The Effect of Swiss Free Trade Agreements on Agricultural Trade

As a country highly dependent on imports, Switzerland has many free trade agreements (FTAs) that liberalise trade barriers. We assess how these agreements affect Swiss agricultural imports at different margins of trade adjustment. We estimate reduced-form gravity models using agricultural trade data for 202 partner countries from 2004 to 2022. We find that Swiss FTAs increase agricultural import values by 8.75%, decrease import prices by 3%, increase the probability of imports by 2% and reduce market exit rates by 1%. These effects are heterogeneous across products, sectors and agreements. Regarding import values and quantities, the positive effects of FTAs are mainly observed for raw products (including vegetables, fruits and nuts, coffee, tea and spices). However, the estimated effects are negative for processed products. Regarding import prices, the effects are positive whenever they are statistically significant. We also find that the number of competing agreements to which a Swiss trade partner is exposed only marginally affects Swiss imports. We extend our analysis to agricultural exports and find that FTAs increase Swiss export values by 47%, quantities by 53% and prices by 3% but do not affect export probabilities or export market exit rates. Thus, although Swiss FTAs generally boost trade on average, policymaking should consider the heterogeneities of the estimated FTA effects regarding products, agreements and time when using FTA estimates for counterfactual analysis and negotiations.