RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/CHE/11
25 September 2001
(01-4539)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English/
French
SUBSIDIES
Replies to Questions from the UNITED STATES1
Regarding the New and Full Notification of SWITZERLAND2
The following communication, dated 17 September 2001, has been received from the
Permanent Mission of Switzerland.
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1. Assistance for economic zones which are under economic renewal
Question 1
How is it decided whether the aid or relief under this programme will take the form of
tax relief, interest subsidies on investment credits or guarantees on investment credits?  Is it
possible that one entity may be the recipient of all three types of aid?
Reply
If a project fulfils the conditions of the Federal Decree in favour of economic zones which are
under economic renewal (cf. point 3), the company has to apply for financial support through the
cantonal development office.  The enterprise has the choice of applying for all three instruments or
only one.  In fact, one of the main changes in the new Federal Decree (FD) which entered into forceon 1 July 2001 is that these three types of aid can be granted separately.
Question 2
What types of tax relief are granted under this programme?  Has tax relief been granted
under this programme?
Reply
The FD may grant a full (100 per cent) or partial federal profit tax exemption to new
industries for a maximum period of 10 years.  In accordance with the Federal Tax Harmonization
Law, the term "new" must be interpreted from an economic point of view.  Thus, an existing
enterprise that undergoes major economic reorganization or reorganization that substantially
innovates its activities may also be recognized as a new enterprise.
Since the FD entered into force on 6 October 1978, the Confederation has granted tax relief to
321 projects, 29 for the year 2000.
                                                     
1 G/SCM/Q2/CHE/10
2 G/SCM/N/71/CHEG/SCM/Q2/CHE/11
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Question 3
Is assistance under this programme available to all enterprises and industries in the
"economic renewal areas"?
Reply
To receive incentives under the FD, the enterprise, which must fulfil the conditions of
Article 3 of the said Decree, has to make a request for support in conjunction with the bank and
cantonal economic promotion agency.  The following criteria must be met in order to benefit from
government support:
− The project shall be innovative and create added value.
− The project must create or maintain jobs at  the beneficiary company and/or among other
partners of the economic zone.
− The enterprise must carry out an industrial activity or perform services closely related to
production.
Under the new Federal Decree, legal entities and projects which increase enterprises’
development capacity and encourage investment and innovation may also obtain a tax holiday.
Question 4
Are the ceilings on the in terest subsidies per-year or per-company ceilings?
Reply
These ceilings represent per-company ceilings.  The government may agree to grant interest
subsidies of up to 25 per cent of the interest charges on a guaranteed loan on the condition that thecanton also agrees to grant a similar subsidy.  These contributions, amounting to 50 per cent of the
interest (25 per cent paid by the Confederation and 25 per cent by the canton), are granted on a
maximum of a third of total project costs for a credit of not more than CHF 5 million.  They have a
duration of up to five years.
Thus, to benefit from the ceiling on interest subsidies (on CHF 5 million), total project costs
must amount to CHF 15 million.
For example: the annual contribution of the Confederation for an investment credit of
1 million with an interest rate of 4.5 per cent would be CHF 11,250.
Question 5
How many enterprises or industries have been granted aid or assistance under this
programme?
Reply
Since the FD entered into force on 6 October 1978, 758 projects have been granted aid:
- 651 with guarantees on investment credits (16 in the year 2000)
- 707 with interest subsidies (33 in the year 2000)- 321 with tax relief (29 in the year 2000)G/SCM/Q2/CHE/11
Page 3
Question 6
Is assistance or aid automatic if an enterprise or industry is in an economic renewal area
or must enterprises apply for each type of aid?
Reply
Aid is not automatic even if the enterprise is in an economic renewal area and satisfies all the
criteria of Article 3 of the FD (cf. question 3 above).  The company must request support (cf. point 3).
Question 7
Does approval for assistance under this programme in any way depend on an
enterprise's or industry’s ability to export its product?
Reply
Government support is limited to enterprises in volved in industrial activities or performing
services closely related to production.  There is no condition related to the ability to export.
2. Assistance for mountain areas
Question 1
Could you please explain, as part of the ove rall goal or purpose of the programme, the
desired outcome of the assistance provided under this programme?  Is it to create more businessin mountain areas or to support the creation or manufacture of goods for export?
