RESTRICTED  
  
WT/TPR/G/ 355 
11 April 2017  
(17-1944) Page: 1/22 
Trade Policy Review Body   Original: English   
 
TRADE POLICY REVIEW  
REPORT S BY 
SWITZERLAND AND LIECHTENSTEIN  
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Trade Organization), the policy statement by 
Switzerland and Li echtenstein  is attached.  
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Switzerland and Liechtenstein . WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  Contents  
1   REPORT BY SWITZERLAN D ................................ ................................ ..........................  3 
1.1   Introduction  ................................ ................................ ................................ ................  3 
1.2   Economic Context  ................................ ................................ ................................ ........  4 
1.2.1    Competitiveness and external environment  ................................ ................................ .. 4 
1.2.2    Economic development  ................................ ................................ ..............................  5 
1.3   Economic Policy  ................................ ................................ ................................ ...........  9 
1.3.1    Growth agenda  ................................ ................................ ................................ .........  9 
1.3.2    Monetary policy  ................................ ................................ ................................ .......10 
1.3.3    Fiscal policy  ................................ ................................ ................................ ............ 10 
1.3.4    Other policy areas  ................................ ................................ ................................ ....11 
1.4   Trade Policy  ................................ ................................ ................................ ............... 11 
1.4.1    Overview  ................................ ................................ ................................ ................ 11 
1.4.2    WTO ................................ ................................ ................................ ...................... 11 
1.4.3    Other multilateral and plurilateral initiatives  ................................ ................................ 13 
1.4.4    Preferential relations  ................................ ................................ ................................ 13 
1.4.5    Trade and development  ................................ ................................ ............................ 14 
1.4.6    Trade and sustainability  ................................ ................................ ............................ 15 
1.5   Outlook  ................................ ................................ ................................ ..................... 15 
2   REPORT BY LIECHTENST EIN ................................ ................................ ......................  16 
2.1   Introduction  ................................ ................................ ................................ ............... 16 
2.2   Trade and Economic Policy Environment  ................................ ................................ ........ 16 
2.2.1    Economic growth  ................................ ................................ ................................ .....17 
2.2.2    The economic sectors  ................................ ................................ ............................... 18 
2.2.3    State activities  ................................ ................................ ................................ ........ 20 
2.3   Trade  Policy Developments and Future Policy Directions  ................................ .................. 20 
2.3.1    The World Trade Organization (WTO)  ................................ ................................ ......... 20 
2.3.2    The European Economic  Area (EEA)  ................................ ................................ ........... 21 
2.3.3    The European Free Trade Association (EFTA)  ................................ ............................... 22 
2.3.4    Customs Union Treaty/economic integration with Swit zerland  ................................ .......22 
 
 WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  1  REPORT BY SWITZERLAN D 
1.1  Introduction  
1.1.  Switzerland submits this policy statement as part of the fifth Joint Trade Policy review of 
Switzerland and Liechtenstein.  
1.2.  With a trade to GDP ratio of 60%, the Swiss economy  is among the most internationally 
integrated worldwide. Lacking natural resources, landlocked in  Europe , and with high levels of 
wages and living costs, Switzerland 's prosperity depends on competitive businesses that succeed 
in international trade through  innovative, high value -added goods and services.  
1.3.  Since the last Trade Policy Review in 2013, the Swiss economy has remained in positive 
territory in spite of challenging circumstances. Recovery of the global economy after the financial 
crisis remained une ven and subdued. The European Union, by far Switzerland 's most important 
economic partner, was faced with patchy growth and monetary challenges in the euro area. 
Sustained upward pressure on the Swiss franc and structural changes induced by technological 
innovation, in particular in the digital economy, and by rapidly evolving international value chains 
contributed to a demanding environment.  
1.4.  The fact that Switzerland 's economy and trade have proved relatively resilient is due  to a 
number of factors. At the  domestic level, these include a diversified structure of the economy, a 
flexible labour market, a multi -tiered, high -quality educational system, well -established 
cooperation between social partners, sound infrastructures, budget balance and political stab ility. 
1.5.  The Government acknowledges that further sustained efforts will be required in order to 
preserve and strengthen Switzerland 's competitive position in a fast changing world. In 2014, the 
Government launched a comprehensive review of its Growth Agenda , resulting in a new set of 
priorities and projected measures in June 2016. Their focus lies on increasing productivity, in 
particular of inward -oriented sectors of the economy, further strengthening of the economy 's 
resilience and mitigation of negative e ffects of economic growth.  
1.6.  As reflected in the Growth Agenda 2016 -2019 and the Government 's foreign economic 
strategy first established in 200 2, creating and securing opportunities for Swiss -based businesses 
abroad through trade and investment remains a ke y policy objective for Switzerland.  
1.7.  The rules -based multilateral trading system developed under the WTO provides the 
institutional basis and regulatory framework for predictable, non -discriminatory global trade and is 
an essential bulwark against protecti onism. For Switzerland, maintaining the integrity and further 
strengthening the role and relevance of the WTO are essential for sustaining  global economic 
development and growth.  
1.8.  Switzerland 's trade policy priority on multilateral, non -discriminatory rules  is complemented 
by the objective of continuous expansion and deepening of preferential trade relations by means of 
regional and bilateral approaches, both with the EU and with partners worldwide.  
1.9.  Switzerland attaches high importance to reduction of discre pancies in the level of 
development between nations, promotion of the further integration of developing countries into 
the global economy, and the need to make economic development more sustainable. The 
Government also takes seriously the concerns among th e public about negative consequences of 
globalisation and structural changes in the economy. In this context, Switzerland strongly supports 
the UN 2030 Agenda for Sustainable Development and measures that contribute to socially and 
environmentally viable e conomic growth.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  1.2  Economic Context  
1.2.1   Competitiveness and external e nvironment  
1.10.   As a medium -sized economy with virtually no natural resources, Switzerland is highly 
dependent on the importation of raw materials and other goods and services that must be financed  
by export earnings. Within this context, the Swiss economy has been successful at product 
transformation and generation of a sizeable share of domestic value -added with respect to export 
products. About 70% of Swiss merchandise and services exports consis t of domestic value 
creation. The remaining 30% are attributable to imported inputs. Known for the export of goods at 
the upper end of the quality scale and speci alist niche products, Switzerland is firmly embedded in 
global value chains. It is estimated t hat roughly one fourth of output growth in Switzerland in the 
past 20 years can be ascribed to foreign trade.  
1.11.   Switzerland is also one of the most innovative and competitive economies in the world. For 
some time now, Switzerland has consistently come first  in the Global Competitiveness Index 
computed by the World Economic Forum and partner institutions. The Global Innovation Index also 
rates Switzerland on top. The rank ing in the World Bank 's Ease of Doing Business Index has 
deteriorated slightly in the las t few years , to 31 out of 190. A  combination of factors underpinning 
these rankings has contributed to making the Swiss economy more resilient in recent years.  
1.12.   For a small, land -locked country in Europe, Switzerland remains more susceptible than 
other, bi gger economies to changing circumstances in the external environment. An important 
determinant for the Swiss economy typically is the economic performance of the European Union: 
72% of Swiss merchandise imports co me from the EU (2015: approx. Sw F 121 billi on), while 54% 
of Swiss exports (2015: approx. Sw F 109 billion) go to the EU, making it by far Switzerland 's most 
important trading partner.  
1.13.   Other major trading partners are the United States , China and Japan, followed by other 
countries in Asia, the Amer icas and the Middle East.  
1.14.   During the period under review, the international economic environment was characterised 
by a gradual, yet patchy recovery after the global financial crisis of 2007 and 2008. The recovery 
within the EU, and more specifically in t he Eurozone, was more subdued than in other parts of the 
world, such as the US. Germany, Switzerland 's most important individual trading partner, also 
registered more robust growth rates than the EU as a whole. There are signs that in 2017 a 
positive econo mic development across the Eurozone is not only gathering pace, but will also be 
more evenly distributed among its member states.  
