Assets of foreign institutionsSwF billionChart IV.6
Assets of  the Swiss banking system, 1993-99
Source : Information provided b y the Swiss National Bank. 
Table IV.11
Structure of the Swiss banking system, 1998
Number Total assets (Sw F billion)
Large banks 2 1,373.5
Cantonal banks 24 274.3
Regional and savings banks 108 71.7
Loan associations 1 61.5
Private banks 16 13.0
Foreign-owned banks (including branches) 149 165.2
Other banks 75 98.6
Source : Information provided by the Swiss National Bank, 1999.
67. A foreign bank may be authorized to open a branch if its head office has adequate
organizational structure and financial resources, is able to maintain a durable activity, and is subject toappropriate surveillance.  A foreign bank, having established a subsidiary, is entitled to open branches
or (unincorporated) agencies, subject to SFBC approval.  The main supervisory responsibilities are
with the supervisory authority of the foreign parent bank:  as from 1 October 1999, competent foreign
supervisory authorities may carry out on-the-spot inspections of foreign banks operating in
Switzerland.
60  Acceptance of funds from foreign banks with no physical presence in Switzerland (e.g.
banks with simple accounts in Switzerland with fund s to be transferred abroad) is no longer subject to
authorization.  However, foreign banks operating in  Switzerland must inform the Swiss National Bank
about their cross-border activities and relations.
                                                     
60 The Banking Law, Article 23septies.WT/TPR/S/77 Trade Policy Review
Page 90
68. In general, the same regulatory requirements apply to Swiss and foreign banks.  The
requirement for Swiss branches of foreign banks to retain 10% of their assets in Switzerland was
repealed in October 1996.  Authorization by the SFBC is required to trade professionally in stocks and
shares, and before Swiss banks open branches, subsidiaries, or representative offices abroad.61  Any
acquisition or sale by a major shareholder (i.e. minimum 10% of the capital or voting rights of the
bank), or acquisition or sale of specified majority of shares of a bank operating in Switzerland is alsosubject to SFBC authorization.
62  Capital exports (including loans to non-residents) in excess of Sw F
10 million and for more than one year are subject to approval by the SNB.
69. The canton in which a cantonal bank is located must hold at least one third of its capital and
voting rights.  Following the 1999 amendment to th e Banking Law, a cantonal guarantee for default
risks is no longer mandatory.  In the case of the Cantonal Bank of Geneva for example, the "GrandConseil" recently voted a guarantee of Sw F 5 billi on in favour of a foundation called the "Fondation
de valorisation".  Moreover, the SFBC is empowered to liquidate cantonal banks that do not comply
with provisions of the Law.  Cantonal supervisory powers remain only for cantonal requirements
regarding special services in the public interest.
70. Under the 1995 Federal Act on Stock Exchanges and Securities Trading (SESTA) and its
1996 Ordinance, the rules of conduct in the stock market are issued by self-regulatory bodies and
approved by the FBC;  the prudential framework is  similar to that of banks.  Under the SESTA,
buyers or sellers of capital shares of Swiss-domiciled companies (with equity stock quoted in
Switzerland) must notify the companies and the stoc k exchange authorities of any transaction that
may cause their shares to reach, exceed or drop below specified thresholds of the total voting rights.
Persons acquiring equity stock of a company and who may thereby possess more than one third of the
voting rights, must submit a bid for all quoted equity stock of the company.  Commercial presence inSwitzerland is required to lead-manage Swiss-franc-denominated issues.
63 Moreover, two institutes
have been granted exclusive rights over the issuance of specific mortgage bonds (Pfandbrief and
"lettre de gage"):  only Swiss cantonal banks are accepted as members of the first institute while
Swiss-based banks (banks with head office in Switze rland) with national mortgage loan business of at
least 60% of their balance sheets can be members of the second.  Transactions in foreign investmentfunds must be operated through representative agents in Switzerland.  There have been no major
changes to the legislation on investment funds since the last TPR of Switzerland.  A revision is under
way to align the 1996 Ordinance on Investment F unds and possibly the Federal Act on Investment
Funds on the relevant EU rules.
71. The 1997 Legal Assistance Act is aimed at accelerating procedures in connection with
assistance in criminal proceedings, subject to mutual legal assistance agreements between Switzerland
and the foreign country;  Switzerland is a member of the Financial Action Task Force (FATF) on
Money Laundering.
64  Under the 1998 Money Laundering Law, banks and non-banking financial
institutions (e.g. insurance companies65, asset managers, foreign exchange bureaux, lawyers) are
required to report suspicious accounts to the police.  The judicial authorities may freeze the assets
                                                     
61 The Banking Law, Article 3bis.
62 The Banking Law, Article 3.
63 WTO document GATS/SC/83/Suppl.4, 26 February 1998.
64 The FATF is a body comprising 26 countries and two regional organizations.  Its aim is to combat
money laundering.
65 Pursuant to the Act, the Self-Regulatory Organization of the Swiss Insurance Association (SRO-SIA)
was established in January 1999 for insurance companies operating in Switzerland.Switzerland and WT/TPR/S/77
Liechtenstein Page 91
during the investigation period.66  Infringers of the obligation to report are liable to a fine of up to Sw
F 200,000.
72. In general, direct taxes (like corporate taxes) on financial institutions are relatively low.
However, the withholding tax of 35% on interests and dividends is relatively high by international
comparison.  Partial or full exemptions may be provided under bilateral treaties on double taxation
between Switzerland and foreign countries.  Profits of joint-stock and co-operative companies areliable to a federal tax of 8.5%.  A stamp duty is levied on shares and all security transactions (up to
1% on Swiss shares, and between 0.06% and 0.12% on Swiss bonds);  Eurobond transactions and
Eurex (the joint Swiss/German derivatives exchange) deliveries are exempted.
 67  A turnover tax is
levied on transactions of certain securities (0.15 % when the issuers are Swiss and 0.3% otherwise). 68
The standard rate of 7.5% of the VAT applies to financial services;  with the exception of fortune
management, transactions in monetary and capital markets are excluded.  All cantons and communes
(except for communes of the canton of Basel) impose taxes on net benefits and on capital of co-
operative and joint-stock companies.  These taxes are progressive (with minimum and maximum
rates) and vary from canton to canton.  Cantonal tax incentives are available.
Liechtenstein73. In Liechtenstein, the development of the banking system has been favoured by its
participation in the monetary union with Switze rland and the worldwide confidence in the Swiss
franc.  Political stability, low levels of taxation, a tradition of bank secrecy, and in recent years,
Liechtenstein's membership in the European Economic Area, and the resultant amendment to its
banking legislation
69, have also played their part.  Liechtenstein does not have a stock exchange, a
highly developed capital market, or a currency of its own.  Eleven of the 16 banks operating in
Liechtenstein were established after its membership in the EEA.  Ten banks are owned by foreigners,seven of which are subsidiaries of Austrian a nd Swiss banks.  At the end of 1999, the combined
balance sheet of all banks amounted to Sw F 35 billion.  Of the two largest banks, one, the
Liechtensteinische Landesbank AG, with total assets of Sw F 12 billion, is currently 68.4% state
owned.  The other, the LGT Bank AG, with total assets of Sw F 13 billion, is 100% owned by the
Foundation of the Prince of Liechtenstein.  In 1999, banking employed 1,606 persons, i.e. around 6%of total employment.
74. The Currency Treaty of 19 June 1980 provides the legal basis for the application of the Swiss
provisions on monetary policy in Liechtenstein.  The Swiss National Bank has the same powers vis-à-
vis Swiss and Liechtenstein banks and accords them similar treatment.  The Liechtenstein banks thus
have the same rights to issue bank credits as the Swiss banks.  According to the authorities, as amatter of principle, they may refinance with the Swiss National Bank and they have to supply it with
statistical data.  Under the Treaty, Liechtenstein wa ives the right to issue its own banknotes;  however,
it may issue coins in Swiss francs but they may not be legal tender.
                                                     