Reply
The Federal Law of 25 June 1976 encouraging credit guarantees and loan-service
contributions in mountain areas (LCC) aims to ma ke long- and medium-term capital loans more easily
available to existing and future small and medium-sized enterprises (SMEs) located in mountain areasand the activity of which is in accordance with a development programme established under the
Federal Law on investment assistance in mountain areas (LIM).  The main aim of the LCC is to create
or maintain employment in mountain areas.  It is not based on the export of any particular goods.
Question 2
Is the Swiss Guarantee Cooperative for the Arts and Crafts a governmental body or
organization?  Does the organization operate thro ughout Switzerland or only in specific areas?
Reply
The Swiss Guarantee Cooperative for the Arts a nd Crafts (CSC) in St-Gall is not a federal
organization or institution, rather a private-law cooperative commissioned by the Swiss Confederation
to implement the LCC.  The geographical scope of the LCC is restricted to the mountain areas
covered by the LIM, although, with regard to its own activities, which are independent of the Swiss
Confederation, the CSC operates throughout Switzerla nd in its capacity as the Swiss Central Office of
Regional Cooperatives.G/SCM/Q2/CHE/11
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Question 3
How are the subsidies provided by the Sw iss Government to the Swiss Guarantee
Cooperative for the Arts and Crafts (the Cooper ative) passed on to recipients?  Or are only
members of the Cooperative eligible for assistance?  If so, are all enterprises and industrieseligible for membership of the Cooperative?
Reply
Assistance from the Swiss Confederation is available to recipients as follows:
Credit guarantees : Under normal circumstances, there is no direct financial intervention by
the Swiss Confederation.  In the event of a lo ss, 90 per cent is borne by the Confederation
(and the remaining 10 per cent by the CSC).
Interest-servicing contributions (ISCs) :  ISCs are financed in full by the Swiss Confederation
which makes a full advance payment to the CSC.  The latter then pays the ISCs on anindividual basis after a close study of the related itemised bank accounts.
Contributions to administrative expenses : The Swiss Confederation pays the administrative
expenses of the CSC insofar as they stem from activities which it conducts under the LCC.
However, the recipients of credit guarantees ar e required to contribute to the administrative
expenses (risk premium).  To this end, the CSC receives a provision of 1 per cent of the
principal.
Membership of the CSC or a regional cooperative is not a prerequisite for LCC assistance.  Each SME
which carries out a project within the area of application of the LCC and does not already receivesome other form of backing from the Swiss Confed eration (with the exception of the LIM) may, in
principle, benefit from LCC assistance.
Question 4
Is there an annual or per-enterprise limit to the amount of interest-servicing
contributions that are made?  If so, what is that amount?
Reply
There is a limit on interest-servicing contributions (ISCs) granted per enterprise:  ISCs are
awarded on loans of up to CHF 500,000 and amount to two fifths of the normal market interest rate
for up to six years.  A single enterprise may be granted several contributions within the framework of
these limits.
3. Contributions for butter
Question 1
You state that "Price-reduction contributions are granted to manufacturers (amount
per unit) and paid monthly".  Is this amount based on units sold in the previous month or on
estimated sales for the coming month?
Reply
Contributions are based on the amount sold the previous month.G/SCM/Q2/CHE/11
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Question 2
Are contributions granted to manufacturers so that they are able to sell their product at
a reduced price on the domestic market?
Reply
Yes.
Question 3
Do the contributions help manufacturers to compete against imported butter and butter
products?
Reply
No. Butter must remain competitive in relation to vegetable fats.
Question 4
Are all butter manufacturers eligible to receive contributions under this programme or
must they apply to receive them?  If they must apply, how often must they do so?  What are the
application criteria?
Reply
Yes.  All manufacturers are authorized to apply for aid.  Contributions are only granted for
certain kinds of butter, namely those facing stiff competition from vegetable fats.
Question 5
What are the expected reductions fo r this programme in the future?
Reply
As a general rule, milk price support should be cut by a third between 1998 and 2003, after
which, in accordance with the legal provisions to be implemented, it will be either continued or
withdrawn.  Butter price support will be reduced even more quickly.