1.15.   Yet in the years leading up to this review, the combination of an uncertain economic 
outlook, persistent sovereign debt probl ems, high private debt ratios in parts of the Eurozone and 
an increasingly expansionary stance of the ECB 's monetary policy induced many investors to place 
their bets in Switzerland. These capital inflows exerted an upward pressure on the Swiss franc, 
traditionally a safe haven currency.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  Chart 1.1 Nominal exchange rate of Swiss franc versus other currencies , 2013 -17 
0.60.70.80.911.11.21.31.41.51.6
2013 2014 2015 2016 2017
CHF / EUR CHF / USD CHF / 100 JPY CHF / GBPFigure 1: Nominal exchange rate of Swiss franc versus other currencies
SNB. Source:
 
Source:  SNB. 
1.2.2   Economic development  
1.16.   In spite of these external challenges, the Swiss economic pe rformance was robust during 
2013-2016. Between 2013 and 2015, real GDP growth averaged 1.5% and the unemployment rate 
has been broadly steady at about 3%. The economy weathered the sharp appreciation that 
followed the exit from the exchange rate floor in J anuary 2015 relatively well. Activity was dented 
in early 2015 by the abrupt strengthening of the franc. However, growth subsequently returned, 
aided by the flexibility of firms and the labour market, to reach 0.8% for the year. For 2016, a 
continuing reco very with growth of 1.5%  is expected . The Government 's forecast for 2017 of 1.8% 
is slightly short of the current trend growth rate estimated at 2.0%.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  Chart 1.2 Real GDP of Switzerland, 2007 -16 
 98 100 102 104 106 108 110 112 114
-2.0-1.5-1.0-0.50.00.51.01.5
07 08 09 10 11 12 13 14 15 16
Change to previous quarter in % Level (right scale)Figure 2: Real GDP of Switzerland 
SECO. Source:
Volume index (2007=100), seasonally and calendar adjusted data.
 
Note:  Volume  index (2007=100), seasonally and calendar adjusted data.  
Source:  SECO.  
1.17.   A variety of factors contributed to Switzerland 's economic performance of the past few 
years. A main driver for moderate growth was domestic demand, while foreign trade lost some of 
its impact. This is in contrast to the years leading up to the global financial crisis when exports 
were a key engine stimulating economic activity in Switzerland. Apart from private consumption, 
construction and equipment investment and spending on health h ave increasingly taken over this 
function in recent years. To a certain extent, this phenomenon may reflect a broader trend in 
global trade, which no longer grows at a faster pace than global output. But the sustained 
appreciation of the Swiss franc since 2008 has certainly had a major dampening effect on the 
country 's external trade dynamics.  
1.18.   Nevertheless, Switzerland 's merchandise exports on the whole continued to grow, albeit at 
fluctuating rates.1 In 2013, sales abroad remained essentially flat, while a  more marked increase 
of 3.5% was registered in 2014. The following year saw a sudden drop in exports by 2.6%, which 
was due mainly to a brisk appreciation of the Swiss franc. Export activity picked up again in 2016 
with an increase of 3.8%. By way of comp arison, from 1988 to 2013, Swiss merchandise exports 
grew at an average of 4.1% per annum.  
1.19.   Imports into Switzerland displayed a similar pattern. In 2013 and 2014, they stagnated at 
the same level as in 2012. In 2015, when the export industry suffered a se tback, import activity 
exhibited an even sharper decrease than exports of 6.9%, despite improved terms of trade, due to 
the rapid appreciation of the Swiss franc. There was a distinct turnaround in 2016 when imports 
rose again by 4.1%. The positive correla tion of import and export activity seems to derive to a 
certain degree from Switzerland 's position as an intermediary within international value chains. If 
export prospects brighten for Swiss industry, so does the need for exporters to purchase input 
mater ial from abroad. In some instances, a different dynamic may be at play as well. The strength 
of the Swiss franc allows exporters to supply themselves with imported inputs at more favourable 
prices than before. Such a reduction in costs will at least in par t compensate for a loss in price 
competitiveness induced by the appreciation of the national currency. Overall, however, large 
segments of Switzerland 's export industry have been exposed to significant downward pressure on 
profit margins due to the strong  Swiss franc.  
                                                
1 Foreign trade statistics  of the Federal Customs Administration.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  Chart 1.3 Trade in goods, 2007 -17 
80859095100105110115120125
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Figure 3: Trade in goods
SECO, FCA. Source:
Volume index (2007=100), seasonally adjusted, quarterly data .Exports of goods (without gold, values and merchanting)
Imports of goods (without gold, values and merchanting)
 
Note:  Volume index (2007=100), seasonally adjusted, quarterly data.  
Source:  SECO, FCA.  
1.20.   A breakdown of the performance of various export industries indicates tha t some sectors 
performed much better than others. In fact, the upward trend in exports of goods was essentially 
due to the chemical and pharmaceutical industry, which now accounts for 46% of total Swiss 
merchandise exports. Even within that sector, a limit ed number of chemical agents and 
pharmaceutical products manufactured by a few companies have contributed an increasing share 
to Switzerland 's export performance. Meanwhile, sales abroad of Swiss machines, precision tools, 
watches, jewellery and other trad itionally important product categories have been sluggish or 
subject to a negative trend. It remains to be seen if a recent upswing in exports of metal and 
other products will be sustained in the future.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  Chart 1.4 Exports of goods by sectors, 2007 -17 
7090110130150170190210
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
chemicals and pharmaceuticals (46%)
machines and electronics (16%)
metals (6%)
precision instruments, watches and jewellery (19%)
othersFigure 4: Exports of goods by sectors
SECO, FCA. Source:
Volume index (2007=100), seasonally adjusted, quarterly data .
 
Note:  Volume index (2007=100), seasonally adjusted, quarterly data.  
Source:  SECO, FCA.  
1.21.   Swiss imports of services have been on an upward trend for almost 20 years and have more 
than doubled since 2000. This devel opment is in a large measure due to the fact that Swiss 
residents  are in a position to take more holidays abroad on account of the strength of the Swiss 
franc and real wage growth. But fees for the use of licenses and patents play an equally important 
role. The evolution of exports of Swiss services has been more unstable. To a certain degree, this 
is to do with the inherently volatile business of merchanting, which is influenced by the price 
movements of raw materials. All in all, exports of services recorded virtually no growth in the 
years from 2013 to 2016.  
1.22.   Consumer prices have stagnated or declined for several years. Inflation measured by year -
on-year (y -o-y) changes of the consumer price index (CPI) has barely risen above zero since the 
end of 2011. As  a consequence, the CPI was 2% lower in December 2015 compared with 
December 2011. A similar development is observed for core inflation (excluding fresh and seasonal 
products and energy and fuel). Looking at yearly averages, both headline ( -1.1%) and core 
inflation ( -0.5%) were negative in 2015, and 2016 witnessed a decline in prices of 0.4%. The 
latest official inflation forecast from December 2016 predicts an inflation rate of 0.1% for 2017 and 
0.5% for 2018. This forecast is based on the assumption that the moderate pace of global growth 
will continue and lead to higher inflation, not only in the U .S. but also in the euro area. Historically, 
Switzerland 's inflation rate has averaged around 2.5%.  
1.23.   Two external factors were the major drivers of the recent p eriod of very low or negative 
inflation: (i) the drop in oil prices and (ii) the appreciation of the Swiss franc, which depressed the 
prices of imported goods. Declines in oil prices have only a temporary effect on inflation as long as 
they do not lead to sustainably lower inflation expectations. In contrast, a persistent appreciation 
of the Swiss franc may lower inflation over longer periods.  
1.24.   Price stability is an important condition for growth and prosperity. Inflation and deflation, by 
contrast, impair e conomic activity. They hinder the role of prices in allocating labour and capital to 
their most efficient use and result in a redistribution of income and wealth. The Swiss National 
Bank (SNB) equates price stability with a rise in consumer prices of less than 2% per annum. 
Deflation – i.e. a sustained decrease in the price level – also breaches the objective of price 
stability. The primary goal of the SNB is to ensure price stability, while taking due account of 
economic developments.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  1.3  Economic Policy  
1.3.1   Growt h agenda  
1.25.   For about 15 years, Switzerland 's Growth Policy, or Growth Agenda, has been at the heart 
of the Swiss Government 's economic policy. Its main objective is to enhance the national 
economy 's growth potential with a view to generating long -term prospe rity gains. This may be 
achieved by higher labour force participation and/or higher labour productivity. The focus lies on 
the enhancement of competition in the domestic market to overcome sluggish productivity growth 
of domestically oriented sectors compa red with the highly productive export sector.  
