25. Switzerland
Switzerland made moderate reductions in support to agriculture in past decades, but levels stabilised over the past ten years. Support to producers as a share of gross farm receipts remains high at 50% on average in 2019-21, almost three times the OECD average. However, changes in the structure of support have been pronounced, as direct payments replaced a substantial share of market price support (MPS).
MPS remains the main component of support, mostly in the form of tariff rate quotas (TRQs) with high out-of-quota tariffs. Over the past 30 years, MPS fell from 80% to around 50% of total producer support. Average domestic prices were 49% above world prices on average in 2019-21. The biggest price gaps (Producer Nominal Protection Coefficient) and shares of Single Commodity Transfers (SCT) in commodity gross farm receipts are for poultry, eggs, pig meat, rapeseed, beef and veal.
Switzerland provides significant direct payments to farms, almost all of which are subject to environmental cross-compliance. The share of total producer support increased from around 20% in the 1980s to almost 50% in recent years. Most are area payments to agricultural land not tied to a specific commodity, payments to maintain farming in less favoured conditions, and payments to farmers who apply stricter farming practices related to environmental and animal welfare.
Expenditures for general services (GSSE) are high in Switzerland. GSSE relative to agricultural production value rose from less than 6% in 2000-02 to more than 8% in 2019-21, among the highest of countries covered in this report. Almost half of GSSE expenditure goes to the agricultural knowledge and innovation system. Support to agriculture as a share of GDP fell from 2% in 2000-02 to 1% in 2019-21.
In March 2021, Switzerland’s National Council confirmed the suspension of its agricultural reform legislative process (AP22+), initially planned to be in place from 2022. That reform, aimed at increasing value-added and productivity in the sector while strengthening protection of the environment and natural resources, will be reconsidered once the Federal Council delivers a more detailed assessment of the reform components and their expected impacts. The new policy is not expected to be in place before 2025. A CHF 14.02 billion (USD 15.3 billion) budget was agreed as a bridge for 2022-25, an increase of 0.6% over 2018-21.
In April 2021, an important package of measures on water quality, initially part of the agricultural reform, was submitted for consultation as separate legislation. The new measures, adopted in 2022, aim to reduce the risk associated with the use of some pesticides by 50% by 2027 compared to the 2012-15 average. They also set a minimum reduction target of 20% for nitrogen and phosphorus losses by 2030, and a 3.5% cropland set-aside for biodiversity protection. The entry into force of the latter measure was postponed to 2024 due to the international market situation. The annual set of ordinances from November 2021 also added cross-compliance elements related to liquid fertiliser management.
In January 2021, Switzerland submitted their Long-Term Strategy (LTS) on climate change, which targets a 40% reduction in greenhouse gas (GHG) emissions compared to 1990 for the agricultural sector by 2050, within a broader carbon neutrality objective for the country. The LTS specifies a minimum food production objective for Swiss agriculture of 50% of the national food supply by 2050. But a key piece of legislation to support the transition (the CO2 Act revision) was rejected by referendum in June 2021, which leaves agriculture without a mid-term mitigation target and consistent policy instruments to implement the long-term commitments. Environmental measures already passed can contribute to specific mitigation efforts, but new proposals are expected from the Federal Council to address more fundamentally this issue.
In June 2021, the Federal Council adopted a 2030 Sustainable Development Strategy and related action plan with objectives for the food system. Four targets were introduced: (1) a 25% reduction in the GHG emissions footprint in consumed food by 2030 compared to 2020; (2) a one-third share of population with healthy and sustainable diets by 2030; (3) 50% less food waste per capita compared to 2017 by 2030 and substantial reduction in food losses; (4) a one-third increase in the share of farms engaged in especially environment- and animal-friendly production under public and private sustainability programmes by 2030 compared to 2020. Stakeholder discussions were held in the context of the Food Systems Dialogues to define a National Pathway for Food Systems Transformation in support of this Strategy. The action plan also envisages an actualisation of the Climate Strategy for Agriculture from 2011 by the end of 2022.
The adoption of medium- to long-term emissions reduction targets for agriculture and food are positive steps on climate action, but the rejection of the revised CO2 Act is less encouraging. A legislative counterproposal is quickly needed to ensure that national climate mitigation plans remain aligned with the Paris agreement commitments and that efforts in agriculture are consistent with a broad cross-sectoral strategy.