66 Some Sw F 1.5 billion were blocked temporarily during the year to 31 March 2000.
67 Annual revenue from the stamp tax exceeds Sw F 2 billion, nearly 5% of total public revenue.  The
tax is to be abolished by the end of 2002.
68 Euro-emission and trade in foreign bonds between foreigners.
69 Licensing criteria were restrictive;  they were based on, inter alia , local and economic needs.WT/TPR/S/77 Trade Policy Review
Page 92
75. Under the 1992 Law on Banks and Finance Companies, as amended up to 199970, and its
Ordinance, a licence is required to establish a bank or a finance company in Liechtenstein.  The
licence is not subject to reciprocity.  The single-licence principle applies to EEA companies.
76. All banks and finance undertakings must be incorporated as limited companies;  their head
offices and principal management must be domiciled in Liechtenstein.  There are no branches of
foreign banks in Liechtenstein.  The legally required minimum capital is Sw F 10 million.  However,the Government deems this minimum insufficient and requires at least Sw F 20 million.  Equities and
voting rights in the companies that are neither banks nor finance companies (e.g. asset managers,
("Treuhandgesellschaften")), must be more than 50% owned by Liechtenstein or EEA citizens.  At
least one member of the administrative body authorized to manage and represent the company must
be a Liechtenstein or EEA citizen domiciled in Liechtenstein or an EEA member country, be inpossession of the relevant professional licence, and work full-time for the juridical person.  At least
one member of the board of directors and the admini strators must be domiciled in Liechtenstein.  They
must be duly authorized to fully represent their company.  The marketing of mutual funds has to be
made by banks, fund management companies or trustees having a commercial presence in
Liechtenstein.  The management of Swiss-franc-de nominated issues has to be made through banks
with a commercial presence in Liechtenstein.  The Financial Services Authority (Amt für
Finanzdienstleistungen), formerly called the Office for Banking Supervision, is the supervisory
authority for all financial institutions (except in surance companies);  it also processes and grants
applications for their establishment.  The licences for banks are granted by the Government;  they are
no longer subject to approval by the Parliament.
71
77. The Financial Services Authority is also ve sted with supervisory authority to ensure
compliance with the 1996 Due Diligence Act.  The Act obliges those subject to its provisions(including banks and other financial institutions, lawyers, trustees and other legal agents, but
excluding exchange offices) to identify the contractual party and the beneficial owner when entering
into business relations (excluding cash transactions of up to Sw F 25,000).
72  Under the Act, a
suspicious-transactions-reporting mechanism has been established.  In addition to the Act, legislation
adopted by Liechtenstein to combat money launde ring and organized crime comprises the Law on
International Legal Assistance in Criminal Matters, and provisions of the Criminal Code.  Various
amendments to the legislation are foreseen;  they are to be completed in autumn 2000.  A Financial
Intelligent Unit is to be established to analyse money-laundering reports.  In the meantime,
Liechtenstein is among the fifteen countries indicated by the Financial Action Task Force on Money
Laundering (FATF) as having serious systemic problems.73  Liechtenstein is not a member of the
FATF.
78. Company taxes in Liechtenstein are low by international standards;  nevertheless they account
for about 30% of public revenue.74  They comprise:  the formation tax of 1% (0.5% on capital
exceeding Sw F 5 million and 0.3% on capital exceeding Sw F 10 million) and 2‰ for foundations,
with a minimum of Sw F 200 (collected on capital upon formation of a company and capital
                                                     
70 The Law was amended in 1993 and 1999.  The 1993 amendment, inter alia , extended the scope of
the Act to finance companies and banking groups.  The 1999 amendment was made after Liechtenstein'smembership in the EEA.
71 The Government's advisory body on banking issues is the Banking Commission;  two of the
members of the Commission are Swiss.
72 According to the Liechtenstein authorities, the level of cash transactions excluded from the
identification requirement has been reduced from Sw F 25,000 to Sw F 15,000.
73 Financial Action Task Force on Money Laundering (2000).
74 The share is 17.5% if the revenue from company taxes of the municipalities were not taken into
account.Switzerland and WT/TPR/S/77
Liechtenstein Page 93
increases);  the capital and earning (progressive) tax of 7% to 20% (depending on the level of profit)
for which companies trading in Liechtenstein are liable;  the special company tax of 1‰, minimum
Sw F 1,000, on capital and reserves of domicile-establishing and holding companies;  the coupon tax
of 4% on capital interest coupons;  and the stamp duty of 1% on domestic equities, and of 1.5‰ when
the issuer is Swiss or Liechtensteiner and 3‰ otherwise on transfers of securities.75
(b) Insurance
Switzerland
79. High per capita expenditure on insurance (US$4,654 in 1998) makes the Swiss population the
most insured in the world.76  Some 170 insurance companies are operating in Switzerland, 37 of
which are foreign owned (mostly with headquarters  in the EU) (Chart IV.5b).  In 1999, total premium
income amounted to some Sw F 126 billion, of which 62% was earned outside Switzerland(Chart IV.7);  revenue from life insurance accounted for around two-fifths (Chart IV.8).
 77  T h e
insurance branch contributes around 2% to real GDP and employs 65,600 persons, i.e. 1.7% of total
employment.78
Switzerland
38.0Chart IV.7
Geographical distribution of premium revenue of Swiss private insurers, 1999
Per cent
European Union
41.2Others
20.9
Source : Swiss Insurance Association.Total revenue: SwF 126.1 billion
80. In order to supply insurance services in Switzerland, foreign-based companies must be
incorporated in their home countries as joint-stock companies or mutual associations (as also required
                                                     