1.26.   Until 2015, the Government's Growth Agenda was based on seven pillars:  
 Enhancing competition on the domestic market;  
 Pursuing Switzerland's integration into the global economy;  
 Optimizing the public sector;  
 Securing high labour market participation;  
 Ensuring a competitive educational system;  
 Facilitating entrepreneurship;  
 Promoting sustainability and an efficient use of natural resources.  
1.27.   Further key objectives have  include d a flexible labour market with a high labour market 
participation, price stability, and sound public finances. On this basis, Switzerland broadly 
succeeded in maintaining its competitiveness during the period under review, with a high per 
capita income, low levels of unemployment and one of th e highest labour market participation 
rates among OECD countries. At the same time, labour immigration increased significantly, along 
with a higher number of workers from neighbouring countries commuting to work in Switzerland 
on a daily basis.  
1.28.   Between 201 2 and 2015, the Government 's Growth Agenda also comprised  efforts aimed at 
reform of the agricultural sector, expansion of Switzerland 's network of preferential trade 
agreements, deepening of the economic relationship with the EU, reform of corporate taxat ion, 
improvement of IT infrastructure, promotion of e -government and reduction of red tape.  
1.29.   In spite of these efforts, productivity growth in Switzerland has remained low. A possible 
explanation is that the contribution to national output of domestic secto rs such as health and social 
services has continued to increase, while their productivity levels stagnated. Moreover, in the wake 
of the global financial crisis  important sectors such as manufacturing, wholesale trade and financial 
services, which used to contribute strongly to productivity gains, have lost some of their vigour.  
1.30.   Against this background, the Government decided in 2015 to focus the Growth Agenda on 
three main pillars:  
 Enhancing labour productivity growth ; 
 Strengthening resilience of the econo my; 
 Improving resources and infrastructure productivity . 
1.31.   For the period 2016 to 2019, measures envisaged by the Government pertain, inter alia , to 
facilitating imports to increase competition in the domestic market, enabling the digital economy 
and streaml ining government regulations. Amendment of 'too-big-to-fail' regulations for 
systemically relevant financial institutions and a stabili zation programme for public finances will 
contribute to the economy 's resilience. The internalisation of the environmenta l costs of energy 
consumption and a more efficient use of traffic infrastructure are further priorities of the 2016 -
2019 Growth Agenda.  
1.32.   With respect to the facilitation of imports, the Growth Agenda 2016 -2019 envisages 
autonomous measures ranging from sim plified IT and value -added tax procedures to options to 
remove impediments to parallel imports and raising de minimis  threshol ds for small consignments.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  1.3.2   Monetary p olicy  
1.33.   The aftermath of the global financial crisis presented monetary policy in Switzerland w ith 
major challenges. In 2011, the European sovereign debt crisis emerged as an additional challenge. 
Capital fled into safe haven currencies, such as the Swiss franc. Appreciation of the Swiss franc, 
which had already set in in 2008, accelerated and almos t reached parity with the euro. This 
substantial overvaluation of the national currency became a threat to economic activity in 
Switzerland and nurtured a deflationary development. Under these exceptional circumstances, 
when short -term interest rates were already close to or at zero, the SNB announc ed a minimum 
exchange rate of Sw F 1.20 per euro in September 2011.  
1.34.   In the course of 2014, the euro depreciated strongly against the US dollar with the Swiss 
franc also weakening against the US dollar. Against th is background, the SNB concluded that 
maintenance of  a minimum exchange rate of Sw F 1.20 per euro had become unsustainable. It took 
the decision to discontinue the exchange rate floor on 15 January 2015, triggering an immediate 
further appreciation of the Swiss franc.  
Chart 1.5 Real exchange rate of Swiss franc and other currencies, 2013 -17 
60708090100110120130
2013 2014 2015 2016 2017
CHF EUR USD JPY GBPigure 5: Real exchange rate of Swiss franc and other currencies
SNB. Source:
Export -weighted, 2013Q1 = 100.
 
Note:  Export -weighted, 2013Q1=100.  
Source:  SNB. 
1.35.   As a consequence, Switzerland 's economy deteriorated in the first quart er of 2015, before 
slowly recovering towards the end of the year. Merchandise exports were particularly hit, along 
with tourism. By 2016, the economy was back on a recovery course, even though the output gap 
remained negative.  
1.3.3   Fiscal p olicy  
1.36.   Switzerland 's fiscal policy is to a large extent determined by the so -called 'debt brake ' rule, 
established in 2003 and amended in 2010. This rule calls for balanced federal budgets; however, a 
budget balance must be achieved over the economic cycle in order that automat ic stabilisers can 
perform their function in cyclical upturns and downswings. Spending overruns are therefore 
expected to be redressed when the economy recovers.  
1.37.   An appraisal of the debt brake by the Government concluded in 2013 that the goals had 
been ac hieved. Federal finances had not shown any structural deficits since 2006. The debt brake 
rule is also applied at the sub -federal level by several cantons. In the period under review, nominal 
gross debt in Switzerland was reduced from 49% of GDP to 46.1%. A further reduction in debt WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  levels will help increase Switzerland 's resilience to external shocks, in line with one of the goals of 
the Government 's Growth Agenda.  
1.38.   While the debt brake has proved to be an efficient fiscal rule for management of the budget  
in the short and medium term, it will not be sufficient to solve long -term structural problems, such 
as an ageing population and its implication for social security. Challenges of this kind need to be 
tackled by dedicated reforms. Further reduction of the  Confederation 's debt ratio would, however, 
provide future generations with the best possible starting point for tackling future problems. An 
overhaul of the existing old -age insurance will continue to be debated in Parliament in 2017.  
1.39.   In February 2017, a  reform of the corporate tax code, which had been adopted by 
Parliament, was rejected in a popular referendum. This major reform had intended to abolish 
certain preferential tax provisions to bring the system into line with evolving international 
standards  and to establish a modern and competitive company taxation. The Government will work 
out a new proposal in keeping with its commitment to conform to international standards.  
1.3.4   Other policy a reas 
1.40.   Switzerland and the EU are closely interlinked in terms of em ployment: as at the end of 
2015, 455,800 Swiss nationals were living and working in the EU, while 1,363,700 EU/EFTA 
citizens were living in Switzerland (the population of Switzerland was about 8,300,000 in 2015). In 
February 2014, a popular initiative to s top "mass immigration " was accepted in a nationwide vote. 
The outcome of the vote brought about an amendment to the constitution with the Government 
tasked to introduce a new system to manage future immigration. At the end of 2016, Parliament 
adopted a new  law that implements the immigration amendment in a manner that is compatible 
with the existing agreement on the free movement of persons within the EU.  
1.41.   In 2016, Switzerland Innovation, a network of independent regional sites for research and 
innovation, bringing industry and academia together, was inaugurated. It is represented by two 
hubs centred around the two Federal Institutes of Technology in Zurich and Lausanne and three 
additional network locations. A key objective of Switzerland Innovation is to c reate a platform that 
allows universities and innovative companies, both domestic and foreign, to collaborate and use 
their research for the development of marketable products and services , in support of  
Switzerland 's global competitiveness.  
1.4  Trade Policy  
1.4.1   Overview  
1.42.   Switzerland 's trade policy aims to promote and secure open markets while contributing to 
sustainable development. It is anchored in the multilateral trading system of the WTO and 
complemented by a broad range of preferential arrangements with the EU and other partner 
countries.  
1.43.   As set out in the latest Growth Agenda adopted by the Government in June 2016, 
Switzerland will continue to focus on strengthening the productivity and competiveness of its 
economy, with further liberalisation of internatio nal trade and investment as an important 
component. At the same time, Switzerland is seeking to mitigate negative effects of economic 
growth, notably by placing a greater emphasis on sustainability and coh erence between global 
policies.  
1.4.2   WTO  
1.44.   For Switzerland 's economy, a strong, transparent and predictable rules -based multilateral 
trading system remains central. The WTO continues to form the indispensable basis of global trade 
and is the only mechanism with the potential to produce truly multilateral, inclusi ve solutions in 
the area of trade for a globali zed economy.  
1.45.   Since the last review, Switzerland has pursued its active engagement across the WTO 
agenda in support of the multilateral trading system. The substantive outcomes achieved at the 
9th and 10th Mini sterial Conferences were momentous milestones, delivering on some important WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  Doha issues and enhancing the multilateral framework. At MC10 in Nairobi i n particular, 
Switzerland contributed in a major way to reaching a consensus.  
