Switzerland and the European Union

In keeping with its long tradition of sovereignty and neutrality, Switzerland is one of only a handful of Western European nations that have not joined the European Union—established in 1957. Nevertheless, the ties between Switzerland and the European Union have been—and remain—close.

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Switzerland is not a member of the European Union, but that doesn’t mean there aren’t many ties and close connections between the sovereign confederation and the 28-member (soon 27-member) union.

Surrounded by four EU states—Germany, Austria, Italy, and France—Switzerland maintains a bilateral relationship with the EU, meaning that the EU and Switzerland negotiate separate agreements on various issues.

The European Union is Switzerland’s main trading partner. More than half of Swiss exports go to the EU—and nearly three-quarters of Switzerland’s imports come from the EU.

Switzerland is—along with non-EU members Iceland, Liechtenstein, and Norway—a member of the European Free Trade Association (EFTA).

Brexit

On June 23, 2016, the British voted in their famous referendum to leave the European Union. Commentators and politicians instantly began to fill pages and airwaves with predictions of the pros and cons (mostly cons) of Brexit—for Britain, the European Union, and Switzerland, whose economies are all interconnected.

Just before the referendum, many Swiss had feared that they would end up as Brexit losers in case of a “Leave” vote, worried especially about the effects on the Swiss franc. So far, developments have been far more positive than widely feared. While the pound sterling has fallen around 15 percent against the Swiss franc since the vote, financial experts believe that the worst of the market volatility is over.

Switzerland is eager for a bilateral relationship with the United Kingdom post-Brexit—Switzerland would like a trade deal between the two countries to be in place as soon as the UK leaves the union—but it does not want an anti-EU alliance.

EU Immigration

Despite recent disagreements with the European Union about how to regulate immigration of EU citizens to Switzerland, the Swiss government values, and relies on, close ties to the European Union. And, it is willing to make compromises to continue Swiss access to the single market of 500 million people.

So, after three years of tension and gridlock between Brussels and Bern, in December 2016, the Swiss parliament passed a compromise immigration law rejecting quotas on EU workers, for which the Swiss public had voted in 2014. Instead, Switzerland will try to curb immigration numbers from the European Union by allowing Swiss residents priority in job-vacancy notification. The new EU ambassador to the alpine nation declared that “the thaw is coming. After the immigration solution found by the Swiss parliament last December, we are entering a more positive phase…the blockages linked to the free movement of people…are being removed.”

Jean-Claude Juncker, president of the European Commission, also welcomed the Swiss rejection of quotas for workers from EU countries, stating that “2017 could be a milestone in the development of closer relations between the European Union and Switzerland…” But the European Commission still wants “cross-border commuters” to have guarantees to information about Swiss job vacancies.

Swiss-EU negotiations in all areas are back on track, including for Switzerland’s participation in the European Union’s massive Horizon 2020 research program. Parallel to the resumed negotiations, Switzerland and the European Union also want to continue talks on an institutional framework agreement to ensure that agreements on market access are applied more consistently and efficiently.

Among the outstanding issues that remain—expected to be resolved by the end of 2017—is the question of whether Switzerland will make another payment into the EU Cohesion Fund to help the poorer member states of the European Union (as EFTA members have been obliged to do).

Before the European Union: Major Swiss–EEC Agreements

Today’s Swiss–EU trade relations are based on a major agreement (that predates the EU, formally established in 1992) between Switzerland and the European Economic Community (EEC), the precursor to the EU:

  • The 1972 Free Trade Agreement (FTA) created a free trade zone for industrial products between Switzerland and the EEC, and governs the bilateral trade in processed agricultural products. This FTA is one of the main pillars of trade between Switzerland and the EU today.

In 2015, 54 percent of Swiss exports went to the EU, and 72 percent of Swiss imports came from the EU. In 2014, 55 percent of Swiss exports went to the EU—and 73 percent of Switzerland’s imports came from the EU.

  • The 1989 Insurance Agreement allowed Swiss insurers to open agencies and branches in the EEC, and EEC (now European Union) insurers have the same rights in Switzerland. The agreement applies to casualty insurance—such as homeowners’, motor vehicle, or travel insurance. (Life and pension insurance are excluded from the agreement.)

Major Swiss–EU Agreements

Bilateral treaties allow Switzerland to work closely with the European Union. By entering into specific contractual agreements, both Switzerland and the EU gain market access, and collaborate on key issues:

  • The 1999 Bilateral Agreements I led Switzerland toward more economic integration with the EU. In 1992, the Swiss had declined to join the European Economic Area (EEA), which would have required Switzerland to adopt part of EU law.
    • One of the most significant Bilateral I agreements is the Agreement on the Free Movement of Persons (AFMP). The AFMP made it easier for EU citizens to work, live, and buy property in Switzerland, and vice versa.
  • The 2004 Bilateral Agreements II expanded economic integration to industries not included in the Bilateral Agreements I, such as food and tourism, and established political cooperation on security, tax and financial fraud, asylum laws, the environment, and retirement issues.
    • With the Bilateral II agreements, Switzerland paved the road to membership in the Schengen/Dublin Association Agreement, which Switzerland would formally join in 2008. The Schengen agreement, which took effect in 1995, established a group of European countries among which border controls were abolished. The 1990 Dublin agreement is a European Union law that determines which member nation is responsible for processing asylum requests from non-European Union refugees and migrants. (Click here for details.)
  • The 2012 agreement on Swiss cooperation with the European Defence Agency (EDA) in the armaments sector in intended to strengthen Switzerland’s economic, research, and technology position.
  • The 2015 Automatic Exchange of Information (AEOI) agreement is intended to prevent cross-border tax evasion. Starting in 2017, Switzerland and the 28 EU states will collect citizens’ account data and exchange it starting in 2018.
  • The 2016 European Asylum Support Office (EASO) agreement is intended to support Schengen states whose asylum systems are especially strained, and to help make the Dublin system fairer and more efficient.

More Changes on the Horizon for Swiss–EU Relations?

Agreements are not necessarily set in stone—there are amendments to existing ones, or new ones that attempt to adjust to new realities and accommodate to changes, developments, and emergencies, such as the migrant crisis affecting most of Western Europe. It is safe to say that there will always be changes—as in any relationship.

Additional reading:

EU and Switzerland back on negotiation track (in German)

A Swiss perspective on the European Union

Switzerland Passed New Immigration Law

Swiss Parliament Reaches Agreement on EU Immigration

Switzerland and the European Union

Brexit and the Swiss connection

Swiss–EU relations post-Brexit

Swiss concerned about Brexit

Swiss optimistic about Brexit

European Union member states