More generally, the objectives of the AP22+ reform were designed to foster a more efficient agricultural sector, improving farm revenues and environmental benefits while preserving food security. The suspension of the legislative process should not undermine the initial ambition.
While Switzerland reduced its share of most-distorting producer support over the past decades, border measures and output-based payments are still among the highest in the OECD. Continuing efforts to decouple income support from farm output would decrease pressure on the environment and strengthen competitiveness and resilience in the sector.
Investments in more efficient production systems would support environmental and climate goals. Despite high support to agricultural knowledge and innovation systems, total factor productivity growth in Swiss agriculture stalled for the past decade.
Large payments allocated to preserve the environment performed well in many domains, but did not reduce the nitrogen surplus – still twice the OECD average – which contributes to GHG emissions. The new clean water programme should help reduce fertiliser applications, but deeper structural changes would be needed.
The need for early action on livestock should also be closely considered, as it generates most Swiss agricultural emissions. Without a medium-term plan specific to that sector, it will be difficult to align with the announced climate targets by 2050 and the Global Methane Pledge efforts.
Switzerland puts food security at the core of its agricultural policy. However, the focus on animal products also leads to dependency on feed crop imports and worsens the country’s calorie deficit. More balanced production would facilitate the achievement of nutritional objectives.
Overview of policy trends
Until the early 1990s, high trade barriers and strong domestic market regulations isolated Swiss agriculture from world markets. Substantial reforms of agricultural policy were implemented in the mid-1990s and early 2000s. These were prompted by commitments made under the GATT and later the WTO. There have been no systematic policy reforms since 2013, and current schemes are expected to extend until at least 2025.
The reforms implemented between 1993 and 2003 had three main elements:
1. Reduction and transparency improvement in import protection, gradual removal of price guarantees and other market regulations, maintenance of production quotas for milk, and introduction (in 1998) of new market regulations for sugar.
2. New direct payments less coupled to production, and voluntary ecological direct payments linked to ecological services (1993-1998).
3. Cross-compliance requirements connecting almost all direct payments to proof of ecological performance as of 1999.
Between 2004 and 2013, policy reforms were comparatively modest and focussed on deregulation of agricultural markets. Export subsidies were phased out, and milk quotas were abandoned in 2009 even though the market remained strongly regulated. In 2013, Switzerland adopted a new policy framework for 2014-17 (AP 2014-17) that was later extended and remains in place (OECD, 2015[1]). This framework amended the direct payment scheme to improve its efficiency and effectiveness and set up a system of direct payments linked to specific agricultural practices (OECD, 2017[2]). A new policy reform for 2022 onward, called AP22+, has been in discussion over the past years and would strengthen the environmental policy objectives. However, the legislative process was suspended, and its entry into force is not expected before 2025. Some first environmental reforms associated to the new policy scheme are being implemented separately (regulations on pesticide and nutrient surpluses, strengthened cross-compliance requirements and budgetary support for sustainable practices).
Support to farmers declined from close to 80% of gross farm receipts in the late 1980s to slightly less than 50% in 2021. Potentially most production- and trade-distorting support (mainly market price support) also declined from around 80% to less than 50% of producer support between 1986 and 2021, while other payments grew.
Main policy instruments
The Swiss agricultural policy is conducted under the framework of the Agriculture Act (AgricA) from 1998, which establishes the principles and instruments governing the regulation of the sector. The AgricA aims at ensuring a sustainable agriculture, oriented towards environmental performance and innovation, and articulated around the following components: i) food security for the population, ii) natural resources conservation, iii) cultivated landscape maintenance, iv) decentralised land occupation, v) animal welfare.
The key elements of the AgricA have been enshrined in the Swiss Federal Constitution (Art. 104) and in 2017, a referendum led to the adoption of a new article on food security (Art. 104a), emphasising the need to guarantee the supply of food to the population through:
adapting food production to local conditions and using natural resources efficiently
ensuring that the agriculture and food sector responds to market requirements
building trade relationships that contribute to the sustainable development of the agriculture and food sector
The Constitution and the AgricA require securing sufficient long-term food supplies for the population, based on both domestic production and imports and considering the entire value chain. This is achieved through specific measures developed within four-year budget and programme cycles.