1.46.   The Trade Facilitation Agree ment (TFA), a key outcome of MC9 in Bali, was ratified by 
Switzerland in September 2015, and a national trade facilitation committee was established in 
November 2016. Switzerland expects the TFA to considerably simplify and expedite international 
business activities worldwide, in particular for MSMEs.  
1.47.   Implementation in Switzerland of the prohibition of export subsidies for agricultural products 
by 2020, adopted at MC10 in Nairobi, called for considerable changes in national legislation. To 
this effect, the  Government conducted a public consultation from October 2015 to January 2016, 
with a view to submitting proposals to Parliament in the first half of 2017. Implementation of the 
expansion of the plurilateral Information Technology Agreement, another major achievement at 
MC10 that benefits all members, is equally subject to legislative changes. Switzerland will abolish 
all respective customs duties in one step, a process that should be completed by mid -2017.  
1.48.   With respect to decisions taken at recent WTO Mini sterial Conferences for least developed 
countries, Switzerland notified its preferential treatment for services and service suppliers of LDCs 
in July 2015. In the context of the Nairobi decision on preferential rules of origin, a Registered 
Exporter System  became effective in Switzerland in January 2017 for LDCs, allowing for self -
certification of origin by LDC exporters to benefit from the Swiss Generalized System of 
Preferences (GSP).  
1.49.   Transposition of the revised Government Procurement Agreement (GPA) was  launched in 
conjunction with a broader effort to harmonise Switzerland 's government procurement system, 
which is characterised by a federal structure and competences at several levels of government. 
Technical work was concluded in 2016 and the federal bil l is expected to be considered by 
Parliament in the course of 2017. Switzerland will be in a position to deposit its instrument of 
ratification on the revised GPA on completion of approval procedures at both federal and cantonal 
levels.  
1.50.   Switzerland is comm itted to contributing to further rule -setting and trade liberalisation 
efforts at the WTO that benefit producers and consumers worldwide. In Switzerland 's view, results 
on outstanding Doha issues remain important. At the same time, the multilateral trading  system 
needs to find responses to relevant developments in other areas, such as in the digital economy.  
1.51.   For Switzerland, further reduction of tariff and non -tariff barriers for industrial products and 
services continues to be of particular interest, alon g with a strengthening of the regulatory 
framework for the protection and enforcement of intellectual property rights, notably those 
advocated by the W/52 coalition. Switzerland also strongly supports WTO work on e -commerce, 
with a view to fostering digita lly enabled trade, particularly for MSMEs and developing countries. 
With respect to agriculture, Switzerland will pursue its constructive engagement in negotiations, 
underlining the need to adequately take into account non -trade concerns.  
1.52.   In Switzerland 's view, multilateral solutions continue to be the best way to avoid 
discrimination between countries and regions, and to create opportunities for all members. In this 
regard, Switzerland is open to consideration of various approaches that can add value to t he 
multilateral trading system, including best practices and other non -legally binding commitments.  
1.53.   Where agreement among all WTO members is not achievable, plurilateral initiatives can be 
a valuable alternative, particularly if benefits are multilaterali zed. In this respect, Switzerland 
hopes that the negotiations on an Environmental Goods Agreement will be concluded in the near 
future, thereby contributing to achievement of environmental goals set out at multilateral level.  
1.54.   Switzerland attaches high impor tance to the WTO 's regular work, in particular the 
monitoring of developments in the trading environment and of compliance by members with WTO 
rules, including on transparency. Switzerland also strongly supports the aim of making the WTO 
truly universal th rough further accession of new members that meet the organisation 's standards. 
Furthermore, Switzerland maintains a keen systemic interest in a well -functioning dispute 
settlement mechanism at the WTO, although no participation by Switzerland as a party or  third 
party in specific dispute settlement proceedings occurred during the period under review.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  1.55.   Switzerland 's engagement in WTO includes active roles in a range of groups of members 
sharing common interests, such as G10 in agriculture, the W/52 coalition in intellectual property 
and the Friends of the System. During the period under review, Switzerland also continued to host 
a yearly informal WTO ministerial gathering on the fringes of the  World Economic Forum in Davos.  
1.4.3   Other multilateral and plurilateral initiatives  
1.56.   Switzerland actively supports trade and investment -related work in the OECD. OECD 's 
analytical and policy -oriented output continues to make a valuable contribution to promoting policy 
coherence, strengthening the multilateral trading system and  showing the consequences of 
protectionism.  
1.57.   Switzerland also supports UNCTAD 's activities in, inter alia , the areas of trade and 
investment. Analysis, consensus -building and technical assistance by UNCTAD play an important 
role in helping developing countr ies better integrate into the global economy, and measure 
progress towards the UN Agenda 2030 Agenda for Sustainable Development.  
1.58.   In the period under review, Switzerland was actively engaged in the negotiations for a 
plurilateral Trade in Services Agreemen t (TiSA). Switzerland remains committed to the conclusion 
of a high -quality services trade agreement that is fully compatible with the General Agreement on 
Trade in Services and open to broad participation, with the long -term objective of integration of 
the TiSA into the WTO framework.  
1.4.4   Preferential  relations  
1.59.   As part of a comprehensive foreign economic strategy first established in 2007 and the 
Government 's Growth Agenda, Switzerland has continued to negotiate and conclude bilateral and 
regional preferential  agreements that complement and support the multilateral trading system. In 
2015, 77% of Switzerland 's merchandise exports went to preferential trading partners. Switzerland 
aims to further expand and deepen its preferential trading relations.  
European Uni on 
 
1.60.   As referred to above, the European Union continues to be Switzerland 's most important 
economic partner by far. The close relations between the two sides are reflected in an extensive 
network of contractual arrangements developed over time. In the area of trade, this network 
includes a free trade agreement concluded in 1972 and a range of further agreements, most of 
which have become effective since 2002 and cover topics such as customs cooperation, 
agricultural products, technical barriers to trade, lan d and air transport, government procurement 
and the free movement of persons.  
1.61.   Consolidation and further development of these close relations in fields of common interest 
has continued to be a priority of the Government. Since Croatia 's accession to the EU in 2013, the 
bilateral framework between Switzerland and the EU has been extended to that member state. 
Negotiations on institutional aspects of the bilateral relationship have been conducted since mid -
2014. Further topics under negotiation include the ele ctricity market, food safety and emissions 
trading. With respect to the movement of persons, and as referred to above, new constitutional 
provisions on immigration, adopted in February 2014 in a popular vote, were implemented by 
Parliament in December 2016  in a manner that does not affect the e xisting agreements with the 
EU. 
Free Trade Partners  
 
1.62.   Deepening and extending Switzerland 's preferential trade relations beyond the EU and the 
European Free Trade Association (EFTA) Convention also remain major objecti ves of the 
Government. These FTAs make an important contribution to sustaining the competitiveness of the 
Swiss economy and the country 's attractiveness as a business location through improved access to 
foreign markets and enhanced cooperation on an equal footing with Switzerland 's main 
competitors.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  1.63.   With partners outside the Euro -Mediterranean area, Switzerland is generally seeking FTAs 
that are comprehensive in scope, including trade in goods, services, investment, intellectual 
property, competition, gove rnment procurement and trade facilitation. In addition, provisions on 
trade and sustainable development have been proposed to all negotiating partners in recent years, 
and have already been included in several FTAs.  
1.64.   Switzerland negotiates, concludes and ad ministers its FTAs mostly in association with its 
EFTA partners. In the period under review, new EFTA free trade agreements were concluded with 
the Central American states of Costa Rica, Panama (2013) and Guatemala (2015), Bosnia & 
Herzegovina (2013), Geor gia (2016) and the Philippines (2016). Switzerland signed a bilateral FTA 
with China in 2013, which entered into force in July 2014.  
1.65.   By the end of 2016, Switzerland had 28 FTAs with 38 partner countries outside the EU and 
EFTA, of which 26 agreements were in force. Together with its EFTA partners, Switzerland is 
pursuing negotiations with Ecuador, India, Indonesia, Malaysia and Viet  Nam. Further processes 
have been started with Algeria, Thailand, and the Russia n Federation , Belarus and Kazakhstan. In 
parall el, Switzerland is engaged in negotiations on further development of several existing EFTA 
free trade agreements, including those with Mexico and Turkey. The possibility of enhancing 
existing FTAs with further partners, such as Canada and Chile, is being e xplored.  
