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Cablegate: Swiss Agriculture at the Crossroads

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R 141545Z JAN 10
FM AMEMBASSY BERN
TO SECSTATE WASHDC 6259
INFO EU MEMBER STATES COLLECTIVE
DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS BERN 000015


E.O. 12958: N/A
TAGS: EAGR ECON SZ
SUBJECT: SWISS AGRICULTURE AT THE CROSSROADS

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Summary
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1. (U) During a January 20 roundtable luncheon on Swiss
agriculture hosted by the Ambassador, representatives of the
Swiss Government, parliament, and the agricultural media laid
out their views on the challenges facing Swiss farmers and
the prospects for an EU-Swiss agricultural free trade
agreement, which is the Swiss Government's top trade priority
for 2010. All agreed that an FTA with the EU, even if it
provided balanced benefits with regard to market opening,
would be heavily opposed by many Swiss farmers as well as
large elements of the Swiss public. Switzerland's
agricultural lobby is well-organized and effective.
Furthermore, it would take at least a year to conclude
negotiations with Brussels, delaying a parliamentary review
of any text until at least early 2011, an election year. It
is thus debatable whether an FTA could make it through the
Swiss parliament before 2012. Even then, it would still
likely have to survive a challenge from a popular referendum,
which is an established right under Switzerland's
constitution and routine on controversial questions. Given
the above constraints, no participant in the luncheon rated
the chances for actual enactment of an FTA with the EU at
greater than 50 Percent.

2. (U) Markus Rediger, the director of the Information
Service for the Agricultural Sector, said that the lack of
progress of the WTO Doha round had lessened pressure for
Swiss agriculture to make concessions on market opening.
However, Swiss farmers would face much stronger demands to
liberalize if the round started showing signs of progress on
agriculture. Swiss farmers know that they face huge
competitive problems vis a vis their EU counterparts. Land
and labor costs are far higher in Switzerland than in the EU,
and productive farmland is scarcer. As a result,
participants see the best hope for Swiss agriculture in high
quality production and increased cultivation of a "Swiss
brand." Strong protection for geographic indicators is thus
a 'sine quod non' for any trade agreement which would
significantly open Switzerland's market.

--------------------------------------------- ----
Switzerland's high cost, high quality farm sector
--------------------------------------------- ----

3. (U) On January 20, the Ambassador hosted a roundtable
luncheon for representatives of Switzerland's agricultural
industry. Participants included National Councilor Laurent
Fauvre, a member of the parliamentary Committee on
Environment Landscape and Energy; Jacques Chavaz, the Vice
Director of Switzerland's Office of Agriculture; Ruedi
Hagman, editor of Switzerland's largest agricultural
newspaper (Bauern Zeitung); Simon Marti, editor of Swiss
Farmer magazine, and Markus Rediger, Director of the
Information Service for Swiss Agriculture, an industry
promotion group.

4. (U) Agricultural Office vice Director Chavas provided an
overview of Switzerland's farm sector. Chavas said that
Swiss agriculture is still dealing with the impact of partial
liberalizations from the past decade. The agricultural
market has evolved from one in which the state pays farmers
to grow crops to one where income support is now de-coupled
from production. Furthermore, the market for processed
agricultural products and cheese is now open, greatly
increasing competition from EU farmers. Since May 2009,
there are no longer any domestic production quotas for milk,
and more efficient operations are allowed to compete directly
with those less so. The result of these changes has been
increased consolidation in the Swiss farming sector, with
about 1.4% of Swiss farms now disappearing each year.