The current regulation is based on the new agricultural budget for the period 2022-25 (AP 2022-25), which follows on the AP 2018-21 that covered the past four years. These successive plans extend the policy framework that revised the system of direct payments in 2014. The budget allocation for AP 2018-21 was 1.5% lower in nominal terms than for AP 2014-17, whereas the new 2022-25 budget is 0.6% higher, compared to AP 2018-21.
Budgetary support to agriculture consists of three broad financial envelopes. These are direct payments, production and marketing expenditures, and support improving the production base combined with social measures.
Direct payments to farmers target primarily food security and environmental services (landscape, biodiversity, sustainable use of resources) and animal welfare. These payments are additionally subject to environmental cross-compliance conditions.
Production and marketing expenditures mainly support dairy producers via three types of payments: (1) for milk delivered for cheese processing; (2) for milk production without silage feed; and (3) for commercial milk (introduced in 2019). In addition, area payments apply to oilseeds, protein crops, grain (introduced in 2019) and sugar beet. Some expenditures under this heading also provide funds for general services to the sector, including marketing and product promotion.
Policies to improve the production base and social measures include direct support to farm investments as well as general support for infrastructure improvement, social aid to farmers, and advisory services. These payments were initiated as part of the AP 2014-17 policy framework, and continued in subsequent periods.
Some markets are also subject to specific regulations. Following the abolition of milk quotas in 2009, the inter-branch organisation for milk, l’Interprofession du Lait (IP Lait), implemented standard milk delivery contracts for its members. These set different prices and volumes for milk delivery (contingents A, B and C). Since 2013, these contracts are compulsory for all milk producers including those outside IP Lait, which means that the previous production quota system was de facto replaced by another production control mechanism on a private basis. This scheme was extended in 2021 by the Federal Council.
Agro-food imports to Switzerland are, to a large extent, regulated by tariff rate quotas with relatively low in-quota tariffs and high out-of-quota tariffs. In particular, TRQs cover meat, milk products, potatoes, fruits, vegetables, bread cereals and wine. Since 1999, an auctioning system allocates some of the TRQs to traders. A notable exception to the quota system is feed grains, which are subject to single tariffs. These are regularly adjusted depending on market conditions to ensure that protection does not lead to unbearable feed prices for the livestock sector.
Preferential tariff rates apply unilaterally to imports from developing countries under the general system of preferences. The Swiss Government grants zero tariffs to all products from Least Developed Countries (LDCs), so agricultural imports from LDCs (according to the official UN definition) are duty- and quota-free since September 2009.
Export subsidies for primary agricultural products were eliminated by 1 January 2010. The remaining export subsidies for some processed products were abolished as of 1 January 2019. Subsequently, additional payments to producers for commercial milk (Agriculture Act Art. 40) and grain (Agriculture Act Art. 55) were introduced.
Switzerland’s network of trade agreements consists of the European Free Trade Association (EFTA) Convention, the Free Trade Agreement with the European Union and some 33 agreements concluded with 43 countries. All were signed within EFTA, with the exception of agreements with the People’s Republic of China, Japan and the Faroe Islands.
Climate change mitigation policies in agriculture
In 2019, agriculture contributed 12.7% (5.9 MtCO2eq) to GHG emissions in Switzerland, mostly due to livestock farming. These are 12% lower than in 1990, but remain relatively stable since 2000.
Switzerland recently announced its intent to reach climate neutrality by 2050 and made new commitments for emissions reductions in the agricultural sector. The Long-Term Strategy (LTS), submitted to the UNFCCC in January 2021, targets 40% emission reduction for agriculture compared to 1990 by 2050. This represents greater ambition from the previous 33% reduction target set in 2011 as part of the Climate Strategy for Agriculture, a first framework for adaptation and mitigation for the sector. The LTS also defines a minimum food production objective for Swiss agriculture of 50% of the national food supply by 2050. However, no emission reduction target was assigned to the agricultural sector in legislation to date. An objective was proposed in the context of the CO2 Act revision (20-25% reduction for agriculture compared to 1990 by 2030), but this was rejected by referendum in June 2021. A new proposal is expected from the Federal Council for the CO2 Act revision that will define the new climate policy reflecting Swiss international commitments: 50% reduction at national level by 2030 according to Swiss NDC, three-quarters of which should be realized domestically without offsets.