75 Office of National Economy (1999). In accordance with the Customs Union Treaty, the Swiss law on
stamp duties applies in Liechtenstein.
76 Swiss Re (1999).
77 There were 159 life-insurance companies in 1996 and 127 in 1998.
78 UBS (2000).WT/TPR/S/77 Trade Policy Review
Page 94
from local companies under Swiss law) and have a minimum of three years of experience in insurance
business in their home country.  The amount of equity capital required is based on the type and
expected volume of insurance contracts.  The minimum (paid-up) share capital is between
Sw F 600,000 and Sw F 10 million for non-life insuran ce companies;  between Sw F 5 million and
Sw F 10 million for life insurance companies;  and in an indicative order of Sw F 10 million for
professional reinsurers.  An organization fund of readily convertible assets, equivalent to between20% and 50% of the paid-up capital, is required to cover possible losses during the first years of
business.
Life insurance
40.6Chart IV.8
World-wide premium revenue of Swiss private insurance companies by type of business, 1999
Per cent
Non-life insurance
36.4Reinsurance
23.0
Source : Swiss Insurance Association.Total revenues: SwF 126.1 billion
81. Fire, natural damage, and insurance against workplace accidents are still under state
monopolies (including cantonal monopolies).  Cross-border supplies of insurance services are not still
possible (Table IV.12a).  As a general rule, all risks physically situated in Switzerland must be
handled by local companies.  Swiss-based insurance companies, as well as branches and agencies of
EU-based non-life insurers79, are required to maintain sector-specific levels of reserves as guarantees
for claims80;  other insurance companies must deposit part of their assets with the Swiss National
Bank.
82. The Federal Office for Private Insurance (FOPI), under the Federal Department of Justice and
Police, has general supervisory authority over virtually all companies established under Swiss law and
                                                     
79 Under a 1989 agreement between the European Economic Community (EEC) and Switzerland, EEC-
based non-life insurance companies may (on a recipro cal basis) establish branches or subsidiaries in
Switzerland;  life insurance and reinsurance companies are excluded.
80 See WTO (1996) for details on the levels of reserves required;  no changes have since been
introduced.Switzerland and WT/TPR/S/77
Liechtenstein Page 95
carrying on business in Switzerland.81  Foreign companies with reinsurance as their only business in
Switzerland are exempted.  Because of increasing overlap between insurance and banking operations,
and to ensure supervision of universal banks largely involved in insurance activities (e.g. Allfinanz,
Bancassurance), cooperation among the Swiss financia l supervisory authorities, i.e. the SFBC and the
FOPI, has been intensified through regular contacts and discussions on matters of common concern.82
Table IV.12
Market access conditions for foreign-based insurance companies, 2000
Sector Form of commercial presence Cross-border supplya
(a) Switzerland
Life insurance Branch or agencybNot currently possible
Fire and natural damage insurance Public monopolies in 19 cantons, branch or
agency in other cantonsNot currently possible
Workplace accidents
(industrial sector)Federal monopoly
Other non-life insurancecBranch or agencybNot currently possible
Reinsurance Unrestricted, with the exception of aircraft liability insurance (commercial presence
required)
(b) Liechtenstein
Social health insurance Association, mutual associations,
foundations;  branchNot currently possible
Life and non-life insurance EU rules for EEA and Swiss companies;
authorization and branch for other
companiesPossible for EEA and Swiss companies;
not currently possible for other
companies
Reinsurance Unrestricted Unrestricted
a Including supply via broker, telephone or mail.
b The head office of the company must be established in a form comparable to a Swiss joint-stock company or a Swiss mutual
association.
c Including supplementary private health insurance.
Source : (a) WTO (1996);  and information provided by the Swiss authorities.
(b) WTO Secretariat, based on WTO document GATS/SC/83-A, 15 April 1994;  and information provided by theLiechtenstein authorities.
83. Premium rates for risks incurred in various categories of compulsory insurance (e.g. third-
party cover, life and sickness insurance) are subject to approval by the FOPI to ensure that they
remain within the limits set by it.  The approval requirement will probably be abolished by 2002.
Under the Life Insurance Act, insurance compan ies must offer a uniform premium within each
canton, without consideration of the age of new insured entrants.  The insurer can only distinguish
three categories of premiums inside the canton and allow reduced premiums to children and young
people in education.  Under the Act, the Confederation and the cantons subsidize insurance premiums.
The financial contribution from the Confederation is allocated to the cantons according to their
population, their respective financial capacities, and the amount of the premiums (since 1997).  The
freedom of choice of an insurer and a type of insurance is ensured by the Act.  Since 1 January 1997,
all other complementary insurance services have been regulated by private laws under the InsuranceContract Act.  The legislation on insurance, including the Law on Life Insurance, the Insurance
Contract Act, and the Insurance Supervision Act, is under revision with a view to bringing it into line
with recent developments in the insurance market.
                                                     
81 The only exceptions are areas where the Federal Department of Justice and Police is legally
empowered (authorization to take-up business, to transfer a policy stock among different insurance companiesand to initiate an adjudication in bankruptcy, and cancelling of a licence).
82 Insurance companies are banned from non-insurance business such as banking transactions in the
strict sense.WT/TPR/S/77 Trade Policy Review
Page 96
84. A federal tax of 8% on settlements from life insurance or 15% on private annuity insurance is
levied on insurance benefits.  A stamp duty of 5% applies to insurance premiums;  a lower rate of
2.5% is levied in the case of single-premium life insurance with a repurchase option.  Insurance
services are not liable to VAT.
Liechtenstein
85. In Liechtenstein, until the end of 1995, insurance services were provided by branches of
foreign companies;  no insurance company had its h ead office in the country.  After signing the EEA
Agreement in 1995, Liechtenstein incorporated the insurance directives of the EU into its national
legislation (the Insurance Supervision Law – ISL - and the related Ordinance).  Therefore, the single-
licence principle applies to Liechtenstein.  A ccordingly, insurance companies domiciled in EEA
member countries have (on a reciprocal basis) free access to the Liechtenstein market and mayprovide insurance services through branches;  this also applies to Swiss insurance companies (on the
basis of a bilateral agreement).  Insurance companies not having their head office in an EEA member
State or in Switzerland must have authorization to take up insurance activities in Liechtenstein.  Since
early 1996, 13 insurance companies (seven life and three non-life insurance, and three reinsurance
companies) have been established in Liechtenstein.  With two exceptions, all direct insurancecompanies are subsidiaries of foreign insurance groups.  In 1998, the insurance branch employed
307 persons, i.e. 1.3% of total employment in Liechtenstein;  in 1999, total gross premium income
amounted to Sw F 242 million, of which 86.8% was from life insurance.
86. Under the 1996 Insurance Supervision Law, a li cence is required to establish an insurance
undertaking in Liechtenstein.  The Government is the supreme supervisory body;  it grants, withdraws
and revokes licences on the recommendation of the Insurance Supervisory Authority.  The Office of
National Economy is commissioned as the Liechtenstein Insurance Supervisory Authority (LISA).Except for EEA and Swiss companies, commercial presence is required for the provision of life and
non-life insurance services in Liechtenstein;  cross-border supply of social health insurance services is
not currently possible (Table IV.12b).
83
87. The minimum share capital required under the ISL is:  Sw F 5 million for life insurance and
Sw F 5 million to Sw F 10 million for reinsurance companies;  and from Sw F 0.5 million toSw F 1 million (per insurance branch) for non-life insurance companies.  In addition, an organization
fund of between 20% and 50% of the minimum capital is required.  Premiums are freely set by the
companies;  they are not subject to approval.  Liechtenstein imposes a special tax on foreign insurance
companies; the rates are 1% on premium receipts from life and old-age insurance and 2% on all other
premium receipts.  Insurance services are not liable to VAT.
(ii) Telecommunications and postal services
Switzerland
88. With 68 access lines per 100 inhabitants
84, Switzerland has one of the highest telephone
densities in the world.  By the end of 1999, the number of cellular users was around 3 million, i.e. a
penetration ratio of some 42%;  around 20% of the population had an internet connection.
89. Except for terminal and data services via radiocommunication networks and leased lines,
supply of telecommunications and postal services in Switzerland remained under state monopoly until
the end of 1997 (operated by the Swiss Postal, Telecommunications and Telegraph Administration
                                                     
