Swiss ditch draft EU pact in break with largest trade partner

Swiss ditch draft EU pact in break with largest trade partner

Thwarted by unbridgeable differences over wages and immigration, the Swiss government pulled the plug on a new framework agreement with the European Union in a move that will resonate in Britain as it seeks to recalibrate its own relationship with the EU.

The decision by the Swiss federal council on Wednesday will probably have far-reaching consequences for Europe’s fourth-biggest trade partner, which is also home to 1.4m EU citizens. It led to a rapid rebuke from the European Commission, which warned of an inevitable deterioration in co-operation.

“We regret this decision,” Brussels said in a statement. “Privileged access to the single market must mean abiding by the same rules and obligations.” Switzerland exported about €160bn of goods and services to the EU last year.

Bern’s decision to withdraw followed stiff domestic political opposition to the draft treaty, which was seen as infringing on Swiss sovereignty, despite a broad desire in the country to maintain close EU ties.

In 2019, the impasse with the EU led to Swiss stock markets losing rights to serve EU customers. Unions, meanwhile, worried the new pact would erode high wages, while differences remained over state aid — both of which Bern labelled as key concerns.

“The conditions are thus not met for the signing of the agreement,” the federal council said in a statement, adding that it hoped existing trade arrangements could be preserved “in the interests of both sides”.

On currency markets, the Swiss franc was broadly unchanged on the day at 1.09 to the euro.

The unique state of EU-Swiss relations has been a longstanding source of frustration in Brussels. Based on more than 100 bilateral treaties, it gives the wealthy alpine nation access to the single market in exchange for open borders and alignment of Swiss and EU law.

Talks to overhaul these arrangements began in 2014 but became more urgent after Brexit because of EU concerns the UK could seize on the Swiss model as evidence it should be able to cherry-pick benefits of the single market while remaining outside formal EU structures.

Switzerland’s decision to abandon the talks means that as existing treaties lapse, trade and immigration between Europe and a country at the heart of the bloc could be dramatically restricted.

The Swiss government said it had begun stockpiling medical equipment and taken other “preventive measures” such as legal protections for listed Swiss companies in expectation of barriers being thrown up with the EU imminently.

Crucial regulatory permissions allowing Swiss-certified medical devices to be sold in the EU expired on Wednesday.

There was deep frustration in Brussels that Bern had decided to junk years of negotiations. But the Swiss government has long wrestled with how to sell an agreement at home.

Under Switzerland’s consensual political model, any deal would have to be agreed in a nationwide referendum, with approval from both a majority of the overall population and a majority of the country’s 26 cantons.

In an interview earlier this month, the EU ambassador to Switzerland, Petros Mavromichalis, warned that the moribund negotiations were “the chronicle of a death foretold”.

“Today is a victory for direct democracy and thus for the Swiss people,” said Marco Chiesa, president of Switzerland’s largest political party, the rightwing populist SVP.

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