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Briefing Paper on Free Trade Agreement with Japan
scienceindustries basically supports efforts to initiate and implement modernization negotiations for the existing Switzerland-Japan free trade agreement, but not at any price. scienceindustries strongly opposes an amendment to the procedure for origin examination analogous to the EU-Japan Free Trade Agreement.
10th June 2019
1. How important is Japan as a trading partner for the chemical and pharmaceutical industry?
Japan is an important market with a population of just under 127 million.
In 2018, total exports of Chemistry Pharma and Life Sciences to Japan were approximately 3.7% (CHF 3.63 billion) of global exports (CHF 98.5 billion) of the sector.
The exports of the scienceindustries member companies corresponded to 47.6% of the total exports of CH to Japan.
Average growth in exports (2010-2018) was slightly positive in Japan: + 1.5%.
Imports of scienceindustries member companies accounted for 28.7% of total imports of CH from Japan.
Main Product Groups 2018: Pharmaceuticals, Vitamins and Diagnostics (CHF 3.32 billion), Organic Raw Materials (CHF 136 million), unformed Plastics (CHF 49 million), Cosmetics and Perfumery Products (CHF 29 million), Chemical end products such as putty, wax, glue, etc. (CHF 27 million) as well as dyes and pigments (CHF 20 million).
Pharmaceuticals, vitamins and diagnostics contributed 91.2% to total exports of chemicals, pharmaceuticals and life sciences.
Japan ranks 8th in the ranking of Swiss exporting countries. In Asia, Japan is the second most important trading partner of our industry, behind China.
2. Existing trade agreements Switzerland-Japan
The existing free trade agreement between Switzerland and Japan has been in force since 01.09.2009.
Japan as well as Switzerland are participants in the GATT "Trade in Pharmaceutical Products" agreement, also known as the "zero-for-zero-agreement" or in short the pharmaceutical agreement. Until now, 4 updates were carried out, the last one was put into force on 01.01.2011.
3. Modernizing the existing Free Trade Agreement - Yes, but not at any price
The free trade agreement between Switzerland and Japan has already been in force for almost 10 years. Switzerland's efforts to modernize Japan have failed due to Japan's negotiations on the Trans-Pacific Free Trade Agreement (TPP) and negotiations for a free-trade agreement with the EU. The latter has meanwhile come into force.
Due to its importance, scienceindustries supports any negotiations on modernization of the existing free trade agreement, especially in the field of rules of origin, but not at any price. In addition to the free trade agreement, the GATT - Trade in Pharmaceutical Products (GATT) is currently available for the currently most important product group, allowing duty-free imports of active pharmaceutical ingredients and intermediates, provided these are listed in the corresponding lists.
4. EU-Japan free trade agreement - assessment and critical points
As a member of working groups of the European associations Cefic and efpia, scienceindustries has actively participated in the negotiations and thus achieved that the EU-Japan agreement contains modern rules of origin. However, against the will of the whole economy, a verification process was agreed, which may force the exporter to disclose confidential business information (such as processes, process details, raw material prices, formulations) to the importer / customs authority of the importing state as part of the origin verification.
For companies driven by innovation and SME's, this is highly problematic and leads them not applying the free trade agreement.
In addition, the method used for the designation of origin has to be indicated on the origin declaration.
These additional requirements of the agreement (shifting the verification to the importing country, specifying the specific rule of origin used for the determination of origin) without clear and coordinated rules will significantly increase the uncertainty among SMEs and therefore decrease the readiness for application of the Agreement significantly.
For these reasons, scienceindustries basically supports efforts to initiate and implement modernization negotiations for the existing Switzerland-Japan free trade agreement, but not at any price. scienceindustries strongly opposes an amendment to the procedure for origin examination analogous to the EU-Japan Free Trade Agreement.
1 Detailed demands are set out in the scienceindustries position paper "Free Trade Agreements (FTA)- Objectives of scienceindustries".