Cheese stands out as one of the main Swiss agricultural trade offensive interests. Outside the EU, the USA are an important export destination. The CAPRI model allows to assess the impact of a free trade agreement for cheese between the USA and CH.
Switzerland (CH) has established 33 free trade agreements (FTAs) with 43 partners till now. For trade in goods, the main offensive interests for the Swiss agricultural sector are in coffee, non-alcoholic beverages, food preparations, chocolate and cheese. Among these products, cheese stands out as the main basic agricultural product with high offensive interests.
The aim of this article is to analyze the developments of the Swiss cheese trade with particular attention to the Swiss export potential.
Swiss Cheese export potential: structural elements and market access conditions
After the period of the gradual elimination of customs duties on cheese between CH and the EU from 2002 to 2007, Swiss cheese imports from the European Union (EU) more than doubled with fresh cheeses increasing their import share. The downward trend in Swiss cheese exports to the EU before 2007 was halted and reversed afterwards. The United States of America (USA) are the main cheese export destination for CH outside the EU, as well as the market with the highest export potential. However, in many markets, except the EU, cheese is still heavily protected, often by tariff rate quotas. The markets with the highest unrealized export potential for Swiss cheese are the United Kingdom, Spain, Japan and Germany. For these markets, CH could improve its export capacity by focusing on structural elements such as a better alignment of supply with foreign consumer preferences and a more optimal allocation of exports to target markets. For the USA, there appears to be no unrealized potential left under current market conditions. This implies that major obstacles to a growth of exports are essentially related to non-structural elements (i.e., expected GDP and population growth, and market access conditions). In the USA, cheese imports are expected to grow over the medium term at an average annual rate of about 0,5%. Cheese imports into the USA are subject to a complex and very detailed system of tariff quotas. For CH, three multilateral tariff quotas (described in notes 16 to 23 and in note 25) defined according to the variety of cheese are relevant. The CAPRI model, a partial equilibrium model for the agricultural sector, is utilized to assess the ex-ante impact of a possible free trade agreement for cheese between the USA and CH.
- The markets with the highest unrealized export potential for Swiss cheese are mostly in the EU where major frictions are likely to be related to non-tariff protection elements (i.e., structural elements). Improved marketing strategies could enhance the Swiss export capacity towards these markets.
- The USA are the second market after Germany with the highest export potential for Swiss cheese. However there appears to be no untapped export potential left indicating that major frictions are related to non-structural elements. In this case, better market access conditions could improve Swiss exports towards the USA as well as the Swiss share on global exports.
- A free trade agreement with the USA would enable CH to increase its cheese exports to the USA by an additional 8 000 tons. The impact on CH total exports would be smaller (around +3 500 tons), as Swiss milk production is characterized by an inelastic supply response. An increased demand for Swiss cheese in the USA would essentially translates into higher Swiss producer prices for cheese and milk. Free-trade conditions for cheese in the USA could help offset the negative autonomous effects of a hypothetical abolition of the payment for milk processed into cheese.