Additional objectives were defined for the food sector as a whole. In 2011, the Climate Strategy for Agriculture set a reduction target of two-thirds of total food production emissions compared to 1990 by 2050. Shorter-term targets were introduced in June 2021 as part of the 2030 Sustainable Development Strategy. Within the sustainable consumption domain, that strategy called for a 25% reduction compared to 2020 of each food consumer GHG emission footprint by 2030. This includes domestic emissions and those in food imports.
The Climate Strategy for Agriculture of 2011 sets out action areas where specific objectives could be assigned to support mitigation. These are in the livestock sector (breed, herd management, animal feed, animal building), the crop sector (crop and variety type, management practices), fertiliser management (application rate, storage and spreading), and energy consumption (building, machinery and renewable energy). AP22+ was expected to develop actions in these areas but was suspended in 2021 following concerns by Parliament (details below). Nonetheless, legislation changes were passed in 2021, including for water quality, which will support mitigation of fertiliser emissions.
Current and new measures that target climate mitigation in agriculture are:
Better control of nutrient losses from fertilisers. The new water quality plan adopted in 2022 introduces a minimum reduction target of 20% for fertiliser nitrogen and phosphorus losses by 2030. In addition, the tolerance margin of 10% for measurement of manure application will no longer apply from 2024, meaning fertiliser inputs should remain below 100% of the land nutrient needs to respect environmental cross-compliance for direct payments.
Strengthened contributions to sustainable production systems from 2023 through: (1) soil fertility improvement measures, benefitting soil carbon stocks; (2) more efficient nitrogen use, relying more on organic fertilisers; (3) longer productive lifetime for cows, which should reduce emissions per unit of output.
The obligation from 2024 to spread liquid farmyard manure with a low emission rate. The regulation of storage and spreading of farmyard manure will be added to the cross-compliance requirements.
A carbon tax on fossil fuels used to heat greenhouses and barns for livestock, as set out by the 2011 version of the CO2 Act. The future level of this tax (CHF 120 per tonne CO2 in 2022) remains uncertain following rejection of the CO2 Act revision by Swiss voters in 2021. Transportation fuels are not subject to the carbon tax. Producers can opt out from the tax payment by submitting a long-term decarbonisation plan for their installations.
A requirement for fossil fuel producers and importers to offset part of transport-related CO2 emissions through national emissions reductions projects. Domestic agricultural projects can contribute to these with investments in anaerobic digesters or fertilisation improvements.
Initiatives are also in place to foster R&D, knowledge dissemination and innovation. These fund information platforms, association initiatives for climate protection in agriculture, or development of sustainability schemes.
The LTS highlights other areas that could deliver better mitigation outcomes. Agricultural emissions (including energy consumption and soil carbon) could be reduced from 7.1 MtCO2eq today to 4.1 MtCO2eq by 2050 thanks to 1.6 MtCO2eq saved through changes in consumption and production patterns, and a 1.4 MtCO2eq reduction distributed between efforts in livestock, energy use, fertilizer management and soil carbon. The LTS emphasises trade-offs for the Swiss agricultural model and refrains from providing specific details on the implication for food production or the development of the livestock sector. Measures on the consumer side are highlighted as a way to reduce pressure from future food demand, in particular dietary changes and food waste reduction.
Domestic policy developments in 2021-22
In March 2021, the National Council confirmed the suspension of the agricultural policy reform AP22+ legislative process. This decision followed a similar vote from the Council of States in December 2020, in response to the Federal Council reform proposal. The main objectives of this reform were to increase the value added of Swiss agricultural products by improving efficiency of production, tightening environmental legislation and protecting further natural resources. The Parliament expressed concerns regarding the consequences of the reform for food security and its economic impact on the sector, deciding to postpone the reform to allow more in-depth review of its potential impacts.
To better support the legislation proposal, the Parliament has asked the Federal Council to submit a report in 2022 examining the following aspects of the reform: i) the measures guaranteeing the country self-sufficiency rate; ii) the broadening of scope to healthy and sustainable food production; iii) the closure of fertiliser nutrient cycles along the supply chain; iv) the simplification and restructuring of support instruments with lower administration costs and bureaucracy; v) the guarantee to the business environment and economic perspective for the sector; and vi) the reduction of competition distortions between imported and domestic production due to different legislations regarding production methods. In February 2021, the National Council also requested that two additional issues be covered by the Federal Council’s report: vii) the promotion of direct sales and short supply chains, and viii) measures limiting food waste.
