Switzerland and the European Union: Balancing National Sovereignty and Strong EU Connections
Switzerland is one of only a handful of Western European countries that are not members of the European Union. Nevertheless, the ties between Switzerland and the EU are close.
By Karina Rollins
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).
On June 23, 2016, the British voted in their famous referendum to leave the European Union. Given that the economies of Britain, the European Union, and Switzerland, are all interconnected, Britain will want and need to maintain strong ties after it officially leaves the EU in March 2019. Will Britain join Switzerland, Iceland, Liechtenstein, and Norway and become a member of EFTA?
David Davis, the Secretary of State for Exiting the European Union (“Brexit Secretary”), has ruled out joining EFTA, as well as remaining in the European Economic Area (EEA—which consists of the EU and EFTA except Switzerland), calling both options “in many ways, the worst of all outcomes,” saying that they would be too complicated, difficult, and not have enough benefits for Britain. (Switzerland is also not a member of the EEA, since that would require adopting part of EU law.)
Others believe that EFTA membership for a post-Brexit Britain would be “the optimal solution.”
Just before the Brexit 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 Britain post-Brexit—Switzerland would like a trade deal between the two countries to be in place as soon as Britain leaves the union—but it does not want an anti-EU alliance.
EU and EFTA Immigration into Switzerland
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 without 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.
Jean-Claude Juncker, president of the European Commission, welcomed the Swiss rejection of quotas for workers from EU countries. But the European Commission still wants “cross-border commuters” to have guaranteed access to information about Swiss job vacancies.
Since then, in early 2018, the Swiss People’s Party and the group Action for an Independent and Neutral Switzerland (AUNS) have begun to collect signatures for an initiative for a new vote on limiting immigration to Switzerland from EU and EFTA countries. If the vote succeeds, Switzerland will have one year to negotiate an end to the Agreement on the Free Movement of Persons—or break the agreement. Supporters of the initiative believe that the December 2016 compromise was not faithful to the will of the people as expressed in the 2014 vote. The initiative has until July 2019 to collect 100,000 signatures.
Major Swiss–EU Agreements
Bilateral agreements 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 2002 Agreement on the Free Movement of Persons which 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. Since 2017, Switzerland and the 28 EU states have been collecting citizens’ account data; the exchange started 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.
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.)
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 and negotiations—such as the ones concerning a potential new treaty that would replace the 120 existing bilateral agreements, and would bind Switzerland more closely to the EU. Under such a treaty, Switzerland would want arbitration panels to settle disputes with the EU.
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