83 WTO document GATS/SC/83-A, 15 April 1994.
84 The Economist (2000).Switzerland and WT/TPR/S/77
Liechtenstein Page 97
known as PTT).85  On 1 January 1998, the Telecommunication Law adopted on 30 April 1997 entered
into force, and PTT was split into Swiss Post (in charge of postal services) and Telecom PTT (for
telecommunications services).  In October 1998, Telecom PTT was transformed into a stock
corporation called Swisscom AG:  the Swiss Conf ederation remains the majority shareholder with
65.5% of the capital, and the quoted shares make up the balance.
90. The aim of the 1997 Law is to ensure the availability of cost-effective and high-quality
competitive telecommunications services to the Swiss population (private individuals and the business
community).  The Law provides for, inter alia,  the upholding of reliable universal services at
affordable prices86,  and full liberalization of all basic telecommunications services.  Accordingly,
state monopolies over terminal equipment and voice telephony markets, and over the provision of
value-added and infrastructure services (e.g. network) were abolished.
91. The provision of telecommunications services and the utilization of radiocommunication
frequencies are subject to licences.  The number of licences granted may be limited only for technical
reasons (e.g. radiocommunication frequencies).  However, subject to international obligations and in
the absence of reciprocity, the licence may not be granted to enterprises incorporated under foreign
law.  The licensing body is either the Communications Commission (ComCom) or the Federal Officefor Communications (OFCOM).  ComCom, a new regulatory authority independent of the
Government, grants those licences allocated by public tendering, e.g. licences for supply of universal
services, and mobile telephone and certain radio services.  It also rules on interconnection disputes
and approves frequency and numbering plans.  OFCOM also grants radio licences that do not involve
any telecommunications services (e.g. company radio and amateur radio licences) and licences to
providers of fixed network services (not subject to  tendering procedures).  Registration with OFCOM
is compulsory for the supply of all telecommunications services in Switzerland.
92. Providers of telecommunications services are required to ensure portability of numbers and
freedom of choice in the selection of suppliers of national and international connections.  Location
portability is not compulsory;  it is restricted to each regional (code) area.  Providers of
telecommunications services that have a dominant market position (including suppliers of part of the
universal services) must agree to provide interconnection to other suppliers without discriminationand in accordance with transparent and cost-related principles.  As from 1 January 2000,
interconnection prices are fixed on the basis of the "long-run incremental costs" (LRIC) method
applied by most European countries.  Suppliers interested in concluding an interconnection contract
must first negotiate the terms (the principle of primacy of negotiations applies). If, after a three-month
period, the negotiations are unsuccessful, the parties may then appeal to ComCom, which, on the basisof OFCOM's recommendations, will settle the dispute and fix the conditions for the interconnection.
87
93. The Federal Council fixes upper limits for prices of telephone connection to users, and
national calls.  It also determines the minimum quality criteria that the universal service provider must
fulfil.  The prices of non-universal services are market-determined.  For a transitional period of five
years, i.e. until the end of 2002, the incumbent supplier of universal services is Swisscom.  After
                                                     
85 See WTO document G/IT/10, 11 April 2000 and WTO (1996) for details on the evolution of this
sector.
86 Universal services mean basic services to be provided throughout the country and comprise: public
telephony (connection and transmission of speeches and data);  access to emergency call services and
localization of these calls;  an adequate network of pub lic telephone kiosks;  access to directories of subscribers
in Switzerland;  and special services for the hard of hearing and visually impaired.
87 Two cases related to interconnection prices (conciliation negotiations), submitted in summer 1998 by
Sunrise and DiAx, were settled in January 1999.  Other cases related to interconnection have since been initiatedand are being investigated by OFCOM.WT/TPR/S/77 Trade Policy Review
Page 98
2002, the award of the licence(s) for universal services will periodically be subject to open tendering
(the cycle has not yet been determined).  In order to finance uncovered costs of universal services,
ComCom may charge a licence fee on other telecommunications services.  According to the
authorities, the fee has not so far been charged.  Cross-subsidization of telecommunications services is
not legally prohibited.
94. Since the liberalization of the telecommunication market, more than 260 suppliers have been
registered with OFCOM (111 with licences).  The reforms have increased competition and brought
down the Swiss prices for international calls below the OECD average;  the prices for local calls
remain relatively high by international comparison.88  For international and national telephone calls
over the fixed network, the new telecommunications service providers offer prices that undercut the
corresponding 1997 prices of Telecom PTT by between 40% and 60% on average.  Despite thedominant position of Swisscom in local calls, consumers can still obtain more favourable services
from its competitors in this market.  In the mobile telephone market, the pressure on Swisscom (77%
of the market at end 1999) from the new providers, Diax (14%) and Orange (8%), has led to price
reductions and a wider range of services.  Competition among internet service providers is also
intensifying;  many providers have moved to offer internet access free of charge subject to certainconditions.  Internet access and telephony are increasingly being offered as a package subject to
special conditions.  Continual market growth in m obile radio, a shift in voice communication from the
fixed to the mobile network, and increasing use of  the internet for private and business purposes are
also expected.  This development will be accompanied by further falls in prices.  On the local loop
side, due to the granting of radio licences for the wireless local loop (WLL), and the use of cable TV
and main power networks for the transmission of telecommunications services, competition is
expected to increase.
95. The reforms ended cross-subsidization between profitable telecommunications services and
poor-performing postal activities.  However, except for courier services and newspaper distribution,
Swiss Post, fully owned and controlled by the C onfederation, still exercises exclusive rights over
virtually all postal services.
Liechtenstein96. Under a bilateral treaty between Switzerland and Liechtenstein, the Swiss PTT had provided
telecommunications services in Liechtenstein for more than 75 years.  The Swiss PTT also carried out
the installation and operation of the telecommunicatio ns network at Liechtenstein's expense.  Swiss
legislation on telecommunications also applied to Liechtenstein, which had been an integral part of
the Swiss telecommunication system.  Liechtenstei n's membership in the EEA, as of 1995, required
significant amendments to the treaty, which was terminated on 31 March 1999.  Postal services are
currently supplied by the Liechtenstein Post AG, a fully state-owned company with exclusive rights
over letters and direct mailing (Table AIII.5).
89
97. In preparation for the separation of the Liechtenstein telecommunications network from that
of Switzerland, Liechtenstein enacted its own Telecommunication Law (TelG) on 20 June 1996, andan Ordinance on individual licensing for the provision of telecommunications services in June 1998.
A National Telecommunication Policy was formulated in July 1997, and Liechtenstein TeleNet AG
(LTN) was established in 1998 as a fully state- owned company to which the management of the
national public telephone network was transferred.  Liechtenstein introduced its own country code in
April 1999.
                                                     