To bridge the gap left by the policy reform suspension, the Council of States voted a new budget for the period 2022-25 with a similar structure as for the 2018-21 period. The total financial envelope amounts to CHF 14.02 billion (USD 15.3 billion) and includes CHF 11.25 billion in direct payments, CHF 2.22 billion in production and marketing support, and CHF 0.55 billion in production base support.
Some environmental legislations initially part of the AP22+ reform were adopted separately. In April 2021, a set of new measures to protect water resource quality were submitted for consultation. These responded to some popular initiatives calling for stricter environmental regulation on water quality. They included a modification of the measures regulating the risks associated with phytosanitary product application. The new measures, adopted in April 2022, aim to reduce the risk associated with some pesticides use by 50% by 2027, compared to the average level in 2012-15. Producers must avoid using some products – classified as high potential risk – to remain eligible for direct payments. The new measures also set a minimum reduction target of 20% for nitrogen and phosphorus losses by 2030 (see climate mitigation section). In addition, farmers should dedicate 3.5% of their cropland area to the promotion of biodiversity. The latter measure, initially expected to enter into force in January 2023, was postponed to 2024 in response to the market tensions due to the Russian aggression against Ukraine.
Following the new water protection legislation proposal and in line with the recommendations of the Federal Council and the Parliament, two popular initiatives proposing stricter rules on clean drinking water and pesticide use were rejected on 13 June 2021 by Swiss voters. The Swiss Government highlighted that taking stricter measures would present food security risks by weakening domestic production, and would redirect negative impacts abroad. Furthermore, the Federal Council released a report in September 2021 showing the impact of the previous 2017 policy package on phytosanitary product applications. A total of 29 out of 51 measures from that package had been introduced and farmers adapted their practices. In 2020, 21% of vineyard and fruit crops were cultivated without herbicide, as well as 16% of open cropland, compared to 5% in 2012.
With respect to the livestock sector, in May 2021 the Federal Council rejected another popular initiative against intensive livestock farming, as the targeted practices were already banned under current legislation for domestic production and could not apply to imported products owing to international trade regulations. However, the Council acknowledged the importance of animal welfare protection in Switzerland and proposed as an alternative to introduce an article on animal welfare covering all animal species into the Federal Constitution. In March 2022, that counter-proposal was however rejected by the Swiss Parliament.
To adapt livestock policies to evolving heath challenges, in June 2021 the Federal office of food safety and veterinary affairs also adopted a new “Strategy on Animal Health Swiss 2022+” setting the main goals of the policy on animal health and protection against epizooties, in the domain of prevention, crisis management, scientific research and international collaborations. Among the new priorities are an emphasis on zoonosis and the One Health approach, the broader use of digitalisation and data collection techniques, and strengthened collaborations with all actors of the sector.
More specific sectoral measures were also adopted in 2021. Border measures on sugar were extended by the Parliament until 2026 to protect Swiss sugar beet farmers from international competition. The Federal Council had advised against such extension due to the production cost implications and the consequences on employment in the food industry. Direct support measures were also extended until 2026 (CHF 2 100 per hectare), and a new premium (CHF 200) was introduced for cultivation of sugar beet under organic or integrated farming practices for 2022, to be maintained until 2026.
New ordinances were passed in November 2021 implementing some additional changes taking effect in January 2022. Hemp cultivation for seed consumption or industrial use will be subject to direct payments as other annual crops, except for cannabidiol (CBD) use. Since 2021 hemp seed is no longer subject to the agricultural legislation on seeds, to facilitate its use for CBD production. New requirements also entered into force on storage and spreading of liquid fertilisers, as part of agro-ecological compliance, however, some requirements related to equipment conversion are postponed to 2024 to allow farmers to adjust. The Federal Council decided to keep the current level of support for milk at CHF 0.15 per kg despite the larger volume produced. In January 2022, the ordinances for proposed measures in 2023 were submitted for consultation. These include new sheep summering management rules to adapt to the expansion of predators such as wolves, and new support payments to protein crops for food consumption, such as chickpeas or lentils.
Agricultural data management improvements were made in 2021 by the Federal office of Agriculture. New software was deployed to simplify data transmission between farmers and the administration through a more secure environment. This new environment is expected to lower the administrative burden for farmers, give them easier access to historical records and facilitate information sharing with other entities such as label-granting organisations.