1.4.5   Trade  and d evelopment  
1.66.   Support of the integration of developing countries into the global economy has been one of 
three pillars of Switzerland 's foreign economic strategy since 2007. In that context, promotion of 
trade plays a key role and offers s ignificant opportunities for sustainable economic growth and job 
creation. In December 2016, the Government, in a strategy submitted to Parliament, confirmed 
trade promotion as a key objective of Switzerland 's development cooperation for the period 2017 -
2020.  
1.67.   Switzerland has supported the global Aid for Trade Initiative of the WTO and the OECD since 
its inception in 2005. In December 2015, Switzerland renewed its commitment to the Enhanced 
Integrated Framework (Phase II) that specifically benefits LDCs.  
1.68.   In the period under review, Switzerland 's trade promotion work focused on strengthening 
export capabilities of SMEs in designated partner countries and on facilitating imports into target 
markets. It also comprised several initiatives aimed at improvement o f the institutional capacity 
required for participation in international trade and value chains. Projects, most of which were 
implemented with partner organisations, included:  
  contributing to the World Bank 's Trade Facilitation Support Programme, notably  to assist 
WTO Members with implementation of the TFA;  
  building in -country export know -how (e.g. on quality requirements, product labelling and 
border procedures) and developing a 'Standards Map ' online database, in partnership with 
the International Tra de Center (ITC);  
  assisting trade support organisations in partner countries in facilitating SME exports to 
Switzerland and other European markets;  
  establishing local quality assurance systems in support of SMEs ' ability to comply with 
international stand ards, in association with the United Nations Industrial Development 
Organization (UNIDO);  
  developing investment climate programmes in 20 partner countries, in cooperation with 
the Internat ional Finance Corporation (IFC).  
1.69.   Furthermore, Switzerland remains a  major donor of the Advisory Centre on WTO Law 
(ACWL). With the International Labour Organization (ILO), Switzerland has been engaged in 
promoting compliance with core labour standards, particularly in the textiles sector, and support of 
SMEs through the S ustaining Competitive and Responsible  Enterprises Programme (SCORE).  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  1.4.6   Trade  and s ustainability  
1.70.   In Switzerland 's view, trade has to play an important role in addressing the goals of 
sustainable development, as reflected in the United Nations 2030 Agenda, and  the challenge of 
climate change in particular. In WTO and other international organi zations, Switzerland therefore 
actively advocates policies and rules that promote sustainable development and coherence 
between trade rules and relevant environmental, lab our and social commitments.  
1.71.   As referred to above, Switzerland remains hopeful that the WTO negotiations on an 
Environmental Goods Agreement will be concluded successfully. Switzerland also strongly supports 
multilateral and plurilateral talks aimed at abol ishing fisheries subsidies detrimental to the 
environment, in line with Sustainable Development Goal 14.6. In the course of 2017, new 
regulations will become effective in Switzerland for imports of products from illegal, unreported  
and unregulated (IIU) fi shing.  
1.72.   Switzerland is actively engaged in the Friends of Fossil Fuel Subsidy Reform. Formed in 
2010, this group promotes a phasing -out of inefficient fossil fuel subsidies, as envisaged by G20 
and APEC leaders. It encourages governments to undertake volunt ary peer reviews with a view to 
a phase -out of such subsidies by 2025.  
1.73.   In the period under review, and as mentioned above, Switzerland moved to negotiating and 
concluding free trade agreements with a dedicated chapter on trade and sustainable development.  
With some partner countries, Switzerland also engages in labour dialogues accompanying the 
implementation of FTAs.  
1.74.   Sustainability -oriented support to partner countries has been provided through UNIDO 's 
Resource Efficient and Cleaner Production Programme and UNCTAD 's Biotrade Facilitation 
Programme.  
1.75.   On 25 May 2016, Switzerland ratified the Minamata Convention, which aims at protecting 
the environment and human health worldwide through the prohibition of exports of mercury 
except under specific conditions.  
1.76.   In December 2016, the Government adopted a National Action Plan to implement the United 
Nations Guiding Principles on Business and Human Rights. The Plan aims to increase coherence 
between Switzerland 's economic policy and human rights obligations, formula te expectations 
towards Swiss -based businesses and plan various awareness -raising and training initiatives.  
1.5  Outlook  
1.77.   During the period under review, Switzerland's economic policy has sharpened its focus on 
fostering the competitiveness of Swiss -based busine sses, building on the strengths of the country 
and addressing weaknesses such as insufficient productivity growth mainly of inward -oriented 
sectors.  
1.78.   For Switzerland to continue to succeed in a rapidly evolving, interdependent global 
economy, open markets and non -discriminatory trade rules are of fundamental importance. At the 
same time, Switzerland is mindful of a strong need to make trade work more and better for 
developing countries, in particular LDCs, and for sustainable development more generally in l ine 
with the UN 2030 Agenda. Switzerland will therefore actively pursue mutually supportive 
economic, social and environmental policies both at the domestic and global levels.  
1.79.   For Switzerland, the WTO remains the anchor of its trade policy. Switzerland wil l continue to 
strongly support and actively contribute to preserving a well -functioning multilateral trading 
system and to keeping it relevant for the membership and the global economy. In Switzerland's 
view, while maintaining the aim of multilateral solut ions at the center, further developing and 
reinforcing the WTO's regulatory framework will also require variable approaches to address the 
wide range of interests and reflect the different stages of development of Members.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  2  REPORT BY LIECHTENSTEIN  
2.1  Introdu ction  
2.1.  With a surface of 160 square kilometers, a resident population of about 38 ,000 and therefore 
a very limited domestic market, Liechtenstein has a constant track record of efforts to extend its 
economic integration with larger economic areas. It 's foreign economic policy is therefore built 
upon four pillars: its membership in two economic areas: the Swiss Customs and Currency Union 
and the European Economic Area (EEA); a network of free trade agreements concluded through 
the European Free Trade Associa tion (EFTA) as well as Liechtenstein 's membership in the World 
Trade Organization (WTO).  
2.2.  This report on the Fifth Trade Policy Review of Switzerland and Liechtenstein presents the 
developments of the economic union between Switzerland and Liechtenstein du ring the past four 
years. Liechtenstein is an integral part of the Swiss customs territory, the two countries form a 
monetary union, and more than 100 other bilateral treaties, such as the Patent treaty, closely link 
them. This economic union has already e xisted for more than 90 years and constitutes a central 
building block for Liechtenstein 's economic access to the world markets.  
2.3.  The Trade Policy Review reflects at the same time the high degree of Liechtenstein 's 
integration in the European Economic Area (EEA), the second pillar of its foreign economic policy. 
The EEA Agreement forms the legal basis for economic cooperation between the three EEA EFTA 
States (Iceland, Liechtenstein, and Norway) and the EU (currently 28 Members). As a party to the 
EEA Agreem ent, Liechtenstein fully participates in the EU's Internal Market, which is based on the 
principle of the free movement of goods, persons, services and capital, with uniform and common 
rules governing competition, including state aid. In addition, the Agre ement covers cooperation in 
i.e. research and development, education, social policy, the environment, consumer protection, 
tourism, and culture. For the last 22 years, the EEA agreement has been the most important pillar 
for Liechtenstein 's economic actors  to participate in the European markets.  
2.4.  Together with the integration into the above mentioned economic areas, and in order to 
establish favourable framework conditions that facilitate cross -border economic relations for the 
heavily export -oriented Liecht enstein companies beyond Europe, Liechtenstein 's membership to 
WTO and  to EFTA constitute the main pillars of its foreign economic policy. Liechtenstein is firmly 
committed to the rules -based, transparent and open multilateral trading system of the World 
Trade Organisation. Since an open and well -functioning multilateral trading system is fundamental 
to economic growth and development, the trading system of the WTO is essential to 
Liechtenstein 's economic policy. Liberalisation of trade at multilateral and regional levels (via WTO 
and EFTA) is a high priority of Liechtenstein 's foreign economic policy. One of its main objectives is 
to ensure and to extend – as far as possible – non-discriminatory access to foreign markets for its 
companies.  
