Switzerland - EU relations

28 September 2016
by eub2 -- last modified 28 September 2016

Switzerland is a very close neighbour of the EU – geographically, politically, economically and culturally. It is the EU's third largest economic partner (trade in goods and services taken together), after the US and China, ahead of Russia and Japan.

In turn, the EU is by far the most important trading partner for Switzerland, accounting for 65% of its imports and 44% of its exports of goods in 2015. In commercial services and foreign direct investments, the EU's share is equally dominant. This is to the mutual benefit, and Switzerland has a policy of promoting itself as a stepping stone to the EU, thanks to the significant degree of integration it has with the EU internal market.

Furthermore, over a million EU citizens live in Switzerland and another 300,000 cross the border daily for work. About 450,000 Swiss live in the EU.

The cornerstone of EU-Swiss relations is the free trade agreement of 1972. As a consequence of the rejection of EEA membership in 1992 by the Swiss people, 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 (road and rail). 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

Current key issues:

Swiss referendum on mass immigration, 9 February 2014

Free movement of persons is a central pillar of our relations with Switzerland, and part of our overall package of ties.

The popular vote in Switzerland of 9 February 2014 in favour of an introduction of annual quantitative limits to "immigration" (this includes cross-border commuters, asylum seekers, job seekers from the EU and third countries) called into question the EU-Swiss agreement on the free movement of persons, requesting that the Swiss Federal Council "renegotiate" this agreement with the EU. In July 2014, the EU High Representative at the time, Catherine Ashton, following consultation with Member States, rejected the Swiss request for renegotiation with the objective of introducing quotas and national preference. Implementing legislation for this initiative is to be enacted by the Federal Council by 9 February 2017.

Following a meeting between President Juncker and former Swiss President Sommaruga in February 2015, informal consultations between the Commission and the Swiss authorities on a possible understanding have been launched. These talks are still ongoing, with the last meeting taking place between President Juncker and President Schneider-Ammann in Zurich on 19 September 2016. President Juncker delivered a key note address on the occasion of the 70^th anniversary of Winston Churchill's speech. While in Zurich, President Juncker stated that "even though many open issues remain, talks are moving in the right direction".

In December 2015, the Swiss Federal Council decided to pursue the talks with the EU whilst initiating work on a draft implementing law in parallel.

Institutional and horizontal questions

The EU and Switzerland are bound by more than a hundred bilateral agreements. The Council of the European Union has made the conclusion of any further agreements giving Switzerland access to the internal market – the world's largest – subject to the solution of longstanding institutional issues notably regarding dynamic incorporation of the evolving EU legislation in the areas of the internal market in which Switzerland participates and an efficient dispute-settlement mechanism.

A resolution of these horizontal issues is necessary before the EU is ready to conclude new agreements giving Switzerland access to further areas of the Single Market (e.g. on electricity). Negotiations on these institutional issues started in May 2014 and have progressed significantly since then.

Free movement of workers and right to supply services freely between the EU and Switzerland has existed since 2002, to clear mutual benefit. However, the extension of the agreement to Croatia has been held up with the decision by the Federal Council not to sign the so-called Croatia Protocol. After two years of deliberations and in view of the link with EU-Swiss research co-operation (see below), the Protocol was signed on 4 March 2016, and is now awaiting ratification by Switzerland. The EU has called for this to be done as soon as possible.

In addition, problems persist with some flanking measures that Switzerland introduced unilaterally in 2006 to protect its labour market. The EU considers a number of restrictions imposed as manifestly incompatible with existing agreements, and as a barrier to trade in services for EU-posted workers and independent service providers. In 2012 and 2013, Switzerland also re-introduced a quota on long-term permits for nationals specifically from eight new Member States (plus 15 Member States in 2013) via the activation of the so-called "safeguard clause". This has prompted strong criticism from the EU for their discriminatory effect and incompatibility with the EU-Swiss agreement.

Tax Transparency: Since 2004, there has been an EU-Swiss agreement on the taxation of savings, with a withholding tax levied from 2005 on the savings income of EU residents for which a Swiss bank acts as paying agent. In 2015, negotiations for a revised agreement with a view to broadening its scope and reflecting international developments in the field of tax transparency, including the global shift towards automatic exchange of information, were concluded.

On 27 May 2015, the EU and Switzerland signed a historic new tax transparency agreement, which will significantly improve the fight against tax evasion. Under the agreement, both sides will automatically exchange information on the financial accounts of each other's residents from 2018. This spells an end to Swiss bank secrecy for EU residents and will prevent tax evaders from hiding undeclared income in Swiss accounts. The agreement was signed by Commissioner Pierre Moscovici and Janis Reirs, Latvian Minister of Finance on behalf of the Latvian Presidency of the Council for the EU, and by the Swiss State Secretary for International Financial Matters, Jacques de Watteville.

As with other third countries, negotiations were concluded on a co-operation agreement in competition law enforcement (exchange of information), and are finalised on the emission trading scheme (ETS). Switzerland also participates in the GALILEO satellite navigation system.

On 1 March 2016, Switzerland ratified the Agreement on the modalities of the participation of the Swiss Confederation in the work of the European Asylum Support Office. This marks a strengthened cooperation between EASO and Switzerland and will allow Switzerland to participate in EASO's work, receive support from EASO, and benefit from its expertise on countries of origin information, training and other tools offered by EASO. Swiss national experts may now be engaged by EASO and deployed in EASO operations, including those in the hotspots in Italy and Greece.

Research cooperation/Horizon 2020

Switzerland is currently associated only to some parts of Horizon 2020, the EU's research and innovation funding scheme, the Euratom Research and Training Programme and the ITER project. If Switzerland ratifies the Protocol on the extension of the EU-Switzerland Free Movement of Persons Agreement (FMOPA) to Croatia before 9 February 2017 it will automatically become fully associated to the entire programme by 1 January 2017. If not, Switzerland's partial association to Horizon 2020 will cease to apply with retroactive effect, as of 31 December 2016.

Swiss participation in Erasmus+

The EU has always made clear that there is a close link between Swiss participation in Erasmus+ and the Protocol, as the programme is closely linked to the free movement of persons (exchange of researchers and students). Given the current circumstances, the EU and the Swiss authorities have agreed to suspend on-going negotiations on Swiss participation in Erasmus+ and took note of the impossibility of signing an agreement in time for the signing of contracts with beneficiaries selected under the 2014 calls for proposals.

Therefore, as foreseen in the Erasmus+ Regulation, until such an agreement is signed, Switzerland will not participate in Erasmus+ on an equal footing with Member States (i.e. as a "Programme Country") as initially envisaged, but will rather enjoy the same status as other third countries (i.e. as a "Partner Country").

Source: European Commission