Swiss exit?

Editor’s Blog: Produced in collaboration with the EU Buzz team 

There is a very well known and highly prestigious country in the middle of Europe which is not a member of the European Union club of EU27. Switzerland is long founded on its cultural stance of neutrality and independence but has always courted a strong accord with its multiple neighbours who are part of the Union. So what made the Swiss recently upset the European’s so abruptly?

Brexit first, now a Swiss exit? Accepting that Switzerland is not a fully paid up member of the European Union, and has never and will never seek to do so, it has been on the cards for a longtime that Switzerland would have a longterm and solid relationship with the EU, where it would following economic and social legislation and would encompass all of the European Union’s values. But, after seven years of negotiating, the Swiss Government in Bern has said “no” to the EU, rejecting the draft Institutional Framework Agreement which would deliver legal security to the relationship on both sides.

Whilst Switzerland and the United Kingdom (UK) are not comparable in their now strained exchanges with the European Union, it was somewhat expected that Switzerland may utilise the exit of the UK for its own advantage in securing preferential terms during the Institutional Framework Agreement negotiations. 

Switzerland has had a Free Trade Agreement with the European Union since 1972. It is part of the single market as well as the EU’s Schengen passport-free zone, even though in 1992 the Swiss voted, narrowly, against joining the European Economic Area. This is because between 1992-2002 Switzerland negotiated a bilateral agreement with the EU. Signed in 2002, this agreement brought interdependence and the free movement of people between Swizerland and the European Union – Considering that thousands of workers cross from France to Switzerland each day, and the Swiss do their shopping in Germany regularly, this was an important accomplishment. In 2005, Switzerland also signed Europe’s Schengen open borders treaty and extended free movement to the ten new EU states. 

Tensions between the two parties began when in 2014 the Swiss voted, again narrowly, to impose  quotas on EU workers, much to the disgust of the European Union. Additionally, as part of its current working relationship with the EU, Switzerland is required to contribute €1.18bn (CHF1.3bn) to the EU’s fund for poorer EU Member States, which it has not done since 2019 when the Swiss parliament froze the request. With 1.4 million EU citizens living in Switzerland the situation is becoming tense and the Bern government is said to be urging the Swiss Parliament to release the funds. 

In its current withdrawal from the negotiating table, the Swiss government has cited that the protection of wages, rules governing state aid, and the right of EU citizens working in Switzerland to claim Swiss welfare benefits as part of freedom of movement, are all terms to which it cannot agree. Foreign Minister Ignazio Cassis said Switzerland could not accept EU demands for equal rights for EU workers as it would lead to an unwanted “paradigm shift” in Switzerland’s migration policy and potentially to higher social security costs….now that does sound like a UK argument! 

The UK left the European Union without access to the single market or customs union – Switzerland retains both under a series of bilateral agreements, however, overtime these will come to an end. The Swiss-EU trading relationship is governed by more than 120 deals yet Switzerland has now given up on trying to agree an over-arching treaty with the EU. Such lengthy negations with fruitless, or insignificant conclusions, are a hallmark of the European Union. In a somewhat threatening stance, the European Commission has said that the current deals in place with Switzerland were “not up to speed”, warning that the impact of Switzerland’s decision would have to be analysed.

So will this be a case of the European Union pushing Switzerland off the invited guest list, or Switzerland choosing to leave the party of its own accord? It will not be a simple decision for Switzerland as it currently has access to the single market, to workers and to an energy union. However, unless Switzerland comes back to the negotiating table sometime soon it appears that, due to the ever developing legislation inside the EU, there will be a situation of legal uncertainty stemming from the absence of a robust and reliable dispute settlement mechanism.

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