Switzerland seeks trade deal with Trump without getting into EU bind

By Dave Graham

ZURICH (Reuters) -Switzerland is exploring what concessions it can make to secure a deal with Washington on trade, but it must tread carefully to protect its interests with key trading partner, the European Union, politicians and people familiar with the matter said.

The Swiss cabinet last month approved its biggest trade policy overhaul in years with the EU, two months after the U.S. stunned Switzerland by announcing 31% tariffs - well above the 20% rate Washington set out for the 27-nation bloc.

That shock prompted a scramble by business leaders and officials to underline how much Switzerland invests in the United States and the tariff threat was suspended for a 90-day period ending July 9. Talks are continuing.

Nicolas Walder, a Greens member of the lower house of parliament's foreign policy committee, said Switzerland must insist on its commitment to multilateralism with the U.S.

"A deal should not interfere with any agreement that Switzerland has signed or wants to sign, and should specifically mention the bilateral agreement with the EU," said Walder, whose committee is regularly briefed on the trade talks.

The Swiss mandate for negotiating with the U.S. stipulates that relations with its other trade partners be upheld. Any U.S. deal must be compatible with Switzerland's future relations with the EU, a Swiss source familiar with the matter said.

Swiss officials and lawmakers believe that a 31% tariff can be averted, but say U.S. President Donald Trump's existing 10% baseline tariff looks likely to stay.

"Switzerland is negotiating in good faith with the U.S. government, aiming for a positive outcome," the Swiss Economy Ministry said in a statement in response to questions on the points made by Reuters in this article.

The EU trade agreement faces a lengthy approval process and is almost certain to be put to a national referendum under Switzerland's system of direct democracy.

CONCESSIONS

Trump's unpredictable approach to trade policy has been a challenge for Switzerland, which abolished its own industrial tariffs last year and sets great store by adherence to rules.

Eager to offer Trump something, Switzerland is exploring granting concessions to the U.S., such as greater market access for produce like seafood and citrus fruits, the source said.

Home to pharmaceutical giants Roche and Novartis - both big U.S. investors - Switzerland also knows Washington has been investigating trade practices in the sector and does not want any deal to be muddied later by pharma tariffs, the source said.

"This is absolutely crucial," said Simon Michel, a federal lawmaker and CEO of medical technology company Ypsomed.

Jean-Philippe Kohl, deputy director of industry association Swissmem, said even if only a 10% tariff applies, the dollar's decline against the Swiss franc amid the trade uncertainty was already making exporters' goods dearer in the U.S.

And if the EU secured better tariff terms with Washington, that could put Swiss firms at a disadvantage.

"It's therefore important that the dialogue with the U.S. quickly lead to a positive outcome," he said.

(Reporting by Dave GrahamEditing by Gareth Jones)