Switzerland’s opportunity costs for not joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Creators: name: Eicher, Roman
Publisher: name: ZHAW Zürcher Hochschule für Angewandte Wissenschaften
Year: 2022
Subjects: 337: Weltwirtschaft und Handel

description: Switzerland has faced growing troubles concerning negotiating new and renegotiating existing free trade agreements (FTAs). These agreements are a critical part of the country’s ability to provide its companies with competitive parity compared to businesses from other countries. Therefore, new options have to be assessed to even the playing field in terms of trade for Swiss companies. One such option is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which to date includes 11 nations. So far, the discussion regarding a Swiss membership in this agreement has been held on a qualitative basis. Therefore, it is unknown what membership in this agreement would mean for Switzerland in numeric terms.

This Bachelor’s thesis provides a first approach to calculating the opportunity costs (OC) for Switzerland in the form of lost trade. In addition, it gives an overview of all current and potential CPTPP countries, their current relationship with Switzerland, and their demographic situation. Moreover, it estimates the FTAs' impact on different Swiss industries and lists the most important countries among current CPTPP members. These countries are then compared with the current priority list of the State Secretariat for Economic Affairs (SECO). To make these forecasts, Swiss trade data from 2012 to 2020 is used to predict how trade might behave in the future. The forecasts estimate how trade between Switzerland and CPTPP members might behave between 2020 and 2030. All detailed calculations can be found in the appendix and an additional Excel file attached to this thesis.

The calculations conducted in this thesis have forecasted that the OC for Switzerland is equal to approximately CHF 989.6 million. Of these costs, CHF 283.9 million are expected to be carried by exporters and CHF 705.7 million by importers of goods. Therefore, imports are expected to rise more than exports if Switzerland enters this FTA. Sectors that will benefit from this treaty were found to be the pharmaceutical, chemical, and metal industries. The industries of precision instruments, watches, jewelry, textiles, precious metals, machinery, agriculture, forestry, and fishing will be at a disadvantage. Another version of this analysis was conducted without Vietnam and found that precision instruments, watches, jewelry, and machines would also benefit from a Swiss CPTPP membership. The most crucial CPTPP members for Switzerland were found to be Vietnam, Japan, Australia, Singapore, Malaysia, and Canada. Of these nations, Australia is the only one that Switzerland does not view as one of its priorities or has started the process of negotiating an FTA.

This thesis recommends that Switzerland becomes a member of the CPTPP as the potential costs resulting from lost trade are significant. It would be beneficial to enter into this FTA from a monetary perspective as the costs of the currently higher tariffs are carried by domestic consumers, reducing their welfare. However, an entry into this agreement is estimated to reduce Swiss net exports, which could put additional stress on domestic producers.