In a somewhat surprise announcement on Wednesday afternoon, the Swiss Federal Council announced its decision to unilaterally end the 7-year long EU-Switzerland negotiations on modernising the bilateral relationship and bringing the 120 individual accords under a singular framework agreement. The Swiss decision will have both immediate and long-term impacts on its economic relationship with the EU and its Member States.
The Federal Council’s decision comes after the formal negotiations between the two partners, which began in 2014, on upgrading the myriad of agreements and treaties began significantly deteriorating in recent years.
While a full draft text had been agreed by negotiators in late 2018 at the political level, the Federal Council pushed back the following year arguing that it could not sign off on the text, and instead required further “clarifications” on issues surrounding state aid, the protection of high Swiss wages, and freedom of movement of persons. The latter, specifically, became an increasingly strenuous issue over the years, with the Swiss right having long campaigned for an end to the freedom of EU citizens working in the Alpine nation without any additional barriers.
Until now, Switzerland’s relationship with the European Union, which is the EU’s 4th largest trade partner by goods, had been a combination of five major agreements within a collective of 120 aging accords. Already today, the Free Trade Agreement has been in place for more than half a century, while 20 years have already passed since the most-recent Bilateral I and II sectoral Agreements entered into force.
Across the different Agreements in force, they govern everything from the free movement of people, Schengen, public procurement, civil aviation and cooperation on energy, pensions and the fight against fraud.
Crucially, however, the seven agreements under the Bilateral I Agreement are legally linked by the so-called “guillotine clause”, stipulating that if one agreements are terminated, all the others will also automatically cease to apply six months later. The agreements in questions cover the free movement of people, the recognition of technical certificates, public procurement, trade in agricultural goods, civil aviation, overland transport, and research.
In a response to the Swiss decision, the European Commission simply “took note of the unilateral decision,” and warned that “without this agreement, [a] modernisation of our relationship will not be possible and our bilateral agreements will inevitably age,” become outdated and “simply erode over time.” With this, the Commission made clear in no uncertain terms, that if the Swiss want to continue to have unfettered access to the EU’s Single Market, especially in the digital and environmental space, it will have to return to the negotiation table – sooner or later.
Meanwhile, the Swiss decision has already had immediate effects, as it came on the very same day on which a mutual recognition agreement on medical devices expired, making it more complicated for manufacturers to trade them between the EU and Switzerland. As a result, products must be re-certified, including the associated legal and paperwork, once placed on each other’s markets, adding significant costs as businesses begin recovering from the COVID-19 pandemic. According to the German-Swiss Chamber of Commerce, the “disruptions in the supply chain may result in the exporting of products from the EU to Switzerland to no longer be worthwhile.”