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Relations between Switzerland and the European Union (EU) have cooled considerably: in May 2021, the Swiss Federal Council surprisingly broke off negotiations on the joint trade agreement - and thus more than irritated the EU Commission. With the agreement, customs duties were supposed to fall and wine trade was also supposed to become much easier. Markus Blaser explains the background and perspectives.

Switzerland is an important sales market for Europe's wine producers: the EU exports wine to the Swiss Confederation for more than one billion euros annually. Conversely, the import of Swiss wine into the EU is very low at barely 30 million euros per year. So the EU is definitely more interested in access to the Swiss wine market than vice versa.

However, wine consumption is also steadily declining in the Alpine Republic: in 2020, it fell by six percent to just under 2.6 million hectolitres due to the pandemic. At the same time, Swiss wines have been gaining market share there again for four years: Four out of ten bottles of white and red wine consumed come from domestic production. Accordingly, the consumption of foreign wine has declined significantly by 154,000 hectolitres. But imports have increased again in 2020, which has surprised even experts.

Every year, Switzerland imports about twice as much wine as it produces itself: about 1.8 million hectolitres come from abroad, of which about 1.6 million from the EU. Swiss wineries produce only about 930,000 hectolitres, of which they export only about 13,000 hectolitres. This is due to the high production costs and thus often demanding prices. Swiss wine is therefore almost exclusively consumed domestically. Therefore, the Swiss want to protect their wine producers from competition from abroad: Swiss viticulture would simply not be competitive if trade were completely liberalised.

Vineyards in the Valais (c) Wikipedia - Joachim Kohler / (c) Switzerland border crossing: Wikipedia - Valéry Héritier

Up to three francs import duty - per litre

To protect local winegrowers, Switzerland imposes duties on wine imports of up to three francs per litre, the equivalent of about 2.75 euros. However, as early as the 1990s, the Federal Council negotiated an import quota of 1.7 million hectolitres of white and red wines at reduced tariffs with the World Trade Organisation (WTO). The tariff is less than one franc per litre. Commercial importers in particular benefit from this, and so the quota has never been exhausted so far.

Importers like Karl Schefer from the Swiss organic wine pioneer Delinat, who has also been present in Germany for several years, however, assess the situation very cautiously: Schefer, for example, would first like to be exempted from the expensive double taxation. Sparkling wines that are first imported into Germany are subject to sparkling wine tax. If they are later resold in Switzerland, the customs duty there is added on top. "It would be desirable if Switzerland were completely integrated into the European customs system 'EMCS' (paperless import procedure) and customs duties on wines were abolished", Karl Schefer emphasises, "in return, Switzerland would also have to reduce its customs duties".

But this is not to be expected in the near future. The negotiations on a free trade agreement in the agricultural and food sector, which began with the EU in 2008, stalled as early as 2010. Since then, not only has resistance to further liberalisation increased in the Swiss Confederation, but also protectionist demands. Besides the tariff quota, they even concern the duty-free import of wine in private travel.

Five litres of private wine duty-free into Switzerland

When the Federal Council planned in 2013 to increase the duty-free quota from two to 20 litres per capita, the Valais wine producer and FDP National Councillor Jean-René Germanier fought the initiative - and was successful: the duty-free quota was increased to only five litres per capita, in line with his proposal. Since the end of 2020, an initiative by oenologist and FDP National Councillor Simone de Montmollin has been running to increase customs duties by two francs per litre "in order to take greater account of the interests of the Swiss wine industry".

However, lower allowances and higher customs duties are not in the interest of Swiss wine lovers. Private consumers who want to order their wine from the vintner or in an online shop from the EU have to bear the costs for the customs clearance of the forwarder alone - they amount to up to 50 Swiss francs (45 euros) per package. According to Christoph Schlee of the Weinhalle in Nuremberg, however, this does not bother their Swiss customers: "Thanks to the franc-euro exchange rate and the difference in VAT, there are almost no additional costs despite customs and freight," he says. But they are incurred by the EU trader: For example, due to the work with additional customs documents or returns due to formal errors. "Nobody pays us for this additional effort," Schlee explains.

Criticism from the EU of Swiss "cherry-pickers

This is why there is growing criticism in the EU of the Swiss "cherry-pickers" who want to have access to the EU's internal market but close off their own market. The buried institutional framework agreement was therefore supposed to establish common rules for Switzerland's participation in the EU's internal market. Without the framework agreement, however, the EU Commission is no longer prepared to ease the current rules for market access for the Swiss.

Currently, wine trade between Switzerland and the EU is regulated by the Agricultural Agreement of 2002, which dismantled trade barriers and created a Joint Committee to "clarify technical issues". These include, for example, the mutual recognition of wine designations, including protected designations of origin and geographical indications, as well as the mutual recognition of production rules for organic wines. The regulations on this have to be permanently updated, and according to the Swiss Federal Office for Agriculture (FOAG), work on this is continuing constructively. A statement from the authority on this nevertheless sounds very sceptical: "Whether the EU Commission will subsequently be prepared to initiate the necessary internal approval procedures and sign the decisions, we cannot say at this point."

"Switzerland cannot do without EU standards".

Should the mutual recognition of new wine designations or organic standards fail to materialise in the future, wines labelled accordingly could face problems in trade. Karl Schefer of Delinat says: "Switzerland cannot do without EU standards. The EU, on the other hand, could exert pressure. But we don't think that's likely." Because the interest on both sides seems to be great not to put any new obstacles in the way of wine trade between the EU and Switzerland. The Brussels experts do not currently expect any new problems for wine exports to Switzerland. After all, FOAG and DG AGRI (EU Directorate-General for Agriculture and Rural Development) unanimously state that tariff dismantling is neither concretely planned nor generally addressed.

It is true that no relief is to be expected in the EU-Switzerland wine trade, but as long as the will to cooperate remains and the protectionist hardliners in Switzerland do not prevail, the players in the wine industry can probably adjust to "business as usual" again - with all the already known bureaucratic obstacles.

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