88 OECD (1999).
89 The services were supplied by the Swiss PTT under the 1921 Postal Treaty between Switzerland and
Liechtenstein (Press and Information Office of the Principality of Liechtenstein, 1998).Switzerland and WT/TPR/S/77
Liechtenstein Page 99
98. The supply of telecommunications services in Liechtenstein is subject to either an individual
or a general licence.90  With the exception of the basic services, and of certain types of services and
equipment for which an individual licence is currently required 91, the supply of all other services is
subject to a general licence.  In cases of innovative services and equipment, the provider must notify the
licensing authority before it starts operating.  Unless there are good reasons not to allow the supplier to go
forward, provisional conditions will then be applied and confirmed in a general licence, or arecommendation will be made to expand the individual licensing obligation, if consistent with the
relevant EEA law.  The Liechtenstein Office for Communications is the national regulatory authority.
It processes applications for both individual and general licences;  customers' contracts related to the
provision of basic telecommunications services are also subject to its approval.  The licences are
granted by the Government;  the licence for the supply of basic telecommunications services isgranted for five years (renewable).  Other individual licences are granted for an undefined period,
subject to conformity with the relevant licence conditions.  In principle, in areas where the number of
licences is limited by the Government for technical reasons, public tendering is required for their
allocation.
99. In addition to its network management (operation and maintenance) licence, the responsibility
for network planning has also been transferred to LTN.  LTN is required to make its infrastructure
available to other licensees in a neutral, non-discriminatory, and cost-based manner 
92;  it is to be
privatized by 2001.  A fully Swisscom-owned Liechtenstein legal subsidiary, Telecom FL AG, has
been granted two licences for the supply of local and international basic telecommunications services.
Telecom FL AG has also been awarded a licence to provide international public voice telephony
services, as well as a continuity licence covering all other telecommunications services formerly
provided by Swisscom.93  Eight additional licences are granted to other companies for the supply of
local and/or international voice telephony services;  only one of them is operating so far.  Owing to
limited availability of frequency resources, the Liechtenstein Government has limited the maximum
number of mobile telephone (GSM) service supplier s to four;  three companies (including Telecom
FL AG) are in operation.  According to the Liechtenstein authorities, all de jure  exclusive rights
previously conferred to telecommunications companies operating in Liechtenstein have beenabolished.
100. Interconnection regulations are based on the relevant EU principles.  The prices of services
supplied by Telecom FL AG are pegged to those of Swisscom:  they are equivalent to 105% of the
Swisscom prices (i.e. 5% higher) in the area of telecommunications services outside the scope of basic
services (continuity services).  Uncovered costs of non-profitable activities required under the licencecontract for the supply of continuity services may, in cases defined in Article 66a of the
Telecommunications Law,  be supported by the Liechtenstein Government.  According to the
authorities, this situation has not so far occurred.
101. The annual turnover of telecommunications services is currently around Sw F 55 million.
The total revenue from sales of postage stamps (mainly to tourists) represented 3% of the nationalincome in 1997.
94
                                                     
90 The licensing regime for the provision of the basic services, based on a set of individual licences,
entered into force on 1 January 1999.
91 The current scope of individual licensing obligations is to be reduced before the end of 2000.
92 LTN also provides certain non-basic telecommunications services to licensed retail entities.
93 The scope of the continuity licence is to be reduced upon entry of new suppliers in the market and
the emergence of competition in the area concerned.
94 Press and Information Office of the Principality of Liechtenstein (1998).WT/TPR/S/77 Trade Policy Review
Page 100
(iii) Transport
102. In Switzerland, air and overland transport (including rail) is well developed.  Maritime
transport is limited to inland waterways such as the Rhine and canals.  Liechtenstein has neither an
airport (except for helicopters), nor a rail company.  In both Switzerland and Liechtenstein, the VAT
applies to transportation services at the standard rate of 7.5%.
103. Switzerland has concluded bilateral agreements with neighbouring countries (including
France, Germany, and Italy) for cooperation in rail transport (connections and access to high-speed
rail networks).  Subject to ratification by the EU Member States, the bilateral agreement between
Switzerland and the EU on civil aviation and land transport will enter into force on 1 January 2001 at
the earliest.  The agreement on land transport does not allow road cabotage.  The agreement on civil
aviation provides for gradual liberalization of commercial flying rights and prohibits discriminationbetween Swiss and EU air companies.  The land transport agreement will replace existing bilateral
agreements between Switzerland and individual EU member countries for market access in the area of
road transport and road transit traffic (w ith the exception of transit across Austria).
95  The agreement
will be implemented gradually and will favour the transfer of freight traffic from road to railways.
Accordingly, the current transit tax of Sw F 40 collected by Switzerland on trucks weighting 28tonnes or more will be increased (Chapter II(5)(ii)).
(a) Air transport
Switzerland
104. Switzerland has three main international airports, at Zurich (the principal airport with almost
two thirds of air traffic), Geneva, and Basel-Mulhouse, and ten regional airports.  SAirGroup, a
holding company, is the major supplier of air transport services and has a dominant position in the
civil aviation market.  SAirGroup comprises, inter alia :  SAirLines (for international, regional, and
domestic air transport services);  SAirLogistics (warehouse management and physical cargo
handling);  SAirServices (aircraft maintenance and global customer services);  SAirRelations
(travellers services);  Flightlease (leasing);  and three international finance companies.  SAirGroup
holds shares in, and collaborates with, several foreign companies.  Each of SAirGroup's branches
consists of several companies.  For instance, SAirLines comprises Swissair, Crossair, andBalair/CTA;  it also holds shares in other companies.
96  At the end of 1999, SAirGroup employed
nearly 20,000 persons in Switzerland.  It was 18.3% owned by the Swiss Confederation, the cantons,
communes, and cantonal banks;  16.8% by foreigners;  and the balance by Swiss nationals (including
banks and insurance companies).  SAirGroup's total turnover increased by 7% to some Sw F 11.3
billion in 1998.  Following a stagnation in the early 1990s, the total number of passengers in the Swiss
airports has been rising since 1994.  In 1998, nearly 60% of some 30 million passengers through these
airports travelled with SAirLines companies.97  Swissair, the national flag carrier, has a market share
of around 45% for passengers on scheduled flights and about 0.6% on charter flights.
105. The supply of air transport services in Switzerland (including through commercial presence)
is subject to a licence.  The licence is granted for five years, renewable.  Foreign participation inSwiss air-transport companies is subject to bilateral or multilateral agreements;  foreign shares must
not exceed 49.9% of the capital.  International traffic rights for passengers and freight are also
governed by bilateral agreements (i.e. contingent upon reciprocity);  the related licence is granted for
                                                     
