Is the Swiss model suitable for post-Brexit UK-EU relations?

Is the Swiss model suitable for post-Brexit UK-EU relations?

Now that the British people have voted to leave the European Union, the UK must seek a new relationship with our European partners – but what form should this new relationship take?

The reality is that the EU has all sorts of relationships with other countries around the world – from Free Trade Agreements (FTAs) to Economic Partnership Agreements (EPAs) to Association Agreements (AAs). Dr Lee Rotherham has written an interesting take on these varied agreements which is well worth a read.

But closer to home, the European countries, territories and microstates – which are outside of the EU but nonetheless enjoy close ties to it – do offer some precedents.

Norway has almost unlimited access to the European Single Market as a member of the European Economic Area (EEA) but some critics argue that this ‘soft brexit’ option would be unsuitable for the UK..They say that the Norway option would mean that UK would not be fully able to restrict EU migrants, would still have to obey EU rules and be obliged to make a financial contribution to the EU.  The Norway option is highly complex and deserves further scrutiny, but suffice it to say here that it would be better for the UK than our current position and would be quite likely cheaper too.

Liechtenstein is also a member of the EEA but has secured additional opt-outs over migration. However, critics say that since the micro-nation only has a population of approximately 37,000, it cannot be a precedent for the UK, with our 65 million population and a much greater landmass.

Jersey has a special relationship with the European Union. The Island is treated as “part of the European Community for the purposes of free trade in goods”, but otherwise is not a part of the EU. A similar relationship exists for Guernsey. Guernsey is not a member of the EU and not part of the UK. Under its Protocol 3 relationship with the EU Guernsey is part of the customs territory which allows for the free movement of goods.

There are many other examples of such bespoke relationships – but perhaps the most pertinent to Brexit is the example of Switzerland.

Switzerland can sign its own Free Trade Agreements, and has retained much of its national sovereignty while still enjoying privileged access to the EU market. It is a member of the European Free Trade Association (EFTA) of which the UK is a former member and co-creator. But unlike its fellow EFTA state, Norway, Switzerland is not a member of the EEA – instead it has a complex bilateral deal with the EU.

As the European Commission website states:

The cornerstone of EU-Swiss relations is the Free Trade Agreement of 1972. As a consequence of the rejection of the EEA membership in 1992, Switzerland and the EU agreed on a package of seven sectoral agreements signed in 1999 (known in Switzerland as “Bilaterals I”). These include: free movement of persons, technical trade barriers, public procurement, agriculture and air and land transport. In addition, a scientific research agreement fully associated Switzerland into the EU’s framework research programmes.

A further set of sectoral agreements was signed in 2004 (known as “Bilaterals II”), covering, inter alia, Switzerland’s participation in Schengen and Dublin, and agreements on taxation of savings, processed agricultural products, statistics, combating fraud, participation in the EU Media Programme, the Environment Agency, and Swiss financial contributions to economic and social cohesion in the new EU Member States.

In 2010 an agreement was signed on Swiss participation in EU education, professional training and youth programmes. In overall, around 100 bilateral agreements currently exist between the EU and Switzerland.

There are, however, three major issues with the Swiss-EU bilateral model.

Firstly, as the model is something that has evolved organically over time, it is not one single agreement but a collection of complicated interconnected agreements. The EU authorities reportedly do not like this and so would be unlikely to replicate it (although I’m sure that with the necessary political will, a simplified single comprehensive agreement could be reached).

The second issue is that the model does not allow Swiss companies and financial institutions unrestricted access to the European market in services.  For this reason, many Swiss firms establish offices and subsidiaries in EU member states to bypass these rules. As an economy that relies on services exports for a large proportion of its income, the UK should aim to have better access to the EU services market than is currently enjoyed by the Swiss.

The third issue is immigration. In 2014 a public vote was held in Switzerland regarding immigration; more specifically, on measures to bring in strict immigration quotas. The European Commission has stated that since the Swiss have signed a free movement agreement, they cannot bring in restrictive measures against EU citizens and still enjoy the benefits of the other bilateral agreements it has signed.*

So does this mean that a Swiss-style relationship would be completely off the table for the UK?

Not according to senior Swiss politician (its former President) Micheline Calmy-Rey, who recently told the BBC that she wants the UK and Switzerland to work together to get a new settlement from Brussels

She said that “Switzerland and Britain have in common the same question – that means the question of freedom of movement and [the need] to find a solution in order to respond to our population to limit migration, I think we could collaborate together – it would be fruitful.”

Ms Calmy-Rey is not the only Swiss politician to propose such an alliance. Before the EU referendum, Christoph Blocher, the Swiss billionaire and veteran political campaigner, told the Telegraph:

“We signed a treaty with the EU allowing the free movement (free circulation) of people and that was a mistake. They said we wouldn’t get more than 8,000 people coming in and instead there was 84,000. I believe you have had the same problem in the UK (in terms of inaccurate predictions). I would be happy to see the British leave the EU, as it would mean we would have a partner on the outside.”

An alliance between the UK – a major export destination for the EU – and Switzerland, whose trade negotiators are known for their savvy and efficiency, could prove very fruitful indeed, allowing both countries to strike a new deal with the EU.

The Prime Minister should be picking up the phone to Berne as soon as possible.

* During a visit to Zurich last week, EU Commission president Jean-Claude Juncker and Swiss president, Johann Schneider-Ammann, are reported to have discussed a proposal to end the deadlock, in which Swiss citizens would be given priority or first refusal over EU citizens in the jobs market.