ANALYSIS: What Brexit means for Switzerland

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ANALYSIS: What Brexit means for Switzerland

The trade agreement between Brussels and London contains a lot that sounds good to Swiss ears. The bilateral path, however, follows a different logic than the British model, writes the Neue Zürcher Zeitung.


The following column was written by Christoph G. Schmutz and Tobias Gafafer and appeared in the Neue Zürcher Zeitung. It has been translated from German and republished by The Local Switzerland with permission. 

Switzerland has also followed the negotiations between Great Britain and the EU with excitement. The question arose as to whether a larger country could wrest more from Brussels than the Bern negotiators have so far been able to do. 

This is a first look at the British free trade agreement from a Swiss perspective.

So has Prime Minister Boris Johnson achieved something that would also be of interest to Switzerland? At first glance, it appears to be the case. 

Great Britain and the EU have agreed on a free trade agreement with additional elements that does not provide any role for the European Court of Justice (ECJ). In addition, London will not completely follow EU laws and will not have to adhere to the EU rules on state aid. 

READ MORE: Swiss President: Brexit is good for Switzerland and the whole world

The Autonomiesuisse committee announced that the Brexit agreement should serve as a model for Switzerland in the talks with Brussels.

However, there are significant differences between the British model and Switzerland's bilateral path, mainly because Great Britain is moving away from the EU and the single market.

Bern signed a free trade agreement with Brussels as early as 1972 that, among other things, abolished customs duties and quantity restrictions for industrial goods. To this day, it forms the basis for the bilateral relationship. 

The British agreement is roughly comparable to this, but covers other areas, as time has not stood still since 1972.

After saying ‘no’ to the European Economic Area in 1992, Switzerland came closer and closer to the EU and the internal market. With the bilateral agreements, it participates in this sectorally - and in some cases also adopts EU law. 

So it is a different model that follows a different logic. Bern and London are pursuing the same goal: both want to have a good starting position in relation to the most attractive domestic market in the world. But the closer the market access, the closer the legal harmonisation.


Autonomy or market access?

Brussels insisted that there was no participation in the internal market through a free trade agreement. Great Britain thus has worse market access than Switzerland - but also does not adopt EU law. 

So it is to be explained that the ECJ does not play a role, as Johnson demanded. The commercial agreement between Brussels and London provides that in the event of a dispute, under certain conditions, the parties can refer to an arbitration tribunal.

An arbitration tribunal is also provided for in the draft framework agreement between Bern and Brussels. However, it has to consult the ECJ when it comes to the interpretation of Union law. Switzerland intends to bind itself more closely to the EU and to conclude new market access agreements. 

This also increases the importance of Union law. The ECJ, however, insists on the position that only it can interpret this conclusively. That is why Brussels will hardly be able to make concessions in this domain.

In principle, the British route would also be open to Switzerland. However, this would mean cutting back on market access, which would mean dismantling the bilateral agreements. 

With the Schengen Treaty, for example, Bern cooperates more closely with Brussels than Great Britain did as an EU member. In 2015, the Federal Council dealt with the question of whether a free trade agreement would be an alternative to bilateral agreements. 

In response to a postulate by the then Councillor of States Karin Keller-Sutter (FDP), He wrote that the needs of the Swiss economy would not be adequately taken into account even with a modernised free trade agreement.

The bilateral agreement enables Swiss companies to participate in the internal market in many areas, which is comparable to the competition from the EU. 

This will no longer be the case for British companies in the future. Rather, there will be new trade barriers. 

For example, the Brexit Agreement does not contain an agreement on the mutual recognition of conformity assessments that would remove non-tariff trade barriers. Switzerland, on the other hand, has such an agreement with the EU.

Great Britain is therefore sacrificing better access to the EU internal market in favour of more sovereignty. How sensible that is is one question. Whether Switzerland should imitate that, the other. 

In 2015, the Federal Council pointed out that Switzerland would probably comply with many EU rules anyway, even without an obligation, because this would be in the economic interest. In some cases this is already the case today.


Stricter aid regime

In terms of state aid, the EU has moved away from the maximum requirement that Great Britain must comply with EU law. 

However, London undertakes to monitor subsidies according to defined principles in the future. And the agreement allows countermeasures if grants on the other side of the channel are too generous.

The framework agreement provides for a stricter aid regime than what Switzerland has known so far. But this is initially only applicable to the aviation agreement, which already contains such rules. 

However, the new regime would also apply to future market access agreements, for example for electricity. In this area, however, the last word has not yet been spoken. The aid is one of the issues on which the Federal Council is demanding that the EU make improvements.

Bern is still striving to conclude a framework agreement. The talks with Brussels about the improvements were delayed and will probably not take place until 2021. 

The government then has to decide whether to sign the agreement and submit it to parliament.

Despite a different logic, there are also parallels to Great Britain. London wants to participate as a third country in the new EU research program Horizon Europe. The same conditions should apply to Switzerland. 

In addition, financial services are not included in the trade agreement with the EU. Brussels will decide unilaterally whether British regulation is equivalent - or can refuse equivalence depending on the political mood, as was the case with the Swiss stock exchange.


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