A silent Swexit

 In Articles

Switzerland opts for sovereignty

Last week the Swiss government broke off negotiations on a new cooperation agreement with the European Union. Both had been in talks for seven years to conclude a so-called framework agreement. The European Commission says it regrets the Swiss decision. The current agreements will no longer be modernised and in some cases will simply lapse. The first concrete consequence of this is the refusal by the European Union to recognise any more Swiss medical devices. Switzerland exports over EUR 5.5 billion worth of respirators, dental drills and scanners to the EU every year. They are the best and most expensive in the world. Medical equipment to combat corona can no longer cross borders.

Switzerland has a centuries-old tradition of neutrality. The aversion to taking on obligations that limit autonomy is in the Swiss genes. Neutrality in both World Wars was an example of this. Yet in 1992, the Swiss applied for membership of the European Union. The Swiss population, however, rejected membership of the less advanced European Economic Area by referendum. As a result, membership of the European Union disappeared somewhere in a drawer. 

Tacit member

For Switzerland, however, trade with the European Union is very important. The European Union accounts for 51 percent of Swiss exports and 69 percent of its imports. Like countries like Norway and Iceland, Switzerland has therefore decided in the past to participate in the European internal market. They adopt EU legislation and pay a symbolic amount for structural funds for poor regions. Switzerland has concluded more than 120 separate agreements with Brussels to this end. These regulate, per sector, market access and the adoption of legislation. Although Switzerland is not officially a member of the European Union, in daily reality it more or less looks like it.

Framework agreement

The agreements that were made had to be adapted continuously to keep up with innovation and other changes. This was constantly negotiated by Brussels and Bern. A very time-consuming activity. The European Union wanted to get rid of this. Therefore, in 2014 it was decided to conclude a framework agreement that could replace the 120 bilateral agreements. This was also against the backdrop of the now ongoing negotiations with the British about the Brexit. The European Union did not want to deprive one of what it gave to the other. In 2018, the Swiss and the European Union had reached an agreement. There was finally a framework agreement.

But no deal

The Swiss government decided, after a long wait, not to sign this agreement after all. The Swiss had objections to three parts of the agreement. The European rules on state aid, the access of workers from the European Union to the Swiss social system and finally the limited possibilities to take measures against immigrants who are prepared to work for lower wages. Sovereignty is more important than its price. Although a poll showed that 64% of the Swiss population could live with this framework agreement, the government decided otherwise. Trade unions, farmers and populist parties proved to be a major obstacle. In the end, the government did not dare to put the agreement to the people by referendum.

Swexit in slow motion

The existing bilateral treaties remain in force. Although the Swiss government wants to keep the political dialogue open, the European Union is less eager. Brussels wants the Swiss to feel the consequences of their decision. The existing treaties will gradually lose their value. Medical equipment is the first example. European shares can no longer be traded on Swiss exchanges and vice versa. More consequences will become clear in time. With the British, the European Union has already lost its most important trading partner. That was annoying. Losing Switzerland too does not make things any better. Especially for the Swiss themselves. One of the richest countries in the world is becoming a little less rich. While the world is still under the spell of the pandemic, a Swexit in slow motion is quietly taking place.

Recent Posts

Leave a Comment

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Receive our FREE Strategy Reports 

Select from Alpha, Alternative, Overlay and Compounding; or get them all. 
GET STRATEGY REPORTS
close-link