In April 2021 the Swiss centre for agricultural research, Agroscope, released a first report on the state of biodiversity on agricultural land based on the national monitoring program on species and habitat (ALL-EMA). Its main findings showed that species and habitat richness were too low in the plain regions where agricultural practices are most intensive. However, it also revealed that biodiversity promotion areas contained more biodiversity than other comparable areas, showing the efficacy of such measures to promote biodiversity on agricultural land. These results will be integrated to the discussions on future development of Swiss agricultural policies.
In December 2021, the Council of States also extended the moratorium on genetically modified organisms which will remained banned from production in Switzerland until end of 2025. An exception was however granted by the Parliament to the case of genetic editing, when no new genes are introduced in a genome of a crop. This follows the recommendation of the Consultative Council on Agriculture, who highlighted the opportunities of developing new crops which might reduce the use of phytosanitary products, be more environmentally-friendly and better adapted to climate changes.
More strategic moves were also taken related to long term developments. In June 2021, the Federal Council adopted its 2030 Sustainable Development Strategy (SDS), as well as its related action plan. It identified three priority themes for which specific objectives were set for 2030: Sustainable consumption and production; Climate, energy and biodiversity; and Social equity. Four targets were assigned for the food system as part of the SDS Sustainable Consumption and Production theme:
A reduction of one quarter in food GHG emissions footprint for Swiss consumer by 2030 compared to 2020 (already mentioned as part of climate policies).
A share of one-third of total population with healthy and sustainable dietary patterns by 2030.
A reduction of 50% in food waste per capita by 2030 compared to 2017, and a substantial reduction in food losses along the supply chain.
An increase by one-third by 2030 in the share of farms engaged in especially environment- and animal-friendly production under public and private sustainability programmes, compared to 2020.
In the context of the preparation of the UN Food Systems Summit, Switzerland also conducted important consultation in 2021 with multi-stakeholder dialogues to discuss the future sustainable development of its food systems. The consultations led to the definition of a National Pathway for Food Systems Transformation, closely integrated with the SDS. The Food Systems Summit Dialogues helped identify themes such as the development of a coherent cross-sectoral food systems strategy, the promotion of food systems transformation through awareness raising and education, the reflection of the true cost of food in prices and fairer distribution of added value along the chain of actors, and the promotion of research, innovation, digitalisation and new technologies. These extra elements could potentially be addressed with one of the next revisions of the SDS action plan by the Federal Council.
To accompany food systems transformations, in the context of the International Year of Fruits and Vegetables, a public information campaign was launched in May 2021 by the Federal office of food safety and veterinary affairs, the Federal office of agriculture and several sectoral unions to promote the health benefits of fruit and vegetable consumption. This campaign complemented the “5 per day” campaign in place since 2007. The Swiss Center for agricultural research, Agroscope, in partnership with the private sector also set up a national network to support future joint research activities on fruits and berries aimed at addressing medium- and long-term challenges to the sector.
In January 2022, a more general economic project from the Parliament entered into force aiming at introducing more equitable prices in the Swiss economy by modifying the federal laws on cartels and on unfair competition. This project is a response to a popular initiative for equitable price, which was withdrawn following the Parliament project. Under this policy change, the notion of relative market power will be introduced as well as a clause related to the freedom to buy a good from abroad.
Domestic policy responses to the COVID-19 pandemic
Many of the measures deployed in 2020 to address sectoral and logistical issues at the time of the COVID-19 pandemic outbreak were phased out or already removed in 2021 (sectoral exceptional aides, anticipatory payment of direct support, flexibility in food product labelling, truck traffic authorisation on weed-end). The pandemic response management has been partly transferred to the cantons, but some general support measures were maintained at federal level. Targeted trade measures were also adjusted in 2021 to address specific food supply bottlenecks (see the trade policy section below).
To help economic sectors to adapt to the continued evolution of the sanitary situation, in June 2021 the Federal Council decided to extend the maximum duration of the indemnity for reduced working time under a simplified procedure until February 2022. This extension was then prolonged until end of 2022 in response to new waves of contamination. Derogation permits for movement of seasonal workers and for the management of land close to Swiss borders were extended in 2021, but now managed at the cantonal level. Exceptions were also given for quarantine rules for professional workers from neighbouring regions. The information portal on the management of the pandemic for the agricultural sector was kept in place and continuously updated all over 2021 to reflect the evolution of the regulations in place.
