After seven years of talks, attempts to establish closer ties between the EU and Switzerland have failed. The government in Bern ended the negotiations due to insurmountable differences in opinions on immigration and wages, with the end of talks likely to have a relatively significant impact on the Swiss economy.
In recent years, Switzerland has built a reputation as a world leader in medical technology. In Basel, St. Gallen, Bern, and near Lake Geneva, there are over 1,600 companies that produce everything from joint replacements to sophisticated ovulation bracelets.
Now, however, the heads of companies, which employ over 55,000 people and account for 5 percent of Swiss exports, are full of worries. From Wednesday, Swiss pharmaceutical certificates will not be recognized in the EU, which greatly complicates exports. It is estimated that new administrative barriers for the whole sector will cost €61 million a year.
Switzerland’s Health Valley thus became the first victim of the long dispute between Bern and Brussels. On Wednesday, Switzerland ended years of negotiations on an umbrella agreement to replace dozens of bilateral agreements from the past. The aim was also to set the framework for Switzerland’s participation in the single market and set up a dispute settlement mechanism.
The failed negotiations will probably have a significant impact on the Swiss economy. The EU market is the largest market for the rich alpine federation, with mutual trade amounting to about €230 billion a year.
The health technology sector is probably just the first victim. As individual agreements with the EU approach the end of their validity, a similar impact awaits the energy market, the pharmaceutical industry, and engineering.
“It’s as if a minefield suddenly appeared in front of us. And each of those mines will explode,” says political scientist Rene Schwok of the University of Geneva, assessing the new trade barriers.
According to The Financial Times, the special relationship with Switzerland has been a source of frustration for the European Commission for years. The ties are based on around 120 treaties covering a range of areas from industry standards to civil aviation and guarantees that the country has access to a large part of the single market in exchange for the free movement of people.
Such an arrangement gives Switzerland a significant degree of flexibility and freedom.
“Basically, it chooses only those areas of common interest in which it wants to participate, and decides, which European legislation it voluntarily implements,” explains Monika Brusenbauch Meislová from the Prague’s Institute of International Relations.
However, the administration of such a large number of agreements, which sometimes contradicted each other and required frequent updating, became increasingly complicated, and so in 2014, both parties began to negotiate an overarching contract. Then Brexit happened, and there were fears that the Swiss model would become the British argument for getting more benefits.
Experts agree that Brussels, after the Brexit experience, pushed Switzerland quite a bit to accept the offered conditions. Two years ago, it blocked trading in Swiss shares on European markets, and this spring, it stopped the participation of the SBB railway carrier in European research projects.
“The European Union has no reason to make concessions, and that’s because of Brexit. The EU must now think carefully about what it means to be part of the single market and what rights and privileges are associated with it,” analyst Nicolas Veron of the Brussels-based Bruegel think tank told Bloomberg.
Switzerland was reluctant. It did not like that in the future, it would almost automatically adopt EU directives and that EU citizens would be more entitled to social benefits. Nationalists from the Swiss People’s Party spoke of a “colonial treaty,” with unions warning of the influx of cheap labor and falling wages.
Although polls have shown that the agreement would probably pass the necessary referendum, the negotiations have waned. The EU ambassador to Switzerland has even recently described the talks as a “chronicle of the announced death.”
On Wednesday, Swiss President Guy Parmelin announced that the government could not accept the demands of the EU negotiators and ended the negotiations. The European Commission has said it regrets this conclusion. However, the European Commission emphasized that access to the single market must be accompanied by the adoption of uniform rules and obligations.
As Swiss opponents of immigration celebrate along with union supporters, economists say the end of talks will be damaging.
“If someone claims that the new administrative costs are bearable, they do not fully understand how tough international competition is today,” said Beat Vonlanthen, head of the MedTech medical technology association.
Title image: A Swiss national flag waves in the wind on this year’s last day of the World Economic Forum annual meeting, in Davos, Switzerland, Friday, Jan. 25, 2019. (AP Photo/Markus Schreiber)