4. Contributions for skimmed milk and skimmed milk powder
Question 1
How many breeders and how many manufacturers received aid under this programme
in 2000?
Reply
A total of 611 farm holdings received aid for producing fresh skimmed milk for animal feed.
Question 2
Do the manufacturers who receive contributions under this programme export their
products?G/SCM/Q2/CHE/11
Page 6
Reply
Certain products which have been granted aid, mainly protein concentrates, are partly
exported.
Question 3
Are all breeders and manufacturers of special products, such as acid casein, caseinates
and milk substitutes, eligible for aid under this programme?  Or must they meet specific criteria
in order to be eligible?
Reply
Aid for milk substitutes is conditional upon certain special requirements being met:  the dry
matter of the substitute must contain at least 30 per cent skimmed milk and the substitute must be
manufactured and sold or used by the farm holding or enterprise requesting the aid.
Question 4
Are contributions made automatically and directly to breeders and manufacturers or do
they have to apply for them?  If they have to apply, what are the application criteria?
Reply
Manufacturers must apply for aid; it is granted automatically if they satisfy all the criteria.
Question 5
Is any aid under this programme contingent on breeders or manufacturers exporting
their products?
Reply
Skimmed milk powder is exported when disposal on the domestic market is not guaranteed.
Financial support to exporters is provided for only in this particular instance.
Question 6
What are the expected reductions fo r this programme in the future?
Reply
As a general rule, skimmed milk price support should be cut by a third between 1998 and
2003.  Although this reduction is in line with estimates as regards quantities, it is steeper from the
financial point of view.  Aid will subsequently be continued or withdrawn in accordance with the
relevant laws to be implemented.G/SCM/Q2/CHE/11
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5. Special price reduction for some soft and semi-hard cheeses
Question 1
You state that subsidies are offered as a reduction in the price per kilogram of cheese;
could you explain in more detail how this programme operates and how benefits are
distributed?
Reply
The average price of milk is CHF 0.80 (80 centimes), less a 20-centime supplement for milk
processed into cheese.  The price of the raw material "milk" is therefore reduced to encourage cheesemanufacture.  The "Special Price Reduction for Some  Soft and Semi-Hard Cheeses" no longer applies
and will be definitively abolished in April 2002.
Question 2
If aid consists of a reduction in the price of cheese, how is the goal of the programme "to
enable the cheese manufacturer to pay a de cent milk price to the farmer" being met?
Reply
In the absence of such aid, producers would sell their milk to manufacturers which do not
produce cheese.
Question 3
Is there a limit to the number of kilograms of cheese for which a manufacturer may
receive aid?
Reply
No, the supplement is paid per kilogram of milk processed into cheese.  The amount of cheese
is irrelevant.
6. Export subsidy for cheese
Question 1
Could you please provide further details on how subsidies under this programme are
granted?  Does the government provide a grant to cheese dealers for each kilogram of cheese
exported?
Reply
Grants are paid per kilogram of cheese and vary according to the type of cheese.  They are
reduced each year and are currently already well below the level at which they were at when the new
milk market organization came into force (early 1999).
Question 2
Are all dealers of all types of cheeses eligible for aid under this programme?G/SCM/Q2/CHE/11
Page 8
Reply
In principle, all dealers may request export allowances for any type of cheese.  However, the
bulk of these allowances are for Emmental and Sbrinz, which are mostly exported to the EC.
Question 3
Can you provide a dollar amount for total subsidies in 2000?
Reply
In the year 2000, a total of CHF 120,480,981.60 was paid out in subsidies for exports to the
EC and CHF 53,413,243.35 for exports to other countries.
Question 4
You state that the duration of the programme is the accounting year.  Does that mean
that this programme was in force only in the year 2000?  Did it continue after 2000?  What is its
expected termination date?
Reply
In principle, financial assistance is guaranteed up until the beginning of 2004 (end of April).
The legislator will then rule on whether to renew or abolish this measure.
7. Export subsidy for other dairy products
Question 1
Is the export subsidy provided contingent on the use of domestically produced whole
milk?
Reply
Yes.
Question 2
Is the same per-kilogram subsidy offered fo r the production of each of the dairy
products mentioned (i.e., cream, skimmed milk powder and milk powder, yoghurt and other
dairy products which are flavoured or contain added fruit, nuts or cocoa)?
