Although Switzerland is not a member of the EU, it maintains very close economic, political and social ties and has good (partial) access to the single market. This access is vital for Switzerland’s export oriented economy. 53.7% of Swiss exports go to the EU, 72.4% of imports into Switzerland come from EU member states (2015).
Swiss-EU relations are managed by more than 120 bilateral agreements. The most important ones are the free trade agreement for industrial goods from 1972 and two sets of so-called bilateral agreements from 1999 (Bilaterals I) and 2004 (Bilaterals II).
These agreements grant Swiss businesses market access for industrial goods and processed agricultural goods. They also manage cooperation in numerous other areas, such as education, scientific research, statistics etc. Most importantly, they have enabled Switzerland to strike a delicate balance: The balance between the domestic demand to maintain a high degree of political independence from the EU and the economic necessity to ensure market access.
However, what advocates of the “Swiss model” often ignore are the following issues:
- The Bilaterals do not include free trade with services e.g. financial services, a crucial element for the UK’s financial services industry.
- Through the bilateral agreements Switzerland has agreed to participate in the EU’s free movement of persons as well as the Schengen area (a policy area in which the UK has refused to participate).
- Switzerland has a de facto obligation to continuously align its legislation to EU law, in order to maintain legal conformity, and thus, access to the single market. However, as a non-member state Switzerland has no say in the decision-making process of these regulations.
What are the implications for the UK? Brexit supporters have advocated a deal with the EU, which would maintain market access while gaining control over immigration and returning political competencies from Brussels to London. However, such a model is not comparable to the Swiss example for the following reasons3:
- In 2014 the Swiss citizen accepted the popular initiative against ‘mass immigration’, which demands that Switzerland shall manage immigration via annual contingents and maximum numbers. Depending on the implementation, this could violate the free movement of persons and hence, the EU might take compensatory measures. This would eventually harm the Swiss access to the EU market. The current legal uncertainty constitutes a serious issue for exporting companies. As a consequence, the Swiss government, backed by trade associations and the majority of political parties, is anxious to reach a compromise with the EU or a solution that doesn’t require further negotiations.
- The EU has stated that the current system of more than 120 bilateral agreements had reached its limits and that the two parties need an institutional framework agreement with rules about the dynamic adoption of and compliance with EU legislation, as well as rules for interpretation of the agreements and dispute settlement. The EU has stated that it does not want to conclude any further bilateral agreements (e.g. liberalization of trade with services, energy and electricity etc.) in absence of such an agreement. Currently, it seems very unlikely that Switzerland will agree to an institutional framework agreement because of the lack of domestic political support to transfer more competencies from Berne to Brussels.
The lessons from the Swiss example for UK Brexit-negotiators are:
No single market access without free movement of persons
The EU has repeatedly and coherently stated that it will not agree to a deal with Switzerland which violates the free movement of persons. And this, despite the fact that Switzerland’s access to the single market is only partial and does not include free trade with services. As a consequence: If the UK wants to reach a deal that preserves its market access – including for trade with financial services – it should not expect any concession on the issue of free movement of persons.
No single market access without adoption of EU legislation
The EU is unwilling to grant Switzerland access to further parts of the single market, as long as Switzerland does not conclude an institutional framework agreement, with clear rules about the dynamic adoption EU legislation. Here again, given Switzerland’s limited market access, there is no reason to think that the EU is willing to grant London greater access without the obligation to comply with EU legislation and jurisprudence.
Andreas Hinterberger is a Senior Consultant at Farner, Switzerland’s leading public affairs and communications agency. Farner is a member of the Interel Global Partnership, the global network of independent public affairs consultancies. For more information about our Brexit services, contact firstname.lastname@example.org