As expected, the free trade agreement between Switzerland and China was signed on 6 July. Leading an economic delegation that included the FH, Federal Councillor Johann Schneider-Ammann met with his Chinese counterpart Gao Hucheng in Beijing to sign the agreement. Its entry into force is planned for mid 2014.

Concretely, the effects for the Swiss watch industry can be summed up as follows:

It will be noted firstly that, overall and according to statistics published by the General Directorate of Customs, the balance of watch industry trade between the two countries is largely in Switzerland’s favour, and has been for many years. In fact, Swiss watch exports to China totalled 1.653 billion francs in 2012, while imports of the same type from China amounted to 740 million francs.

In value terms, finished watches accounted for 98% of Swiss watch exports to China. Under the terms of the agreement, these will benefit either from the total removal of customs duties over a period of five to ten years, according to the type of product, or from a staggered 60% reduction over ten years. An initial reduction of 18% will apply when the agreement enters into force.

More precisely, three types of watches, namely automatic watches manufactured from precious metals and common metals, and quartz watches with non-digital displays, which alone account for 90% of the total value of exports, will benefit from this 60% reduction. In concrete terms, customs duties on these products will drop from the current level of between 11 and 12.5% to rates varying between 4.4 and 5% at the end of the adjustment period.

Further measures to remove or reduce customs duties will apply to other watchmaking products such as alarm clocks, movements, exterior components, supplies, etc. Only watch bracelets manufactured from precious metals exported separately will see their 20% customs duty maintained on arrival in China. In 2012, these products accounted for less than 0.05% of Swiss exports by value.

The positive knock-on effects for the Swiss watch industry, and indeed for other exporting branches, are not limited to customs duties. The wide-ranging agreement also includes provisions to protect intellectual property rights and promote investment. It thus creates an additional institutional framework and places trade on a more secure legal footing. For the Swiss watch industry it means also, and above all, improved conditions for the protection of trademarks and indications of origin (Swiss made).

China, the Swiss watch industry’s third largest customer, thus becomes the fifth Asian country to have signed such an agreement with Switzerland or EFTA, after Singapore, South Korea, Japan and Hong Kong.

Source: FH