95 Switzerland has concluded bilateral agreements on road transport with some 40 countries, including
EU Member States (WTO document GATS/SC/83, 15 April 1994).
96 SAirGroup (1999).
97 Federal Office for Civil Aviation (1999).Switzerland and WT/TPR/S/77
Liechtenstein Page 101
eight years, renewable.  The registration of aircraft is subject to national ownership and management
requirements.98  Under the authority of the Federal Department of Environment, Transport, Energy
and Communications, the Federal Office for Civil Aviation (FOCA) is the regulatory body:  its
responsibilities include drafting legislation (including Swiss comments on international agreements),
and implementing and enforcing policies (including licensing and registration) on civil aviation.
106. The 1998 amendment to the 1948 Law on Civil Aviation repealed the monopoly of Swissair
over most international traffic from Switzerland.99  However, Swissair's monopoly traffic rights over
destinations for which it is actually operating (e.g. Barcelona) will be protected until expiry in
2008.100  As from 2001, a public company (Swisscontrol) and the Swiss Air Force, which currently
provide air traffic services within Swiss airspace for civil and military air traffic, respectively, are to
be merged into a new public company in order to im prove efficiency in air traffic control; it will be
majority-owned by the State.  Swiss airports are owned and managed by the cantons.101  T h e
allocation of slots is generally based on "grandfather" rights.  Airlines with passenger traffic shares
exceeding 4.5% in Geneva and 1.5% in Zurich are allowed to provide their own ground-handling
(including check-in);  supply of these services to third parties is not allowed.  This regulation does not
apply to cargo planes.
107. The pricing system was revised in 1998 and enforced as from 1 January 1999.  All tariffs
must be submitted to the FOCA at least one day before the proposed effective date. 102  The FOCA
rejects, inter alia :  "unreasonably discriminatory" tariffs or practices;  "unreasonably high or
restrictive" tariffs due to the abuse of a dominant position;  and "artificially low tariffs" due to
government subsidies or support.103  In general, fares for incoming traffic are often approved while
special fares (more than 25% lower than the normal  economy class return ticket) for outgoing flights
that may lead to traffic diversion may be rejected.104  No reply from the FOCA within seven working
days after the notification of tariffs means that the latter have been approved.  Moreover, under
bilateral or multilateral agreements to which Switzerland is a signatory, most fares must be approved
by the FOCA and the competent au thority in the foreign country.
Liechtenstein
108. Liechtenstein does not have its own legislation on civil aviation.  Under a bilateral agreement
concluded in January 1950, Swiss legislation on civil aviation applies to Liechtenstein.  The bilateral
agreement between the EU and Switzerland and the obligation to comply with the EEA legislation
were among the reasons for the renewal of the Swiss-Liechtenstein bilateral agreement and also for
the establishment of basic Liechtenstein legislation in the field of civil aviation.105
                                                     
98 See WTO (1996), and the 1973 Ordinance on Aviation as modified up to 1998, for details.
99 The revised Law encourages "multiple designation" type bilateral and multilateral agreements
(Article 30 (4)).
100 The 1948 Law on Civil Aviation as revised up to 1998 (Transitional Provisions);  and Conseil
Fédéral Suisse (1997).
101 WTO (1996).
102 Companies that are granted international traffic rights must inform the FOCA of their schedules and
tariffs.
103 The assessment criteria used by the FOCA are based on EU Regulation 2409/92.
104 See WTO (1996) for details.
105 The transitional period for Liechtenstein to comply with the EEA rules in civil aviation will expire
on 31 December 2001, after a review has taken place.WT/TPR/S/77 Trade Policy Review
Page 102
(b) Overland transport
Switzerland
109. Switzerland has an overall road network of some 71,000 km, of which about 1,600 km of
"national routes";  and a rail network of 5,041 km , of which about 3,007 km are owned by the Swiss
Federal Railways (SBB), a State-owned company, and 2,034 km by regional companies.  Total road
freight has remained relatively stable (at around 330 million tonnes) during the last four years.Environmental considerations have favoured rail freight, which was 57 million tonnes in 1999 (about
40% of total tonne-kilometre freight transport);  around four fifths of the total revenue from rail
freight is earned by the SBB.  Passenger transport accounts for nearly two thirds of total revenue from
overland transport.
110. In 1999, the SBB was transformed into a joint-stock company and was granted more
management powers;  it sets prices for rail freigh t.  However, the SBB is still fully owned by the
Confederation and therefore remains under the supervision of the Federal Council.  The rail network
has been opened to all rail companies, mainly for merchandise transport, against payment.  The SBB
still holds exclusive rights over regular passenger transport (along the main railways).  Indeed, the
SBB is assigned specified basic tasks by the Federal Council (e.g. regular supply of basic railtransport services throughout the country).  The Swiss Confederation and cantons also provide
financial assistance to suppliers of rail transport services (for services ordered by the public
authorities);  the contributions finance specified uncovered costs as well as costs related to natural
damage.
111. A licence and a security certificate are required to provide rail passenger and freight transport
services.  The licence is subject to the proof of the need for the undertaking and of the absence of other
means of transport that could handle the service in a more ecological, economic, and reasonable way
106;
it is granted for a period of up to ten years, renewabl e.  For foreign companies,  the licence is subject to
reciprocity under international or bilateral agr eements.  The licence fee ranges from Sw F 500 to
Sw F 2,000 and the fee for safety certificates rang es from Sw F 300 to Sw F 5,000.  The Federal Office
for Transport is the regulatory body for public transport;  it grants licences, issues security certificates,
and the pricing principle for access by companies to  the rail network and for passenger transport by
rail.  As of end 1997, regional rail companies, which were generally owned by cantons, had been
granted 52 licences.
112. The supply of international road transport services (passenger and freight), as well as transit
traffic in Switzerland is also subject to reciprocity under bilateral or multilateral agreements.  Public
transport services are provided by cantonal companie s and the Swiss Post.  The latter also supplied the
services to Liechtenstein until 1999.107  Financial assistance by the Swiss Confederation to suppliers
of public transport services amounted to Sw  F 3.8 billion in 1999 (Chapter III(4)(i)).
Liechtenstein
113. As a consequence of Liechtenstein's membership in the EEA, a state-owned company, the
"Liechtenstein Bus Anstalt" has taken over the business.  The eleven Liechtenstein communes areintegrated into the bus network
108;  the Swiss half-fare general season tickets are valid on the
Liechtenstein bus network.  The Liechtenstain Government provides financial assistance of
                                                     