2.5.  In an economic en vironment which is increasingly internationally linked and globally 
dependent, it is a central priority of the Liechtenstein Government to promote general conditions 
for business activities which are stable and favorable. In addition to political continuit y, this 
requires a predictable legal and social as well as a liberal economic order. The level of State 
intervention in economic processes is kept low. They are facilitated by fast administrative 
channels, a low level of bureaucracy and business -friendly t ax legislation.  
2.2  Trade and Economic Policy Environment  
2.6.  During the last four years, the Liechtenstein Government has continued to adhere to its long -
standing liberal economic policy based on self -dependent economic actors and state interventions 
that are lim ited to the establishment of framework conditions which are favourable to 
entrepreneurship. At the same time Liechtenstein incorporated newly adopted acquis 
communautaire  into domestic law, more than 8 ,700 EEA relevant EU legal acts are now applicable 
in Liechtenstein. The implementing act for the EU Services Directive regulating the general 
framework for the provision of services in Liechtenstein by EEA nationals, either as permanent 
establishment or as temporary cross -border provision, is one example for this policy. Moreover, 
Liechtenstein expanded its network of free trade agreements together with the other EFTA Member 
States.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  2.7.  Great efforts have finally been put into the creation of new and the improvement of existing 
laws in the context of financial ser vices in order to comply with evolving European and 
international standards while providing the basis for future business opportunities.  
2.2.1   Economic growth  
2.8.  Liechtenstein 's economy is small in absolute terms, poor in natural resources and highly 
export -orient ed with a large share of value added in industry (41% of GDP in 2014). These factors 
are reflected in the impact of the global financial and economic crisis on Liechtenstein 's economy 
during the last years from which Liechtenstein relatively well recovered  despite the massive 
strengthening of the Swiss franc in the wake of the sovereign debt crisis in the Euro zone and its 
pressure on Liechtenstein 's export industry. GDP increased every year (with 0.4% in 2012, 4.7 in 
2013 and 2014 3% (provisional)).  
2.9.  Liecht enstein 's economy has continued to steadily create new jobs. The total number of 
people employed in Liechtenstein increased from 34 ,334 in 2010 to 36 ,680 in 2014, reaching a 
further high in 2015 with 36 ,755. More than half of the employed persons (19 ,652) in 2015 
commuted daily from neighbouring Switzerland and Austria or from Germany. Compared to the 
total resident population (37 ,622 in 2015), the high proportion of job creation remains a particular 
feature of Liechtenstein 's economy. In 2015 38.4% of the labour force worked in industry, 60.9% 
in services and 0.8% in agriculture. By international comparison, the very low proportion of 
agriculture and forestry is striking, as is the relatively high proportion of the manufacturing sector. 
The services sector is smaller than in other European countries. Unemployment rates during the 
last four years varied slightly between 2.3% (2012) and 2.5% (2013) as well as 2.4% (2014 and 
2015).  
2.10.   Industrial direct exports, excluding exports to or through Switzerland, increas ed from 
SwF 3,389 million in 2013 to SwF 3,453 million in 2014 before it fell to SwF 3,217 million in 2015 
and increased again to SwF 3,346 million in 2016 (provisional numbers) amounting to SwF 89,000 
per inhabitant. The most important export country of L iechtenstein 's industry and goods 
production sector remains Switzerland, followed by Germany and the United States.  
2.11.   At the end of 2015, the 16 Liechtenstein banks managed client assets in the amount of 
SwF 130.5 billion. The decline in assets under manage ment by 3.0 % des pite net inflows of new 
money is due to market developments, especially exchange rate effects after the abolition of the 
euro minimum exchange rate by the Swiss National Bank.  
2.12.   As regards insurance services, 21 life insurance, 17 non -life insurance, and 3 reinsurance 
undertakings operated with registered offices in Liechtenstein at the end of 2015. 11 undertakings 
operated as captives. Compared with the previous year, the numbers of insurances slightly 
decreased from 42 to 41. Liechtenstein  is the only insurance center that offers insurance 
undertakings direct access both to the countries of the European Economic Area and to 
Switzerland.  
2.13.   The Liechtenstein fund center is a young market that has grown successively in recent 
years. Thanks to L iechtenstein 's membership in the EEA, investment undertakings benefit from 
free access to the European market. At the end of 2015, there were 510 investment undertakings 
in Liechtenstein with net assets of SwF 45.2 billion.  
2.14.   Liechtenstein has the same infla tion rate as Switzerland (2012: -0.7%, 2013: -0.2%, 2014: 
0.0%, 2015: -1.1%, 2016: -0.4%). Interest rates continuously decreased and reached a historical 
low in 2016. There are no figures available reflecting private consumption or investment.  
2.15.   After struc tural problems were foreshadowed in the fiscal programming for 2010 -2014 due 
to, amongst other factors, the economic and financial crisis, the general demographic 
development, and structural changes in the financial sector, fiscal consolidation was made on e of 
the priorities of the Liechtenstein Government. On the basis of three fiscal stabilization packages, 
state budget consolidation measures were successfully implemented leading to savings of about 
SwF 162 Mio. and an increase of revenues of SwF 59 Mio. In 2014 and 2015, the state budget 
again posted a surplus. Liechtenstein focuses now on securing a balanced state budget. The sound WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  budgetary position of Liechtenstein was one decisive factor for the recent confirmation of its AAA 
rating from Standard and Poor's.  
2.2.2   The economic sectors  
2.16.   Liechtenstein 's economy is broadly diversified by sectors, businesses and products. The 
average value added is very high, based on research and development, qualified expertise, a wide 
range of high -tech and niche products, st rong export orientation of its industry, and a highly 
developed financial services sector. Its services sector covers more or less all services of the UN 
services classification system. The rate of investment in research and development compared to 
GDP cur rently stands at the remarkable figure of 8.4%.  
2.17.   In 2013 and 2014, about 41% of the GDP is the result of value added in industrial 
production and manufacturing, 27% in general services, 25% in the financial services sector and 
the remainder in household, ag riculture and forestry. At the end of 2015 Liechtenstein 's economy 
accounted for 4 ,482 businesses (i.e. an average of one business per 8.4 inhabitants). Almost 90 % 
of these are small businesses (1 to 9 employees) while 17 companies have more than 
250 emplo yees.  
2.18.   The primary sector employs 0.8% of the total workforce. The number of employees in the 
primary sector stayed stable in 2014 and 2015. Especially the dairy industry is important for 
Liechtenstein farmers. Some 55 farms produce around 13 million kg mil k per year. In 2013, one 
third of 109 registered farms were certified to produce agricultural products according to organic 
farming production methods. The Liechtenstein agricultural sector plays an important role for the 
sustainable maintenance of hilly a nd mountainous areas, which make up two thirds of 
Liechtenstein 's territory.  
2.19.   Liechtenstein 's agriculture is closely linked with Switzerland through the Customs Union 
Treaty due to which the Swiss Federal Law on Agriculture is applicable in Liechtenstein.  Moreover, 
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 32.7 ha in Liechtenstein and around 19 ha in Switzerland. 
The prices of agricultural products are broadly the same in Switzerland and Liechtenstein. The 
reduction of the total  number of farms over the last few decades (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.  
2.20.   Liechtenstein is one of the mo st highly industrialized countries in the world. Lacking a 
significant home market, virtually all goods produced are exported. Therefore, Liechtenstein 's 
industry, specialized in high -tech niche products, was from the outset exposed to international 
compet ition. The high dependence on export constitutes a certain vulnerability of Liechtenstein 's 
industrial sector. Thanks to its specific range of products and the diversity of its export markets, it 
is, however, relatively well recovering from the exchange ra te drop after the Swiss national Bank 's 
decision to lift the fixed minimum exchange rate between the Swiss franc and the Euro in 
January  2015. This had led to an economic slowdown and direct exports decreased by 6.9% in 
2015. However, the direct exports fr om Liechtenstein undertakings increased again by 4% in 2016 
compared to the previous year. The most important branches of the internationally competitive 
industrial sector are mechanical engineering, plant construction, manufacturing of precision 
instrumen ts, dental technology, electronic control devices, vacuum, heating and lighting 
technology, dentistry and pharmaceutical products and food -processing industry.  
