Brussels warns that the access of the Swiss to the internal market will not be extended to new sectors and will erode over time.
The relationships between European Union Y Swiss have suffered a severe blow after the announcement by Geneva that it is permanently burying the agreement to strengthen its relationship with Brussels, which has taken seven years to negotiate and in the end will not see the light. It is a kind of brexit by a country that, although not a member of the European club, does enjoy privileged access to the single market. An access that is now at risk.
Switzerland and the EU are key economic partners. Trade amounts to around € 1 billion every day working. Switzerland is the EU’s fourth largest trading partner, behind China, the United States and the United Kingdom: it accounts for 6.9% of its exports and 5.7% of its imports. For its part, the EU is by far Switzerland’s main trading partner: 42% of its exports and 50% of its imports.
“There will be no signing of the institutional agreement between the EU and Switzerland“, announced this Wednesday the Swiss Federal Council. The authorities of the Alpine country allege that “substantial differences persist” on the central elements of the pact and “the necessary conditions are not in place” to sign it. In addition, they renounce continuing to dialogue with the Ursula von der Leyen Commission and finalize the negotiation.
“The Federal Council nevertheless considers that it is in the common interest of Switzerland and the EU to safeguard their strong cooperation and systematically maintain agreements already in force, “the statement continues. Geneva launches a new offer of”political dialogue“to Brussels. A proposal that has not been received with enthusiasm by the Community Executive. Quite the contrary.
“Without this agreement, the modernization of our relationship will not be possible and our bilateral agreements will inevitably age“, said the Commission in a statement. The Community Executive announces that” it will carefully analyze the impact of this announcement “before deciding the next steps.
But the breakdown of the dialogue has had immediate consequences: from this very Wednesday, Swiss-made medical devices have lost the automatic recognition they once enjoyed in the EU. If the Swiss want to introduce these products into the single market, they will have to follow the same certification procedure as any other non-EU country.
The president of the Swiss Confederation, Guy Parmelin, and Ursula Von der Leyen, during their meeting in Brussels on April 23
Today, EU-Swiss relations are based on a tangle of 120 bilateral agreements, the first of which date back to the 1970s. However, there are no common provisions guaranteeing a level playing field between European companies and Swiss nor an adequate dispute resolution mechanism. That gradually leads to a lack of legal homogeneity, growing uncertainty and unequal treatment of economic operators, complains Brussels.
This is precisely the gap that the new institutional agreement between the EU and Switzerland had to fill. Guarantee a level playing field in the sectors in which Switzerland has access to the single market, including in matters of public subsidies; and create an effective dispute resolution mechanism in which the Court of Justice of the EU would have the last word.
The impact of the breakup
Negotiations between Brussels and Geneva started in 2014. Successive Commission Presidents held more than 20 meetings with their counterparts from the Swiss Confederation. In November 2018 a political agreement was reached on the full text of the institutional agreement. But in June 2019, the Federal Council declined and informed the Community Executive that it could not ratify the commitment.
The Swiss wanted exclude from the agreement three elements that Brussels considers essential to ensure a level playing field: the free movement of people, salaries of posted workers, and public subsidies. The Community Executive has been willing to offer flexibility, but not to give Geneva a blank check on these issues.
“I believe that it is possible to find compromises and conclude our international agreement”, assured Von der Leyen in his last meeting in Brussels with the president of the Swiss Confederation, Guy parmelin, on April 23. But in the end the negotiation has finally ended up in a wreck due to these three issues.
What will be the concrete consequences of this failure? The 120 bilateral agreements between Brussels and Geneva remain in force. But in the absence of these common rules that guarantee fair competition, the EU refuses to sign new agreements, for example in the electricity sector which is particularly important for Switzerland.
Furthermore, existing agreements “will erode” as the EU reforms its internal rules. This is what has happened with medical devices: automatic recognition is no longer possible because this Wednesday a new European regulation came into force. A brexit to the Switzerland.