106 WTO document GATS/SC/83, 15 April 1994.
107 The services were supplied under the postal and telecommunications services (PTT) treaty between
Switzerland and Liechtenstein, which was repealed in 1999.
108 Office of National Economy (1999).Switzerland and WT/TPR/S/77
Liechtenstein Page 103
Sw F 12 million per year for public transport.  Liechtenstein has 250 km of highways and 18.5 km of
railways.  The railway track is owned and operated by the Austrian Federal Railways.
114. International transport services for goods and passengers are supplied by private companies.
Carriers for road freight and passsengers transport need a permit issued by the Office of National
Economy.  The permit is granted if certain criteria relating to, inter alia , reliability, financial standing
qualification or business establishment are met.  In  addition, for international transport in the EEA,
carriers need a special licence issued by the Office of Customs Affairs.  Bilateral agreements,
concluded by Liechtenstein with Austria and France, provide for quotas on road transport of goods to
third countries.  The agreement with France is applied on a provisional basis;  it has not so far been
ratified.
(iv) Tourism
Switzerland
115. With 28,300 hotels and restaurants, the tourism branch of the Swiss economy contributes
around 10% to the total value of Swiss exports of goods and services;  it is the third source of foreign
exchange earnings after metalworking and machinery, and chemicals.  The branch employs some
243,100 persons, i.e. 6.3% of total employment.109  With over 10 million visitors in 1998, Switzerland
ranked 17th in the world as a tourist destination.110  In 1997, Swiss nationals represented some 48% of
the visitors (Chart IV.9).  Business tourism (including meetings organized by the international
organizations hosted by Switzerland, generally held during the summer), is a major component of the
branch.  Switzerland also has a worldwide reputati on as a skiing centre.  Lakes and their resorts are
among the other principal tourist attractions.  Some 2,100 travel agencies (900 sales offices run by
tour operators and 1,200 independent agencies) with total sales estimated at Sw F 10 billion handle
around one third of all travel arrangements.111
116. High prices of inputs from highly protec ted sectors such as agriculture (mainly food
products), construction, energy and telecommunications (at least up to 1998), and high wages, as well
as the remaining restrictions on the acquisition of real estate, have negatively affected the
development of the tourism branch and delayed its recovery from the early 1990s crisis (Chart IV.10).
For instance, restaurants have been performing poorly since the slump, and the Swiss hotel businesshas been recovering slowly since 1997.  The average occupancy rate of available beds is still low
(about 40% in 1999).  Reflecting the increasing share of business tourism (traditional tourism having
declined), hotels have the largest share of overnight stays (47%), followed by apartments and private
rooms (30%), camping and caravanning (11%), collective tourist accommodation (10%), treatment
establishment (2%), and youth hostel (1%).  As a result of the lasting crisis in the tourism branch andthe related investment risk, interest rates on loans for investment in the branch have generally
increased.
117. Federal legislation enables cantons to grant licences for the supply of restaurant services.
Based on economic needs, the licensing criteria include:  the population density, the neighbourhood
and the degree of built-up area;  tourist attractions;  and the number of existing restaurants.Commercial presence in Switzerland is required for the supply of hotel and restaurant (including
catering) services.  The applicant may also be required to have his residence in the canton where the
business is to be established and to take an examination.  In addition, other specific requirements
apply to the supply of tourist guides services (mainly mountain guides or ski instructors):  for
                                                     
109 UBS (2000).
110 EIU (1999).
111 UBS (2000).WT/TPR/S/77 Trade Policy Review
Page 104
instance, in certain cantons, the required tests are not open to foreigners;  in others, foreigners cannot
operate independently.112
Chart IV.9
Geographical distribution of tourists, Switzerland, 1997
Source:   Swiss Federal Office for Statistics.Switzerland
47.9
Germany
19.2United States
7.2Japan
4.9United Kingdom
4.5France
4.0Italy
 3.7Netherlands
2.4Other
5.8Per cent
118. At the beginning of 2000, 25 Swiss towns la unched an association named Swisscities to
promote tourism, both in Switzerland and abroad, and to counter the image of Switzerland as an
expensive destination.  An agency of the State Secr etariat for Economic Affairs (SECO) is in charge of
research and development in the tourism branch;  it is also a policy implementation body.  Two other
public corporations, Swiss Tourism (responsible for communication and marketing) and the Swiss
Corporation for Hotel Credit (Société suisse de crédit hôtelier), as well as a Consultative Commission,
were established to contribute to the development of the branch.  The Swiss Corporation for Hotel
Credit has a working capital of SwF 118 million;  it provides concessional loans (with subsidized
interest rates at 2 percentage points below the normal rates) and credit guarantees to small and medium-
sized companies investing in tourist areas.  The Confederation allocated a credit of Sw F 18 million for
the period 1997-01 (i.e. Sw F 3.6 million per year on average) to finance innovation and cooperation
between tourism operators.113  Prices are freely set by the companies that operate in the tourism branch.
                                                     
112 WTO document GATS/SC/83, 15 April 1994.
113 Arrêté fédéral finançant l'encouragement de l'innovation et de la coopération dans le domaine du
tourisme de 1997 à 2001, 10 octobre 1997, Article 8.  The annual allowance of Sw F 8 million, formerly grantedby the Confederation to hotels and inns, was abolished in 1998.Switzerland and WT/TPR/S/77
Liechtenstein Page 105
02468101214
1994 1995 1996 1997 1998Chart IV.10
Tourism receipts, Switzerland, 1994-98
SwF billion
Expenditure by non-Swiss visitors in Switzerland minus expenditure by Swiss travellers abroad.
Federal Department of Economic Affairs, La Vie économique;   Federal  Statistics Office, La Balance 
touristique en Suisse de 1998.a
Source:Foreign tourists Swiss tourists Tourism balancea
Liechtenstein
119. In Liechtenstein, the tourism branch has be en performing poorly since the mid 1980s:  a
downward trend has been recorded in the number of visitors, hotels and guest houses, available beds,
and overnight stays.  The number of arrivals declined from 77,735 in 1990 to 60,463 in 1998;
overnight stays fell from 149,861 to 123,252;  available beds from 1,411 to 1,327;  and hotels andguest houses from 60 to 52.
114  The number of overnight stays in the 51 establishments offering
holiday apartments was 27,061 in 1998, up from 25,333 in 1996 despite a reduction in their overall
capacity from 323 to 256 beds. 115  In 1998, hotels, guests houses, holiday apartments, and restaurants
in Liechtenstein employed 726 persons, i.e. 3% of total employment. The poor performance of the
tourism branch has resulted from the relatively low standard of the hotels and other tourism facilities
(few of them are modern), increasing competition from cheaper destinations, and limited promotion
activities.  The appreciation of the Swiss franc in the early 1990s also played a part.  Most visitors
come from neighbouring countries (Chart IV.11).
120. The Liechtenstein Government provides fina ncial support of some Sw F 500,000 per year (on
average) for marketing activities.  Liechtenstein Tourism, a newly created public entity, is in chargeof marketing activities.
116  Certain marketing activities are coordinated with Swiss tourism
associations.  Except for differences in rules governing acquisition of real estate, Liechtenstein's
                                                     