Trade policy developments in 2021-22
In November 2021, the Federal Council adopted its new Foreign Economic Policy Strategy, revising its approach to global economic integration in the medium to long term, in light of the past two decades of economic, environmental, socio-political and geopolitical developments. The strategy has nine main areas of action, stressing the importance of transparency, multilateralism, open markets, independence, resilience, sustainability, digital data protection, and policy coherence. The strategy mainly adds clearer objectives more visible to all stakeholders to existing policies.
A new trade agreement between EFTA and Indonesia, the Comprehensive Economic Partnership Agreement (CEPA), entered into force on 1 November 2021. This agreement, approved in March 2021, has a specific ordonnance granting reduced duties to palm oil only in the case of sustainable production, and within limited quotas. Switzerland also signed in February 2021 a joint economic co-operation programme of USD 65 million to support economic transformation in Indonesia towards more economic competitiveness, resilience and equity. The CEPA is the first multilateral agreement signed between some European countries and Indonesia.
On 1 October 2021, a revised EFTA-Turkey agreement also entered into force, replacing the previous version of 1992. The agreement modernises market access in a number of sectors, improves legal safeguards for exporters and better addresses issues related to rules of origin, trade facilitation, non-tariff measures, intellectual property rights, competition, public procurement, as well as trade and sustainable development. With this revision, Turkey grants to EFTA partners the same duties as for the European Union and gives Switzerland additional rights in the context of an additional bilateral agreement, with improved access for dairy products, including cheese, meat preparation, fruit juice, coffee, tobacco, chocolate, biscuits Muesli, and some infant food preparation. Turkey obtains in exchange improved access for some of its own agricultural products (cucumber, olive oil, wheat bulgur, nuts, capers, artichoke preserve, or fruit juices).
On 1 August 2021, a series of revised agricultural agreements also entered into force between EFTA States and Israel, as well as the revised protocol on transformed agricultural products for the free trade agreement between EFTA and Israel. These revisions allow Switzerland to enjoy an improved market access for its agricultural products in Israel (live animals, meat, cheese and dairy products, fruit juice, tobacco, pasta, vegetable preparations, fruits and nuts), aligned with other preferential agreements recently signed by Israel. In exchange, Switzerland will apply to Israeli products the same reduced tariffs as for some other partners (cut flowers, vegetables, fruits, coffee, tea, jams, tomato preparation and cacao products).
On 1 August 2021, Switzerland ended its preferential tariffs on transformed agricultural products granted to Egypt within the context of the EFTA-Egypt free trade agreement of 2007. These specific concessions, governed by a specific bilateral protocol, were set to expire and needed renewal, but the negotiations did not take place. The least favoured nation tariff therefore now applies to Egyptian exports to Switzerland, in particular for coffee, chocolate and confectionery, even though the trade flows involved are relatively small.
Following the departure of the United Kingdom from the European Union, organic farming labels were no longer mutually recognised between Switzerland and the United Kingdom. An agreement of equivalence recognising the various country schemes was signed in January 2021 and should remain in force until end of 2022, date after which a longer term solution should be found.
On 1 March 2021, adjusted reference prices were adopted for some raw agricultural products traded between Switzerland and the European Union (Protocol n. 2), following a February decision by the Joint Committee of the EU-Switzerland Free Trade Agreement. Revisions apply to skimmed milk powder (reduced duties), whole milk powder, butter and cereals (increased duties). Some duties based on reference prices were also adjusted by the Federal Council for transformed products imported from non-EU countries.
On 1 January 2021, the tariff rate quota for beef was increased by 1 200 tonnes to resolve a conflict on the seasoned meat imports. In 2015, following an import surge, Switzerland decided to reclassify some seasoned meat in its trade nomenclature and apply a higher tariff to these products. This led partner countries to challenge this decision at the WTO. After having recognised the non-compatibility of the measure with trade rules, and to avoid retaliatory measures, the Federal Council negotiated to equalise the tariff for fresh and seasoned meat and offered to expand its beef TRQ by 1 200 tonnes, including 600 tonnes for seasoned beef.
Negotiations continue to establish free trade agreements between EFTA and India, Malaysia, Viet Nam and Moldova. In the case of Moldova, a list of geographical indications to be mutually recognised was established and Switzerland published a list of 15 indications in Moldova to be potentially protected. Discussions are also ongoing for revisions of other existing trade agreements between EFTA and other regions, such as Chile and the Southern African Custom Union (SACU).