Reply
Export subsidies are paid according to the percentage of milk in the product.
Question 3
You state that the duration of the programme is the accounting year.  Does that mean
that this programme was in force only in the year 2000?  Did it continue after 2000?  What is its
expected termination date?G/SCM/Q2/CHE/11
Page 9
Reply
In principle, aid is available until 2004.  The legislator will then rule on whether to renew or
abolish this measure.
8. Breeding and dairy cattle export subsidies
Question 1
What is the fixed amount of the subsidy a nd how is it determined?  Does the fixed
amount change every year?
Reply
In accordance with the WTO commitment, the subsidy cannot exceed CHF 1,950 per head.
The actual amount is normally lower and depends on the quality of the exported cattle.  The fixed
amount does not change every year.
Question 2
Does the programme have an expected termination date?
Reply
No.
9. Horse export subsidies
Question 1
You state that part of the goal/purpose of the programme is to "maintain domestic
horse-breeding for the needs of agriculture".  Could you please explain how this export
programme accomplishes that goal?
Reply
A total of 99 per cent of export subsidies are granted for the "Freiberger" horse, the only
original Swiss breed.  The Freiberger is used both in agriculture and forestry as well as for riding and
other recreational activities.  A certain demand has also arisen in a number of foreign countries.Compared with other countries, rearing costs in Switzerland are very high and the price of young
horses would not be competitive without export subsidies.  For breeders, who are mainly farmers, it is
very important to have the opportunity of exporting Freibergers: on the one hand, the domestic market
is relatively small (danger of in-breeding) and, on the other, exports contribute towards maintaining
the population in remote areas of the country.
Question 2
What is the expected termination date of this programme?
Reply
None.G/SCM/Q2/CHE/11
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10. Purchase of domestic wool
Question 1
Is the Domestic Wool Board a governmental organization or body?  Is it federally
regulated?  Is the organization under which it operates (the Swiss Sheep Farmers' Federation) a
governmental organization or body?
Reply
The Domestic Wool Board is a non-governmental organization and, as such, is not federally
regulated.  Neither is the Swiss Sheep Farmer’s Federation, which is a private breeders' organization.
Question 2
Does the Domestic Wool Board purchase all wool produced in Switzerland?  Does it
purchase the wool only when mark et prices fall below a certain price or price range?  Is the
wool purchased by the Domestic Wool Board ex ported or sold on the domestic market for
further processing?
Reply
The Domestic Wool Board purchases all of the wool which Swiss breeders want to sell,
independently of the market price.  The wool is not exported, but sold to Swiss traders for further
processing.
Question 3
Are all producers required to sell their wool to the Domestic Wool Board?  Are
producers all over Switzerland eligible to receive aid under this programme?
Reply
No.  The breeders themselves decide whether or not they want to sell their wool to the
Domestic Wool Board.  Yes, wool delivery/collection points are organized for breeders living in
mountain areas.
Question 4
Do producers pay a membership or other type of fee to the Domestic Wool Board in
order to be eligible for price support?
Reply
Breeders contribute to company expenses by paying a fee per kilo of delivered wool.
Question 5
What is the expected termination date, if any, of the programme?
Reply
The subsidy will be eliminated on 31 December 2003.G/SCM/Q2/CHE/11
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11. Price equalization fund for eggs and egg products
Question 1
Are the additional grants available for cracked  eggs and price reductions also available
for imported eggs?
Reply
No.  Pursuant to Article 52, paragraph 2, of th e Agriculture Law (RS 910.1) of 29 April 1998,
the price equalization fund for eggs helps in particular to maintain domestic production by small
farms and to finance measures to valorise Swiss eggs.
Question 2
Is aid also provided under this programme to cover expenses incurred for domestic eggs
which are intended for export?
Reply
No.  This question does not arise as no eggs have been exported in recent years.
12. Bonuses to promote the growing of feed grains, except maize, and seed legumes
Question 1
You state that in 2000 growing bonuses were paid regardless of surface area.  Does this
mean that farmers were paid for their surface area regardless of whether the area was under
cultivation?