114 There are currently 60 hotels and guest houses.
115 Office of National Economy (1999).
116 Liechtenstein Tourism was created under a law that entered into force on 1 September 2000.WT/TPR/S/77 Trade Policy Review
Page 106
regulations in the tourism branch are similar to those in Switzerland.  Prices are freely set by
companies operating in the branch.
Chart IV.11
Geographical distribution of tourists, Liechtenstein, 1990 and 1998
Liechtenstein
0.3
Liechtenstein
2.1Switzerland
23.4Switzerland
22.3Austria
4.6Austria
3.8
Germany
34.9Germany
26.9
Source:   Government of Liechtenstein (1999), Statisticsches Jahrbuch.United Kingdom
3.4United 
Kingdom
5.0
France
3.0France
4.2Italy
6.1Italy
4.4
Netherlands
2.1Netherlands
2.2Other 
European countries
8.1Other
 European countries
10.3United States
12.9United States
6.5Other countries
8.1
Other 
countries
5.41990 1998
Total:  72,806 visitors Total:  59,240 visitorsPer cent
(v) Construction
Switzerland
121. The economic crisis of the early 1990s negatively affected the construction branch of the
Swiss economy.  House-building, and commercial and industrial construction were the most affected.
The continual increase in vacant business properties in major cities such as Zurich and Geneva until
1998, and the vacancy rate for private homes, which reached 1.66% in 1999 (the highest since the1970s) have deterred new construction.  Employment in the branch fell from 327,000 workers in 1993
to 298,200 (i.e. 7.7% of total employment) in 1999.
117  Fluctuations in construction activities have
generally resulted from interest rate changes.  However, the sharp decline in recent years was also a
consequence of productivity gains that resulted from an increase in investment in streamlining
processes.
                                                     
117 UBS (2000).Switzerland and WT/TPR/S/77
Liechtenstein Page 107
122. The structure of the branch has also been affected, with an increasing share of the cost of
civil engineering in total expenditure on construction.  The development of civil engineering will be
sustained by the realization of large-scale infrastructure projects such as the new transalpine railways,
Rail 2000, noise abatement measures, and high-speed connections. 118  In general, public investment in
construction has remained above 10% of the federal budget;  it represented nearly 13% of total federal
outlays in 1998 and 11% of the 1999 budget.  This relative stability helped to contain the decline inpublic expenditure on construction between 1994 and 1998 (Chart IV.12).
0102030405060
1994 1995 1996 1997 1998Source :  Swiss National Bank, Statistisches Monatshe ft.Chart IV.12
Construction spending  by sector, Switzerland, 1994-98
SwF billion
Public
Other privateIndustry
Housing
123. As one of the most densely populated countries in the world, Switzerland strictly regulates
land utilization through building and zoning prescriptions (e.g. land utilization ratios, minimum size
of rooms, ratio of windows to ground surface, insulation, floor heights, and availability of bomb
shelter) with a view to ensuring optimum use of  its surface area.  Under the "Lex Friedrich",
acquisition of real estate by foreigners not permanently established in Switzerland and by companies
with headquarters abroad and/or under foreign control is subject to prior approval by both cantonal
and federal authorities.119  The requirement also applies to long-term lease or rental contracts with far-
reaching provisions, as well as to the financing of real estate companies.  Purely financial investments
in the branch and in real estate business operations are still prohibited.  The amendment to "Lex
Friedrich" has abolished the permit requirement for the acquisition of:  land or premises used for the
setting-up of a business or for capital investment;  a stake in a real estate company engaged in trading
in such properties;  and a principal residence by foreigners with residence permits.
124. The federal authorities determine annual global quotas of work permits for foreign
employees.  Swiss nationality is required for the surveying of engineering activities in the public
                                                     
118 UBS (2000).
119 Loi fédérale sur l'acquisition d'immeubles par des personnes à l'étranger, Articles 13, 15 and 16.WT/TPR/S/77 Trade Policy Review
Page 108
sector;  however, foreign surveyors can work under the responsibility of a licensed Swiss surveyor.120
Certain requirements remain canton-specific:  for instance, three years of prior professional
experience in Switzerland are required before offering architectural or building-engineering services
in the canton of Lucerne.  The Swiss Society of Engineers and Architects (SIA), a member of the
Swiss Association for Standardization, initiates standards for the construction branch.  As from
1 January 1996, the wages in the branch are negotiated between employers and employees;  the wagesset by the SIA have been used as references.
125. Stringent building regulations (including standards on construction products), the lack of
competition (at least until the adoption of Intercantonal Concordat and the Federal Law on Internal
Market (Chapter III(2)(ix))), bureaucracy, and the lack of fiscal incentives (among others) have
contributed to maintaining construction costs high by international comparison
121: construction costs
are up to one third higher than the OECD average.  The resultant high prices have meant that less than
one third of the Swiss population own their own homes (among the lowest levels in Europe).122
Liechtenstein
126. In Liechtenstein too, house-building, and commercial and industrial construction were the
most affected by the early 1990s crisis (Chart IV.13).  The construction branch employed 1,922persons in 1998, i.e. about 8% of total employment.
123 Non-residents are excluded from acquisition of
real estate in Liechtenstein.  All acquisitions of real estate are subject to authorization, which is
granted only after a minimum of ten years of residence or presence in Liechtenstein124;  applicants
must prove that the acquisition is required for living or business purposes.  Liechtenstein nationality is
required for conducting engineering services as a surveyor of activities in the public sector;  however,
foreign surveyors can work under the responsibility of a Liechtenstein surveyor.125
                                                     
120 WTO document GATS/SC/83, 15 April 1994.
121 See WTO (1996) for details on restrictive arra ngements and other anti-competitive practices that
have affected the branch, as well as on lengthy appr oval procedures for infrastructure projects and special
permits for installation works.
122 EIU (1999).
123 Office of National Economy (1999).
124 The regulation does not apply to natural persons with Liechtenstein citizenship or from an EEA
member State.  Legal persons must have their head office in Liechtenstein or in an EEA member State.
125 WTO document GATS/SC/83-A, 15 April 1994.Switzerland and WT/TPR/S/77
Liechtenstein Page 109
On the basis of data on construction permits. Sometimes, construction activities start more than 
two years after the grant of the permit.
Government of Liechtenstein (1999 ), Statistisches Jahrbuch.a
Source: Chart IV.13
Construction volume by sectora, Liechtenstein, 1990 and 1998
Per cent
1990 1998
Housing
46.9
Housing
37.8
Industrial &
 commercial
40.6 Industrial & commercial
36.5Agricultural
1.4
Agricultural
0.7Public
24.6Public
4.1Movable
0.4Movable
6.9
Total:  1 ,030,550 m3Total:  766 ,959 m3Switzerland and WT/TPR/S/77
Liechtenstein Page 111
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