Trade policy responses to the COVID-19 pandemic
Some trade measures were adjusted in 2021 reflecting supply difficulties for some specific products in the context of the COVID-19 pandemic. The tariff rate quota for butter was increased by 1 500 tonnes in February 2021, and by an additional 1 000 tonnes, in June 2021, to accommodate the domestic demand of about 40 000 tonnes annually. The tariff rate quota was also increased in April 2021 by 5 000 tonnes for potatoes, in reaction to delayed harvest due to bad weather conditions, and increased consumption at home. Eggs supply also faced difficulties to respond to the increased consumption of households due to the pandemic, and the corresponding tariff rate quota was increased by 3 500 tonnes in October 2021 (+20%) until the end of the year.
Switzerland is a small economy with high GDP per capita that has experienced low and periodically negative inflation and unemployment rates below 5% over the past two decades. GDP growth has been stable at around 2% prior to the COVID-19 pandemic. Swiss GDP shrank by just 2.5% in 2020 – a smaller contraction than in most other economies – and it recovered to pre-crisis levels by mid-2021.
The relative importance of agriculture in the Swiss economy is low accounting for just 0.7% of GDP and around 2% of employment. The farm structure is dominated by relatively small family farms. Hills and mountain farming areas (including alpine summer pastures) are used for extensive milk and meat production, while more concentrated pork and poultry production is located in valleys. Agricultural land covers 37% of the country area and is composed mostly of grassland, with arable land representing only 10% of total area. Crop production has shifted away from traditional arable crops (grains, oilseeds) towards an increasing production of fruits and vegetables over time.
Switzerland has consistently been a net agro-food importer; its current share of agro-food imports in total imports is 4.8%, while the share of agro-food exports in total exports is 3.1%. Swiss agro-food exports consist mostly of processed products for final consumption (86% of total agro-food exports). This category also represents half of the agro-food imports (Figure 25.6).
Total factor productivity (TFP) growth in agriculture has slowed significantly to close to zero between 2010 and 2019. However, both the use of intermediary inputs (-0.36%) and primary factor (-0.12%) decreased. As a result, overall output has declined over that period.
Swiss agriculture is largely rain-fed. Swiss farmers irrigate only 2.2% of their agricultural land and the share of agriculture in the country’s water abstraction (8%) is less than one-fifth of the OECD average. In addition, the water stress indicator is well below the OECD average. Nutrient surpluses have declined moderately, but the surplus of nitrogen (59 kg/ha for N) is still twice the OECD average, which negatively impacts water quality and GHG emissions. Agriculture’s share of energy use went down, and is less than one-third of the OECD average.
Swiss agriculture emissions amounted to 5.9 MtCO2eq in 2019 (12.7% of national emissions), not counting emissions from energy consumption in agriculture, forestry and fisheries (0.6 MtCO2, i.e. 1.3%). This places the country above the OECD average. Methane is the largest source of emissions in the agricultural sector (66%), in particular enteric fermentation emissions from cattle (55%) and manure management (11%). Nitrous oxide emissions also come from manure management (8%) and to a larger extent from agricultural soil (26%) due mostly to manure deposited by animals on pasture or applied as organic fertilisers, and to crop residues. Synthetic fertilisers are responsible for only 4% of total agricultural non-CO2 emissions. Agricultural emissions have been decreasing since 1990 (-12%), but unevenly across sources. Agricultural soil emissions decreased the most due to better fertiliser management (-17%), followed by manure management (-14%). Enteric fermentation emissions have decreased relatively less (-9%) and have been rather stable for the last 20 years. The agriculture sector is also a source of emissions through the land use, land-use change, and forestry (LULUCF) sector, with the changes in soil carbon in agricultural land. While the LULUCF sector in Switzerland is a net sink, thanks to forest management (-2.3 MtCO2 per year), cropland and grassland emit an average 0.7 MtCO2 (1.5% of the national emissions).
References
[2] OECD (2017), Reforming agricultural subsidies to support biodiversity in Switzerland: Country Study, OECD Publishing, Paris, https://doi.org/10.1787/23097841.
[1] OECD (2015), OECD Review of Agricultural Policies: Switzerland 2015, OECD Review of Agricultural Policies, OECD Publishing, Paris, https://doi.org/10.1787/9789264168039-en.