The stock of U.S. foreign direct investment in Switzerland was $34.5 billion in 1994, a 5.2 increase over that in 1993. U.S. direct investment in Switzerland is largely concentrated in finance, wholesale and manufaccturing..

After the rejection of the European Economic Area (EEA) Treaty by the Swiss electorate at the end of 1992, the Swiss government has sought to reduce potential discrimination against Swiss products by EU countries through bilateral sectoral negotiations with the European Union. These negotiations are continuing in 1996, and it is not clear that agreement will be reached. The EU insists upon a package agreement involving all seven negotiating groups. Switzerland is known to have serious objections to EU proposals in at least two of the groups. Any eventual deal with the EU is likely to cause collateral damage to U.S. interests in some of the areas under negotiation. This phenomenon has already been seen in cases where Switzerland adopts EU standards and regulations.

IMPORT POLICIES

According to the OECD, Swiss farmers are one of the most highly protected producer groups in the World. Switzerland is self-sufficient in pork, dairy and other agricultural commodities, but imports approximately $6 billion in food annually, accounting for 40 percent of total food consumption. The U.S. share of the agricultural import market in Switzerland continues to be frozen at less than five percent. This extremely low share contrasts sharply with U.S. agricultural export performance in similar markets worldwide. Switzerland enjoys significant access to the U.S. food market, exporting approximately $158 million annually to the United States, the majority of which are high-value, processed products.

A serious obstacle to U.S. exporters has been restrictive government import policies. While Switzerland has begun liberalizing some markets in response to the GATT Uruguay Round results on agriculture and domestic budget pressures, the full benefits of these reforms have not yet been realized. Difficulties have been encountered in implementing a new import licensing system for wine, and it is unclear at this pointwhether the methods of implementation chosen for certain other products are fully in conformity with Switzerland's WTO obligations.

Currently, the main constraint blocking U.S. food products from Switzerland's lucrative import market is the very limited competition in the retail sectors. Two retail "giants" control over two-thirds of chain store sales. Although there are a few exceptions, U.S. exporters are denied access to Swiss consumers because both retail giants manufacture their own consumer-ready products and are reluctant to market products which compete with in-house brands. U.S. exporters are also disadvantaged by the long-standing business ties

Swiss retailers have with European suppliers. Further, U.S. exporters pay tariffs on processed products while some European exports may enter the Swiss market at preferential rates or tariff-free.

As a result of restrictive government policies and the lack of effective competition, the U.S. has a weak presence in the Swiss food import market, especially the high-value, consumer ready food market. Initiatives begun two years ago to work jointly with the two Swiss retail giants to identify and reduce constraints facing U.S. exporters have produced some positive results with one of the retailers.

STANDARDS, TESTING, AND CERTIFICATION

Swiss technical standards and testing requirements for such key products as automobiles have long been an expensive and difficult hurdle for foreign suppliers. By adopting EU automobile standards in 1995, cars made in the EU can now enter the Swiss market without additional testing. This development puts U.S. manufacturers at a significant competitive disadvantage. Discussions with the Swiss Government on this problem have been positive, and the Government of Switzerland has now agreed that U.S.-made cars imported directly by individuals can be registered with only minimal modification and testing. However, the United States is still seeking complete parity with the favorable access now enjoyed by EU models and encouraging the Swiss Government to recognize U.S. auto standards and test results.

In 1995 the U.S. also encountered problems over Swiss standards for imported pet food. U.S. sales of pet food in the growing Swiss import market doubled in 1994, but in July 1995 U.S. pet food exports were jeopardized when Switzerland began enforcing a new, but not yet implemented, directive on pet food. An interim agreement permitting resumed shipments was reached after months of negotiation, but the problem remains outstanding.

ANTI-COMPETITIVE PRACTICES

There is a very high degree of cartellization in the Swiss economy, because the existing Swiss law toleratescartels which are not deemed to be "harmful to society." The new cartel law coming in force at the beginning of July 1996 will still allow cartels, but it requires the companies in the cartel to justify such action under restrictive economic requirements. The existence of the cartels disadvantages U.S. exports to Switzerland. As noted above, the Swiss food industry, for example, is controlled by cartels of producers, wholesalers, processors and retailers. These organizations have succeeded in maintaining non–tariff barriers, such as an import calendar, which is designed to favor domestic production.

INTELLECTUAL PROPERTY PROTECTION

Switzerland has one of the strongest regimes in the world for the protection of intellectual property rights and has shown a willingness to enforce its laws effectively. A new copyright law entered into force in 1993, providing for stiffer penalties for the illegal copying and distribution of video cassettes. While some illegal importation and copying may still occur, video piracy appears to have been driven entirely underground and does not have a significant market impact. Software piracy has been a problem, but a large and well–publicized corporate raid in 1993 appears to have made a significant dent in corporate copying. An industry group estimated that U.S. software exports to Switzerland had increased at least 50% between the first half of 1993 and the first half of 1994. However, while Swiss copyright law provides for a cable retransmission right, claims by foreign producers can only be made through a local collection society. Moreover, theft of pay-TV, premium channels, and other satellite signals using decoding devices has become a widespread problem. The government has shown some interest in legislating to solve this problem, but no specific proposals have yet emerged.

SERVICES BARRIERS

There are widespread cantonal insurance restrictions that deny foreign companies the ability to underwrite direct insurance in key areas. U.S. airlines are also prohibited from providing ground handling services to third-country airlines at Swiss airports, and U.S. government efforts to eliminate this barrier have been unsuccessful.

Telecommunications and information services are dominated by the Swiss Post Telephone and Telegram Administration's statutory monopoly over most of the telecommunications market. The government is consulting on a legislative proposal, adapted from current European Community initiatives, to end the monopoly and to rely more on private investment and competition. However, its offer in the ongoing WTO telecommunications services negotiations fails to reflect these plans or commit to an eventual opening of the market, and does not contribute to the need for high quality commitments to achieve an agreement.