5. (U) Chavas said that there are about 61,000 farms in
Switzerland. The typical Swiss farm is between 10 and 30
hectares (25-75 acres) in area, though about one-third of
operations do not even achieve this scale. The farms are
almost all family run operations, with only larger commercial
farms typically employing outside labor. While entry into
farming is unrestricted, the high cost of Swiss land and the
requirement for individuals to have an agricultural education
in order to take over farmland entitled to government support
payments, serve as major entry barriers. Despite the small
scale of its farming, Switzerland is 60 percent
self-sufficient in food production. The self-sufficiency
percentage is about 90 percent for meat and 100 percent for
milk products (Switzerland is well endowed with dairy farms
and alpine pasturage), but falls to roughly 45 percent for
vegetable products. National Councilor Fauvre said that an
overall 60 percent self-sufficiency rate is regarded as the
minimum necessary for the nation's food security, and the
ratio enjoys strong parliamentary backing. Market opening
which leads to a significant drop in this figure would be
unacceptable.

--------------------------------------------- ----------
Swiss consumers accept higher prices for Swiss products
--------------------------------------------- ----------

6. (U) Agricultural Information Service director Rediger said
that Swiss consumers are willing to pay somewhat more for
Swiss farm products because they appreciate the quality and
the contribution farms make to keeping the Swiss countryside
looking beautiful. At present, the Swiss government
estimates that Swiss consumers pay about 50 percent more than
those in the EU for food products. However, when far higher
Swiss incomes are taken into account, the typical Swiss
household pays out only about 8 percent of its disposable
income for food, or somewhat less than the EU average.
Furthermore, the fact that most of Switzerland's population
lives within and hour of the border (and EU supermarkets)
serves to limit the gap.

---------------------------------------
The Prospects for Market Liberalization
---------------------------------------

7.(U) With regard to negotiation of an agricultural free
trade agreement with the EU, the Economics Department's top
trade priority for 2010, all participants expressed
skepticism regarding the prospects for early enactment. All
agreed that an FTA with the EU, even if it provided balanced
benefits to Swiss agriculture, would be heavily opposed by
many Swiss farmers as well as large elements of the Swiss
public, which appreciate Switzerland's garden-like rural
landscape. Fauvre said that Switzerland's agricultural lobby
is well-organized and effective, and has much influence in
parliament. Furthermore, it will take at least a year to
conclude any FTA negotiations with Brussels, delaying Swiss
parliamentary review of a text until at least 2011, an
election year. It is thus debatable whether an FTA could
make it through the Swiss legislature before 2012. Even
then, it would still have to survive a challenge from a
popular referendum, which is an established right under
Switzerland's constitution and almost certain on such a
controversial question. Given the above constraints, none of
the Swiss luncheon participants rated the chances of actual
enactment of an EU-Switzerland FTA in agriculture as higher
than 50 Percent.

8. (U) Nonetheless, the media representatives agreed that
market liberalization would eventually be forced upon
Switzerland if real progress is made on agriculture in the
WTO Doha round. Swiss farmers need to prepare themselves for
this more competitive future. Both Marti and Rediger
expressed optimism that Switzerland's product strategy of
innovation and high quality, which it successfully applies in
other economic sectors, would also be the appropriate
strategy for agriculture. Chavas noted that cheese trade
with the EU had been liberalized and that Swiss farmers were
competing very successfully, based on perceived higher
quality. The key here was the ability to brand a Swiss
product with a geographic origin, such as Gruyere cheese from
the Fribourg region. This had allowed the Swiss to generate
a trade surplus in cheese with the EU despite having far
higher production costs. Fauvre said that Switzerland would
take a far tougher line on geographical indicators than US
agricultural negotiators. The protection of the Swiss brand
is essential to the competitiveness of Swiss farmers, who
will never be able to compete on price. Furthermore, the
need to reduce the world's carbon footprint means that it
will be more and more important for food to be grown near
where it is consumed, thus saving energy consumed in
transport.

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GMO's
-----

9. (U) The participants agreed that the Swiss public is still
highly skeptical of the benefits of GMO's in food production.
The firms marketing GMO's had stressed the benefits that
their products provided farmers. However, it was less clear
how use of these seeds benefited consumers. The Swiss public
is more relaxed about GMO's in products, such as cotton, that
are used as industrial raw materials. However, the
participants did not think that the public resistance to
introduction of GMO food varieties was losing strength,
despite the benefits they could bring in cutting consumption
of fertilizers and pesticides.

CARTER

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