JNow it’s official: The Swiss government wants to end the relationship crisis with the European Union and negotiate a treaty package with Brussels that is intended to secure the Confederation’s access to the European internal market and pave the way for new agreements. The Federal Council, as the multi-party government in Bern is called, had already approved the draft for a corresponding negotiating mandate shortly before Christmas. The parliamentary commissions, cantons, social partners, business associations and other interest groups then looked at the paper. As a result, numerous critical questions and recommendations poured in, but on balance the consultations were positive.
The Federal Council therefore wants to enter into concrete negotiations with Brussels this month. However, given the complexity of the matter, it is questionable whether this can be completed by the end of this year, as those involved hope. In any case, Swiss Foreign Minister Ignazio Cassis did not want to give a timeline in a press conference. But the FDP politician emphasized the importance of an agreement: “In an increasingly unstable world, it is crucial to have stable relations with our neighboring countries.”
Switzerland’s relationship with the EU has been severely disrupted since May 2021. At that time, the Federal Council unilaterally broke off negotiations with Brussels on an institutional framework agreement. After a phase of the ice age, the possibilities for a new start were explored in several rounds of talks with the EU Commission, which focused on updating Switzerland’s five existing internal market agreements (free movement of people, removal of technical barriers to trade, agriculture, land and air transport) as well as the Conclusion of two new agreements on electricity and food security. Orderly relations with the EU, by far the most important trading partner, are very important for the Swiss economy, which has strong exports.
Joint arbitration tribunal is intended to settle disputes
One of the biggest sticking points in the contract package is the planned dispute resolution mechanism. Now, as is usual in international treaties, there should be an arbitration tribunal with equal representation that decides in the event of disputes. If EU law is affected, the opinion of the European Court of Justice (ECJ) must first be obtained. For the national-conservative Swiss People’s Party (SVP), the involvement of the ECJ is the devil. The party with the largest number of voters in the country rails against “foreign judges” and describes the planned agreement as a “subordination agreement”. The business association Economiesuisse, however, sees advantages for Switzerland in the dispute settlement mechanism: it provides an instrument to effectively assert one’s own interests through legal proceedings. Foreign Minister Cassis spoke of “legal certainty instead of arbitrariness”.
In fact, Switzerland currently has no legal remedy if, for example, the EU refuses to adapt the agreement on technical barriers to trade to legal developments in the European internal market. Brussels has already done this in the field of medical devices, which is painful and expensive for this industry. Other bilateral agreements will also gradually erode if an agreement is not reached.
In the future, any countermeasure (such as tariffs or trade barriers) that threatens if Switzerland decides not to adopt certain parts of EU law would have to be proportionate. And the question of proportionality would be decided by the joint arbitration tribunal. Economiesuisse sees Switzerland’s sovereignty further strengthened by the fact that, according to the draft contract, Switzerland will have a say in the future when it comes to the development of EU internal market law relevant to it.
There is still a problem with wage protection
A second major sticking point is the issue of wage protection. To protect domestic companies from competitors from abroad, Switzerland has adopted so-called accompanying measures, which include, among other things, the obligation to give advance notice of cross-border work and the payment of a deposit. Since these measures violate the freedom to provide services agreed with the EU, Brussels is pushing for them to be defused. But the unions and with them large sections of the Social Democrats are resisting this. In order to give in, they demand concessions in other areas, which in turn goes against the grain of employers.
Economiesuisse considers the concerns about wage dumping to be exaggerated and points out that the principle of “equal pay for equal work in the same place” applies in EU posting law. The association points out that reportable short-time work assignments by foreign companies only make up 1 percent of the total work volume in Switzerland.
The plan to conclude an electricity agreement with the EU for the first time is very well received by business. This will improve network stability and strengthen security of supply. According to a study from ETH Zurich commissioned by Economiesuisse, Switzerland could save more than 50 billion francs by 2050 with an electricity agreement because Switzerland would not have to set up many systems twice if it were integrated into Europe.
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