2.21.   Financial services also constitute an important economic sector in Liechtenstein (25% of 
GDP in  2015). Private wealth management dominates the financial centre today, offering a broad 
product portfolio. Fiduciary services and private banking account for a substantial part of the 
added value generated by the financial centre, while the rest is genera ted by insurers, the fund 
industry, independent asset managers and others. Globalization has an important effect on the 
competitive situation of the Liechtenstein financial centre. The most important challenges include 
the worldwide opening of markets, rap id technological progress, and the accelerating cycles of 
innovation. These challenges have changed the framework conditions and rules of the game for 
international competition.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  2.22.   As an EEA member, Liechtenstein implements relevant EU legislation. According ly, banking, 
insurance, securities and accounting legislation is based on the relevant EU Directives. Moreover, 
Liechtenstein as an EEA Member fully participates without the right to vote in the European 
Financial Surveillance System. In addition, the Liec htenstein financial institutions profit from the 
EU passport granting them the unhindered access to the EU Market . National accounting standards 
for financial institutions (mainly banks, which are not quoted) are also similar to the accounting 
rules of the  Swiss FINMA. In general, the company may choose between the national accounting 
standard or IFRS standard. However, only 3 Banking Groups in Liechtenstein apply IFRS on a 
consolidated level. National accounting standard is applied on stand -alone basis onl y.  
2.23.   The strong Swiss franc continues to represent a challenge as a large and growing share of 
turnover is being generated abroad in foreign currencies. When the Swiss franc appreciates, the 
turnovers reported in francs drop accordingly. The same is true of  income. Most of the costs of the 
financial sector are incurred in Swiss francs, however, to the extent the parent companies are 
located in Liechtenstein. This leads to a worsening ratio of costs and income. In the longer term, 
there is a risk of shifting costs abroad unless the currency situation returns to "normal ". 
2.24.   The Liechtenstein financial sector is facing this high uncertainty with a comfortable capacity 
to bear risks. The average core capital (Tier 1) ratio at the end of  2015 across all banks was 
21.3%. This represents an increase of about 2.5 percentage points over the previous year. These 
figures are based on the CRD IV provisions that entered into force at the beginning of 2015. The 
core capital ratio of the Liechtenstein banking cen ter is thorou ghly solid compared with other 
countries. The high level of capital adequacy offers a guarantee for a stable financial center and 
security for banking clients.  
2.25.   In accordance with the "Liechtenstein Declaration " of 12 March 2009, where the 
Liechtenstein Gov ernment committed  to implement global standards of transparency and 
exchange of tax information as developed by the OECD and to advance its participation in 
international efforts in order to counteract non -compliance with foreign tax laws, Liechtenstein is  
inter alia actively participating in the work of the Global Forum on Transparency and Exchange of 
Information for Tax Purposes and has been assigned a Rating of "Largely Compliant " in the second 
phase of the Peer Review. Until now, Liechtenstein has negot iated and concluded 17 Double 
Taxation Agreements according to the OECD Standard, concluded 27 Tax Information Exchange 
Agreements (TIEA), ratified the Multilateral Convention on Administrative Assistance in Tax 
Matters in August 2016 ( "Multilateral Conven tion") and signed the Multilateral Competent Authority 
Agreement on Automatic Exchange of Financial Account Information ( "AEI MCAA ") in 2014. As an 
early adopter to implement the global standard on automatic exchange of information, 
Liechtenstein has concl uded an Agreement to Automatic Exchange of Information in Tax Matters 
(AEOI) with the EU which has entered into force on 1 January 2016.  As of 1 January 2017 
Liechtenstein 's AEOI network comprises a total of 60 AEOI exchange partners. A further extension 
is planned with effect from 1 January 2018 for exchanges in 2019. Liechtenstein has also joined 
the Inclusive Framework of the OECD to implement BEPS measures and signed the Multilateral 
Competent Authority Agreement on Country -by-Country Reporting ( "CBC MC AA") in 2016.  
2.26.   Liechtenstein has a vital interest in the worldwide enforcement of internationally recognized 
standards to prevent abuse of the financial markets. Liechtenstein 's foreign policy therefore pays 
great attention to the development and internati onal enforcement of uniform rules to prevent and 
combat money laundering and the financing of terrorism.   
2.27.   At the national level, legislative, administrative and other practical measures have been 
taken in the last years to achieve this goal. Liechtenstein has fully implemented the 3rd EU Anti -
Money Laundering Directive and complete implementation of the 4th Anti -Money Laundering 
Directive is envisaged for July 2017.The relevant standards in Liechtenstein have been 
acknowledged by international bodies. In 20 07, Liechtenstein underwent the second Financial 
Centre Assessment by the IMF. The IMF certified the FMA 's effective measures in the fight against 
money laundering and financial transactions with a terrorist background.  
2.28.   In 2014 the anti-money laundering ( AML) and combating the financing of terrorism (CFT) 
regime of Liechtenstein was again assessed by the IMF and the Council of Europe Committee of 
Experts on the Evaluation of AML and CFT (Moneyval). The assessment concluded that 
Liechtenstein has made signi ficant steps and achieved considerable progress since the last mutual 
evaluation, particularly in bringing its legal framework more closely in line with the Financial Action WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  Task Force (FATF) recommendations, consolidating an overall robust institutional f ramework for 
combating money laundering and terrorist financing and moving towards greater transparency. 
The assessment also found that domestic cooperation is robust, and key stakeholders enjoy the 
trust of the financial and nonfinancial sectors. In 2016/ 2017 Liechtenstein was the first country to 
be evaluated in the Second Review Cycle of the United Nations Convention against Corruption in 
respect of its measures to prevent corruption and to recover stolen assets.  
2.2.3   State activities  
2.29.   The Government of Liecht enstein neither provides export subsidies or guarantees, structural 
policy nor subsidies to companies with the exception of farms. The main features of the playing 
field set by the Government 's economic policy are trade laws, stability and reliability of t he policy, 
the creation of high quality educational systems, a business -friendly tax regime, low administrative 
burden and a slim and customer oriented public administration.  
2.30.   With the aim of further promoting an investor -friendly environment in accordance  with 
relevant EEA law, the Liechtenstein tax legislation has been revised and in 2011, a totally new tax 
act replaced the previous one dating back to 1961. Under the new tax act legal persons taxable in 
Liechtenstein and engaged in economic activities are  subject to a corporate income tax of 12.5%. 
The existing capital tax has been abolished. Income and gains from participations are tax -exempt, 
and losses carried over are no longer subject to a time limit. In addition, a notional interest 
deduction has bee n introduced. Other important innovations include group taxation for affiliated 
companies, provisions for private asset structure, facilitating the taxation of asset management 
companies, or provisions on the tax treatment of national and cross -border rest ructurings.  
2.31.   In addition to its participation in the Competence Centre for Small and Medium -Sized 
Enterprises (SME) under the direction of the Liechtenstein University of Applied Science (the 
Centre advises young professionals and companies in the growth ph ase on business planning and 
management, arranges contacts with financial institutions, investors or potential business 
partners) the Liechtenstein Government has also launched, together with the authorities of the 
neighbouring Swiss canton of St. Gallen, the establishment of the "RhySearch " centre. Under the 
umbrella of this centre for research and innovation several Swiss universities and the Liechtenstein 
University of Applied Science will cooperate and facilitate access for SME in the Rhine Valley to 
research activities carried out by those institutions.  
2.32.   Due to the country 's small territory and in view of the high proportion of non -Liechtenstein 
citizens of the total resident and working population (34% and 70% respectively), Liechtenstein 
regulates emp loyment and immigration. Compared to the last Trade Policy Review of Switzerland -
Liechtenstein the portion of non -Liechtenstein citizens of the resident and working population has 
slightly increased. Therefore, the Government does not see any leeway to eas e restrictions 
concerning immigration and employment as also the special rules concerning the freedom of 
movement of persons, granted to Liechtenstein in the EEA, remain unchanged. Furthermore, in 
view of Liechtenstein 's geographic situation and in order t o respect its rural character and preserve 
access to real estate for the resident population, the Government regulates investment into real 
estate (also for non -resident Liechtenstein citizens).  
