Swiss prepare for EU chill after quitting market access talks

An employee checks an oscillating surgical bone saw blade at the company Gomina in Niederwald, canton Valais, Switzerland, in 2018. The Swiss medical devices sector, which exports almost half of all devices to the EU, is expected to be affected by Switzerland's decision to pull out of an institutional framework agreement with the EU. © Keystone / Gaetan Bally

In Brussels there was shock and anger. In Switzerland, quiet celebration and relief — but, for some, doubts about what exactly comes next. 

On Wednesday, Bern announced it was formally withdrawing from negotiations to codify future relations with the EU into a single overarching “framework agreement” — a back-and-forth exchange that has dominated an increasingly fraught relationship with Brussels since 2014. 

“You’d never sign a contract like that in business,” said Philip Erzinger, the head of a Kompass Europe, an anti-framework agreement campaign group. “It was one sided. It required us to take on EU law without any mechanism for saying No. It would have been a direct interference in our system of direct democracy and cantons in Switzerland.”

For opponents of the process, the moment was akin to the UK’s referendum to end its membership of the bloc — a Swexit, of sorts. 

There are parallels. Switzerland has never been in the EU and rejected membership of the European Economic Area in a referendum in 1992.

Yet through 120 bilateral agreements, it enjoys almost full access to the EU’s internal market and is a member of its passport-free travel zone. It is also tightly aligned with the bloc that surrounds it on a vast array of economic and legal matters.

Even so, without a framework agreement the EU will not update or upgrade the bilateral arrangements when it changes its own rules. As a result, the Swiss will gradually lose access, creating uncertainty for businesses and residents.

Switzerland is the EU’s fourth largest trading partner. Over 1.4 million EU and UK nationals live in Switzerland. And an estimated 330,000 people cross the Swiss land border every single day, according to customs authorities. 

Unclear consequences

The decision was a huge victory for Switzerland’s rightwing populist Swiss People’s Party, the SVP, which has long campaigned against Switzerland ceding ground to Brussels. 

For the most part, however, in Switzerland on Thursday morning, unlike in Britain on June 24 five years ago, there was little sense of a political earthquake having just occurred. 

“To be honest I do not yet have a sense of the direct consequences for our business,” said Hugo Roppel, chief executive of Geneva Logistics Group, a Swiss haulier in Geneva. “The most rational thing would be to say that we need Europe and that Europe needs Switzerland . . . I think it is necessary for everybody to take a moment to calm down and then negotiations can perhaps begin again.”

According to Martin Janssen, chief executive of Zurich-based financial software company Ecofin, Switzerland has to be “allowed to be different”. The framework agreement did not provide for that, he said. 

Glad to move on

After seven years of diplomatic frustration, many Swiss are simply glad of the opportunity to move on. 

The country’s biggest newspapers offered tepid support for the federal council’s move. “Despite all the sympathy [one might have] for overcoming the narrow national borders that have led to many wars in Europe, it’s not necessary to sign everything that Brussels wants,” left-leaning broadsheet Tages-Anzeiger wrote in an editorial. 

Lukas Golder, president of leading Swiss pollster GFS Bern, said such an attitude was probably typical of most Swiss people. 

There was broad support for close relations with the EU, he said, but a belief that too much was being given away. Many Swiss are also optimistic Brussels will come around to Bern’s plan B — referred to as the “bilateral track” — whereby existing agreements can be rolled over individually.

“People believe Switzerland was too weak in its position versus the EU. But there are also probably too high expectations about alternatives,” Golder said. 

Freezing period

Erzinger, the campaigner against the framework agreement, said the EU would eventually come back to the negotiating table. In the meantime, Switzerland would have to endure a “freezing period, when you feel the chill from Brussels”, he said. But unlike Brexit, it would be able to fall back on “existing agreements that allow us to breathe and not panic.”

Diplomats warn such optimism is misplaced. The EU’s overall intention in seeking a single “framework agreement” with Switzerland was to curb as much of the country’s privileges as it could, or extract concessions to maintain them. 

Already, certain crucial agreements face imminent collapse, as guillotine clauses come into effect. In a sign of how serious that may be, the Swiss federal council said on Thursday in its statement that it had already begun to take precautionary measures — such as stockpiling medical equipment.

Avenir Suisse, a pro-EU think-tank in Zurich, calculated that lapsing Swiss-EU agreements on medical equipment, industrial machinery and chemicals and pharmaceuticals would impose one-off costs of CHF1.7 billion ($1.9 billion) and recurring annual costs of CHF1.3 billion on Swiss companies in those sectors alone.

Teresa Hug Alonso, a researcher at Avenir Suisse, said the federal council, which operates by consensus, had failed to present the Swiss people with the potential disadvantages of foregoing the framework agreement.

It had ended negotiations for party political reasons rather than a lack of public support, she said. Yet recent surveys suggested a referendum on the framework agreement would have passed with 60 per cent support.

The SVP is the only overtly anti-EU political party, but others are at best equivocal about Europe. The Social Democrats, for example, were strongly opposed to measures that would erode Swiss workers’ wage protections and the issue became a red line.

Switzerland now faces the prospect of a gradual degradation of its economic ties with the EU. But it would not be a disaster for one of the richest countries in the world, conceded Hug Alonso.

“We are not talking about massive changes. It is an erosion. That’s a problem. It doesn’t create a momentum in Switzerland for entering new negotiations with the EU.”

Copyright The Financial Times Limited 2021