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Saturday, July 13, 2024

The EU-Swiss fallout shows the UK is right to go it alone

Following seven years of intense negotiations between Switzerland and the European Union to formulate a new trading agreement, the Swiss have walked out, leaving an uncertain future between the two neighbours. Has this episode shown the limits of the EU’s approach to negotiations?

Switzerland and the EU are closely integrated, with Switzerland being the EU’s fourth-largest trading partner. With more than 120 bilateral agreements covering issues from trade to freedom of movement, an outsider may be forgiven for thinking that Switzerland was part of the EU. As the EU had just finished the higher-profile – and at times bumpy – UK-EU trade agreement following Brexit this year, hopes have been high that talks with Switzerland would go more smoothly. The sudden rejection from Switzerland has shattered that assumption.

The EU, diminished by the United Kingdom’s departure, continues to harbour ambitions for further expansion. Switzerland would appear to be an obvious candidate to join the club, with its close geography, liberal philosophies and wealth. Yet despite decades of EU political pressure to bolster European unity, it has failed to fully persuade the Swiss, who sought instead to achieve the best of both worlds – a close economic partnership while remaining strictly politically independent.

The Swiss have always been aloof when it comes to the EU. The closest Switzerland has ever come to joining was a referendum in 1992 over becoming part of the European Economic Area (EEA), one step away from being fully in the EU. That was rejected by the Swiss people and attempts to join the EU were soon abandoned.

The appeal of joining has only declined since. EU institutions have taken a battering in recent times, with a slow vaccine rollout during the COVID-19 pandemic, a lack of solidarity in crucial matters such as on migration policy, with rogue EU members Hungary and Poland openly challenging the EU’s principles, causing frequent tussles between the 27 member countries during their council meetings. In turn, jaded EU officials have become more defensive and inflexible, desperate to show their strength by jabbing both the UK and Switzerland with tough trading demands.

The EU’s behaviour has given fuel to Eurosceptic demands in the UK for an economically looser Brexit. In a similar vein, the EU has failed to convince the Swiss that more oversight from the European Court of Justice (ECJ), alongside more rights for EU citizens in Switzerland, were a fair price to pay for more market access. The Swiss government, which practises direct democracy with nationwide referendums for significant policies, knew that any public vote would soundly rebuff those proposals.

The humiliation dealt by the EU in 2014, when the Swiss people narrowly voted to put an end to freedom of movement, demanding quotas for migration, remains fresh in Swiss memory. Switzerland had agreed to freedom of movement with the EU in 2002 and even abolished passport controls when it joined the Schengen Area in 2009. When the Swiss government attempted to negotiate with the EU to fulfil the referendum decision in 2014, however, it was swiftly slapped down by the EU, which threatened to cut access and funding for various education and science programmes.

That move forced the Swiss instead to propose only minor tweaks to favour Swiss residents in Switzerland over foreign workers for unemployment benefits and for new migrants to be required to demonstrate that they have integrated into Swiss society – very far removed from the spirit of the referendum decision. The Swiss people, ever pragmatic, agreed to accept freedom of movement in 2020 during another public referendum. Still, the lingering feeling that the EU appears to be calling the shots has meant a line was drawn on future Swiss cooperation.

With the latest trade talks, the EU had hoped to agree on an overarching partnership framework with Switzerland, which would bring Switzerland into line with other countries in close economic orbit with the EU.

The collapse of these talks means sticking with the status quo – a bureaucratic nightmare, even for the famously complex EU Commission, as the patchwork of bilateral arrangements struggles to cope with ever-changing Swiss and EU laws.

This leaves the EU with a strategic dilemma. Its “take it or leave it” mentality is putting partners off engaging with it and undermines the EU as a political force when smaller countries choose to walk away.

The EU’s defensive mentality stems from its “ever-close union” policy. Brussels policymakers have always fantasised about an increasingly centralised political control over member states’ domestic and foreign policies, including defence and taxation. The UK foresaw and resisted this, and its departure will only accelerate this agenda. This obsession for uniformity leaks into how the EU approaches trade deals with external countries, too.

The EU will see Switzerland as simply stalling the inevitable, given its economic dependency on the European bloc. Without alignment, their respective laws will diverge and trade barriers are already forming.

For example, Swiss medical technology companies, comprising three percent of Switzerland’s gross domestic product (GDP), are now facing tariffs as a result of this divergence. Therefore, the EU will likely lean in, behaving like an overly controlling larger neighbour, but this would be a mistake.

Instead, the EU should take some time for a period of self-reflection during which it should ask itself whether it, rather than the Brits or the Swiss, is the one who is making unreasonable demands. Maybe then it would make more friends again. Until then, it makes a good deal of sense for the UK and Switzerland to stay well away from the EU’s institutions.

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