It seems the Swiss trade deal is causing trouble
Posted: 05 May 2022, 13:09I read today about Switzerland being bounced out of the ITER fusion project in the EU because they stopped talks on a bilateral trade deal. Switzerland and the EU have over 100 trade deals but were talking about one overarching deal to cover trade and movement of people without Switzerland having to join the EU.
I decided to see what all this is about and found an article on UK in a Changing Europe. I did a bit of research after reading the article because of what I read. I wanted to know the bias of the authors. Looking at the members of the academic group, they seem to be moderately (or more so), EU biased. Which makes the article even more interesting.
This article was written in June 2021.
The two following parts tell me that the UK exit from the EU is now having real impact and also something many said before the 2016 referendum is coming true.
Something which was a leading challenge in the run up to the referendum. Had we been told in the 70's that this was going to happen, we would have voted Yes to leave. Had the Maastricht Treaty been put to a vote in 1991, we would have voted NO. The Swiss put these negotiations to the people during stages and the people did not support what the EU were asking for.
Then there is a little bit following. Given the view of the author's, that the EU is our better place, it was extremely interesting.
The article follows with the June 2021 view of the unravelling of the Swiss/EU trade deals and the refusal of the EU to renew them, requiring that the Swiss sign up to a full bilateral agreement or reach a slow rolling unpicking of the 100+ trade and movement agreements.
Well one "happening" was the new trade deal with Switzerland and the UK. Something the EU now have to live with as they didn't conclude with Switzerland. Now when the EU agree a trade deal with Switzerland they must accept the existing agreement between Switzerland and the UK.
Another one is the slow breakdown in the existing agreements as per the ITER expulsion.
This one is now on my tracker.
I decided to see what all this is about and found an article on UK in a Changing Europe. I did a bit of research after reading the article because of what I read. I wanted to know the bias of the authors. Looking at the members of the academic group, they seem to be moderately (or more so), EU biased. Which makes the article even more interesting.
This article was written in June 2021.
The two following parts tell me that the UK exit from the EU is now having real impact and also something many said before the 2016 referendum is coming true.
Why did the negotiations fail?
On 26 May, the Swiss Federal Council announced it was ending the negotiations.
The Swiss Federal Council cited three sticking points for the breakdown: state aid rules, salary protection and EU citizens’ access to social security benefits in Switzerland.
Swiss cantons were concerned that their system of providing unrestricted state guarantees to banks would no longer be permitted under EU state aid rules.
On wage protection, Swiss unions and businesses expressed concerns that the framework agreement would lead to ‘wage dumping’. Switzerland seeks to protect its higher wages and working conditions with ‘social flanking measures’, however, the EU wanted to remove these to create a level playing field for competition.
On EU citizens’ access to social security benefits, the Swiss Federal Council has argued that incorporating the 2004 EU’s Citizens’ Rights Directive (CRD) – the EU law giving EEA citizens rights to freedom of movement and residence in all EEA countries – into the existing bilateral Agreement on the Free Movement of Persons (AFMP) would require a total ‘paradigm shift’ in Swiss migration policy. The AFMP sets out basic rules on free movement between Switzerland and the EU, however, this is conditional on possession of a valid employment contract or if self-employed proof of financial independence and full health-insurance coverage. Critics in Switzerland have long expressed concerns that removing these free movement conditions would result in ‘welfare tourism’.
Something which was a leading challenge in the run up to the referendum. Had we been told in the 70's that this was going to happen, we would have voted Yes to leave. Had the Maastricht Treaty been put to a vote in 1991, we would have voted NO. The Swiss put these negotiations to the people during stages and the people did not support what the EU were asking for.
Then there is a little bit following. Given the view of the author's, that the EU is our better place, it was extremely interesting.
Has Brexit affected these negotiations?
Both the EU and Switzerland have rejected suggestions of parallels between the two negotiation processes. But EU concerns that the UK might seize the Swiss model as an opportunity to ‘cherry pick’ have been highlighted as impacting EU-Switzerland negotiations. Arguably, the EU has taken a tougher stance with Switzerland to avoid similar demands from the UK Government meaning Swiss ‘room for manoeuvre’ has shrunk. The Swiss Ambassador to the UK, Alexandre Fasel, described this as an EU desire for a ‘consistent way’ across both negotiations processes.
That the UK avoided the ‘Ukraine mechanism’ – the mandatory requirement for ECJ involvement included in the EU’s association agreements with its eastern neighbours such as Ukraine – in its Trade and Cooperation Agreement with the EU has resulted in ‘Brexit envy’ in Switzerland. The ‘Ukraine mechanism’ has remained part of the proposed EU-Switzerland framework agreement.
The article follows with the June 2021 view of the unravelling of the Swiss/EU trade deals and the refusal of the EU to renew them, requiring that the Swiss sign up to a full bilateral agreement or reach a slow rolling unpicking of the 100+ trade and movement agreements.
What happens now between Switzerland and the EU?
The Swiss Federal Council statement stressed that ‘even without an institutional agreement, Switzerland remains a reliable and committed partner for the EU.’ However, the latest breakdown in framework agreement talks has been described by the Financial Times as a ‘slow-motion Swexit’.
Current bilateral agreements remain between the EU and Switzerland meaning there is no ‘cliff edge’ situation. Both the EU and Switzerland are major trading partners for each other. The EU accounts for roughly 50% of Swiss exports and 42% of their imports, while Switzerland is the EU’s fourth largest trading partner.
However, the European Commission has warned ‘modernisation’ of the EU-Switzerland relationship will ‘not be possible’ without a framework agreement, and that the agreements will lapse. This is already starting to happen: in December 2017, even as negotiations were proceeding, the European Commission announced the equivalence decision for Swiss stock exchanges would be limited to one year. This was then extended by six months to the summer of 2019, after which it lapsed.
On 26 May 2021, the EU-Switzerland Mutual Recognition Agreement (MRA) for Medical Devices ceased to apply. The MRA was the key agreement facilitating bilateral trade on medical devices, and it fell under the scope of the framework agreement that was not agreed to. Swiss MedTech have said this new third country status on medical devices will cost the sector an estimated CHF 114 million (£89 million) initially and CHF 75 million (£59 million) thereafter.
It is too early to tell what will happen next as the fall-out from the breakdown in talks continues.
Well one "happening" was the new trade deal with Switzerland and the UK. Something the EU now have to live with as they didn't conclude with Switzerland. Now when the EU agree a trade deal with Switzerland they must accept the existing agreement between Switzerland and the UK.
Another one is the slow breakdown in the existing agreements as per the ITER expulsion.
This one is now on my tracker.