Reply
The specific bonus for areas of oats, barley, triticale, emmer and einkorn under cultivation
was abolished at the end of the year 2000.  It was subject to the following conditions:
• Grain had to be harvested when fully ripe.
• The area under cultivation had to be at least 20 ares per crop.
• The minimum area of useful farmland had to be one hectare for farm holdings with no
speciality crops, 50 ares for holdings with speciality crops and 30 ares for holdings including
vines on steep slopes and terraces.
• Farmers had to render the required ecological services.
• Operation of the farm holding had to represent at least 0.3 of a standard labour unit.
• 50 per cent of the work on the holding had to be carried out by its own labourers.
• The maximum age of the recipient of the bonus was 65.
Conditions and responsibilities are set forth in detail in the Ordinance on Bonuses for Areas Under
Cultivation and Changes in Arable Farming Practices (Ordinance on Bonuses for Arable Farming,
OCCCh, RS 910.17).
Question 2
Are all farmers of these products eligible to receive this aid?G/SCM/Q2/CHE/11
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Reply
Yes, insofar as they satisfy the conditions mentioned in point 1 above.
13. Potato price support
Question 1
Could you please explain more clearly what form the subsidy takes?  Is the subsidy a
grant for the various uses of potatoes?  Are subsidies granted to farmers who use potatoes for
feed?  If so, how is the amount of the grant determined?  How are subsidies provided for the
export of seed potatoes?  Are they provided in the form of export insu rance, aid for shipping,
etc.?
Reply
The subsidy is available to farmers who, on their own holding, green feed non-classified
potatoes which they have produced for their own us e and at their own risk or who sell them for
fodder.  Non-classified potatoes are marked using an authorized food colouring.  Financial assistance
is established on the basis of crop estimates and must not exceed CHF 15 per 100 kg.  Up to
3,000 tonnes of Swiss potato seedlings may be exported with the benefit of federal subsidies.  Export
subsidies must not, however, exceed CHF 800,000 (WTO ceiling).
Question 2
You state that the "Confederation mandate s interested organizations to carry out
development measures for potatoes which cannot be sold on the market and grants subsidies forthat purpose".  Which are these "interested organizations"?
Reply
The Swiss Potato Commission (Swisspatat as of 1 January 2000) has been mandated to
valorize potatoes (excluding potato seedlings).  Swisspatat which constitutes the umbrella structure
for the entire potato industry, is an association within the meaning of Article 60 et seq.  of the Civil
Code.  The Swiss Seed Growers' Association (Schweizerischer Saatgutproduzenten-Verband/
Association Suisse des Producteurs de Semences or SSPV-ASPS), a cooperative within the meaning
of Article 828 et seq.  of the Code of Obligations, is mandated with the use of potato seedlings.  The
Federal Office of Agriculture (OFAG) has signed a valorization mandate with the above-mentioned
organizations, in conformity with Article 5 of the Ordinance on Potatoes.
Question 3
Are export subsidies paid to producers of all potato products?
Reply
The Swiss Confederation pays export subsidies for potato products and up to 5,400 tonnes of
potato equivalents may be exported with the benefit of these subsidies.  Export incentives help to
offset the differences between the prices of raw materials and therefore to export potato products.  Asof 1997, the subsidy amounts to CHF 18 per 100 kg. of fresh processed potatoes (potato equivalents).
Question 4
What is the expected termination date, if any, of this programme?G/SCM/Q2/CHE/11
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Reply
The potato industry has already been informed of the probable elimination of export
subsidies.  No deadline has yet been established and the measure currently in force will therefore berenewed for the next few years.
14. Fruit:  valorization of domestic production
Question 1
Do export subsidies take the form of grants?  Do subsidies granted to exporters have to
be repaid?  Or are they granted in some other form, such as export credit insurance or export
credit guarantees?
Reply
Export subsidies are granted as non-repayable grants and may not take any other form.
Question 2
What is the expected termination date, if any, of this programme?
Reply
No schedule has been drawn up as regards the elimination of export subsidies for fruit.
15. Processed agricultural commodities:  export subsidies
Question 1
What is the expected termination date, if any, of this programme?
Reply
Export refunds are made on the basis of the Fe deral Law on Imports and Exports of Processed
Agricultural Products (SR 632.111.72).  The Law does not specify a termination date.
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