2.3  Trade Policy Developments and Future Policy D irections  
2.33.   The framework of the trade environment of Liechtenstein is outlined by the Customs Union 
Treaty with Switzerland, Liechtenstein 's membership in the European Free Trade Association 
(EFTA), the EEA and the WTO. These vessels allow Liechtenstein to participate in the multilateral 
trading system but at the same time to join, as a complementary tool, deeper economic 
cooperation in regional agreements. So far Liechtenstein has not been involved in any WTO or 
EFTA dispute settlement case.  
2.3.1   The World Trade Organization (WTO)  
2.34.   Liechtenstein attaches high importance to a strong, rules based Multilateral Trading System. 
The WTO plays a key role in ensuring non -discriminatory market access for all WTO members and 
as a stronghold against protectionism. Liechtenstein remains co mmitted to solve the outstanding 
Doha issues. At the same time the WTO system has to respond with flexibility to the realities and WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  needs of this century 's globalized economy and to the increasingly diverse situations of its 
members. Improved market access means more trade, and more trade is beneficial to all, 
developed and developing countries alike. Furthermore, it offers opportunities for an increase in 
trade among developing countries. The multilateral trading system is a proven vehicle in 
promoting econ omic development and growth and is central to the future prosperity of our 
nations. At MC9 and MC10 the WTO has proven that it can deliver tangible results. Both the 
monitoring and negotiating arms of the WTO need to be strengthened and further developed.  
2.35.   Liechtenstein is committed to engage to further strengthen the multilateral system. Thus 
Liechtenstein has ratified the Trade Facilitation Agreement in September 2015. Furthermore, in 
May 2013 Liechtenstein was the first to ratify the revised Government Pr ocurement Agreement 
that was adopted on March 2012. Liechtenstein also welcomes the ITA expansion and the launch 
of negotiations on an Environmental Goods Agreement in 2014. Switzerland is representing 
Liechtenstein in both initiatives by virtue of the Cus toms Union Treaty.  
2.36.   Services form an important part of the overall package of the current negotiating Round. 
Services account for a large part of economic growth, both in industrialized and developing 
countries. Liechtenstein is therefore supportive of ong oing efforts in the area of trade in services 
and is ready to engage constructively. Moreover, Liechtenstein joined the initiative on an ambitious 
plurilateral trade in services agreement (TiSA) in 2013 and is participating actively since then.  
2.3.2   The Europe an Economic Area (EEA)  
2.37.   The European single market is the most important market for Liechtenstein 's economic 
operators. Due to the EEA -Agreement with its four freedoms, Liechtenstein has non -discriminatory 
access to this market. As a consequence of this agr eement, a large part of Liechtenstein 's 
economic legislation is based on EU law. End 2016, Liechtenstein had implemented 99.4% of the 
relevant internal market rules. Liechtenstein 's legislation in the respective areas is therefore 
identical with European l aw.  
2.38.   The relationship between Liechtenstein and the EU is not limited to the EEA. Since January 
2012 Liechtenstein participates in the areas of Schengen and Dublin (open borders, visa, police co -
operation, asylum, etc.). Association with Schengen and Dubli n supplements and deepens 
Liechtenstein 's integration in Europe in the areas of justice and home affairs.  
2.39.   During recent years, relations with the EU have also significantly advanced in areas 
regarding transparency and international cooperation in tax matt ers. Already in March 2009, 
Liechtenstein took a deliberate and far -reaching policy decision to support the increasing efforts on 
international cooperation in tax matters. In November 2013, the Government confirmed its 
commitment to the OECD Global Standar d, thereby underlining Liechtenstein 's international 
position as a reliable and trustworthy partner. In October 2015, Liechtenstein and the EU signed 
the Agreement on the Automatic Exchange of Tax Information. It reflects the evolution of EU 
legislation an d incorporates the OECD 's Global Standard for Automatic Exchange of Financial 
Account Information. With the agreement 's entry into force on 1 January 2016, Liechtenstein 
fulfilled its political commitment as an Early Adopter of the OECD Global Standard.  
2.40.   Liechtenstein is furthermore committed to the implementation of the rules against tax 
avoidance practices that directly affect the functioning of the internal market ((EU) 2016/1164) 
based on the OECD Action Plan on tax base erosion and profit shifting (BEP S), with a view to 
ensuring a level playing field among countries. In this regard, the Liechtenstein Parliament 
adopted a number of adaptations of the Tax Act. These concern, inter alia, the correspondence 
principle for dividends within corporate groups to  avoid double non -taxation, country -by-country 
reporting for large multinational enterprises, and transfer pricing rules.  
2.41.   The EEA had shown in its past that it offers a stable contractual framework for economic 
relations with the EU. Liechtenstein remains  strongly committed to the EEA and focuses on 
continuing the good cooperation between the EFTA and the EU side in the EEA to protect the 
functioning of this common market.  WT/TPR/G/ 355 • Switzerland and Liechtenstein  
 
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  2.3.3   The European Free Trade Association (EFTA)  
2.42.   Liechtenstein became a full EFTA member o n 1 September 1991. Hitherto, in light of the 
customs union with Switzerland, Liechtenstein had been covered by the EFTA convention through a 
particular Protocol.  
2.43.   Since the early 1990s, EFTA has established an extensive network of contractual relations 
with States and Territories in Central and Eastern Europe, in the Mediterranean region and 
overseas. As of today, the EFTA States have a network of 27 Free Trade Agreements with a total 
of 38 partner countries and territories around the world: with Albania ( 2010), Bosnia and 
Herzegovina (2013), Canada (2009), Central American States (2013 Costa Rica /2015 Panama and 
Guatemala (entry into force pending)), Chile (2003), Colombia (2011), Egypt (2007), Georgia 
(2016 entry into force pending), Gulf Co -operation Co uncil (GCC, comprising Bahrain, Kuwait, 
Oman, Qatar, Saudi Arabia, United Arab Emirates), Hong Kong, China (2012), Israel (1992), 
Jordan (2001), Lebanon (2004), Macedonia (2000), Mexico (2000), Montenegro (2012), Morocco 
(1997), Palestinian Authority (1998 ), Peru (2011), Philippines (2016 entry into force pending), 
Serbia (2010), Southern African Customs Union (SACU , comprising Botswana, Lesotho, Namibia, 
South Africa and Swaziland) (2006), Singapore (2002), the Republic of Korea (2005), Tunisia 
(2004), Tur key (1991) and Ukraine (2012) . The FTAs concluded by the EFTA States aim at 
enhancing mutual market access and ensuring that economic operators are granted non -
discriminatory treatment vis -à-vis their main competitors in these markets.  
2.44.   EFTA is currently en gaged in free trade negotiations with Algeria (on hold), Ecuador, India, 
Indonesia, Malaysia, Thailand (on hold), Customs Union Russia -Belarus -Kazakhstan (on hold) as 
well as with Viet  Nam. Furthermore, the EFTA States explore the possibility to open negot iations 
with other third countries.  
2.3.4   Customs Union Treaty/economic i ntegration with Switzerland  
2.45.   The close cooperation with Switzerland is reflected in more than 100 bilateral treaties, the 
most important of them being the Customs Union Treaty and the Curre ncy Union Treaty. The 
Customs Union Treaty, in combination with other agreements pertaining to the movement of 
persons, allowed for the abolition of any border or customs control between the two countries. Of 
equal practical importance to Liechtenstein 's economy is the Currency Union Treaty which forms 
the legal basis for using the Swiss franc as the official currency in Liechtenstein.  
2.46.   The provisions of the Customs Union Treaty stipulate that the Swiss laws pertaining to 
customs as well as other federal le gislation necessary for the implementation of the customs -free 
zone are applicable in Liechtenstein. In addition, trade and customs treaties concluded by 
Switzerland with third parties (with the exception of the EEA countries) regarding the provisions 
concerning trade in goods also apply to Liechtenstein on the basis of the Customs Union Treaty. 
Switzerland is authorized to represent Liechtenstein in relevant negotiations and to conclude such 
treaties with effect in Liechtenstein.  
2.47.   The Customs Union Treaty f acilitated the bilateral cooperation far beyond its original scope 
of application, in particular in the areas of social welfare (health, social security), education 
(vocational and professional training), transport and environment. The entry into force of the 
revised EFTA Convention on 1 June 2002 has led to an additional integration step in the economic 
relations between Liechtenstein and Switzerland. Despite the difference in their integration policy 
towards the EU, both countries not only manged to maint ain but foster the already existing close 
links.  
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