Switzerland - the Brexit model nobody's talking about

27 Jul 2017

There’s a country outside the European Union that gets to have its cake and eat it. Kind of.

 

They get single market membership, kind of. Free movement of persons, kind of. Political independence from EU law, kind of. The unique deal they have struck, while not perfect, could well inspire the outcome of Brexit negotiations. There are precedents in there that we could point to, and use to our advantage when the talks gets tough - not just for the UK as a whole, but an independent Scotland too.

 

The country we’re talking about is Switzerland. So what exactly does their relationship with the EU look like, and how did they do it?

 

Timeline

 

They’ve basically negotiated a situation where they get the benefits of EU membership for sectors they want, with as few concessions as possible. Case-by-case, line-by-line. It’s a ridiculously complex mishmash of bilateral deals dating back to 1972. From those, they’ve cobbled together a combination that kinda looks like single market membership.

 

Take that original ’72 deal, abolishing tariffs and quotas for selected goods. It doesn’t just create a blanket exemption for say, all electrical goods. They literally take it down to the wire; specifying what material that wire’s made of, whether or not it’s insulated, what proportion the total value of the final product it is. The level of detail is incredible.

 

In 1992, the Swiss government sought to end this approach. Working alongside other countries, the European Economic Area was created (often dubbed ‘the Norway Option’, or EEA), with the eventual aim of full EU membership for Switzerland. Inconveniently for the government, that bid was rejected at the ballot box. Nonetheless determined, they took the long way round - negotiating single market membership on a case-by-case basis.

 

They emerged, come 1999, with seven bilateral agreements; each covering a different topic. Among other things, these extended single market membership to an array of further products. The main concessions, from the Swiss perspective, were freedom of movement and the adoption of relevant EU legislation. Crucially, the agreements included a so-called ‘guillotine clause’ - if one is breached, all seven cease to apply.

 

In years since, further deals have extended cross-border cooperation on a number of fronts. Schengen, Europol, environmental protections; Switzerland opts into all of these. Ultimate sovereignty remains with the people, and there’s no guillotine clause. All these agreements combined leave Switzerland half-in, half-out of the European Union.

 

(Just to clarify, the EEA covers all 31 full members of the single market, who in return opt into set areas of EU policy. 28 of those 31 choose to integrate deeper through full EU membership. EFTA refers to four countries with at least partial market membership, while remaining outside the EU. Switzerland is the only EFTA state not a member of the EEA - the other three being Norway, Iceland and Liechtenstein.)

 

The Single Market

 

For industrial goods (boilers, protective gear, etc.), the country might as well be a full member. Tariffs, quotas, and technical barriers have been abolished. In return, the Swiss are obligated to update their regulations in line with EU law. We’ll get back to the exact mechanism on how that works later.

 

Most agricultural products (vegetables, chocolate, etc.) get a similar deal - no duties, no quotas. Subsidy mechanisms on both sides were altered, to make sure all goods get a level playing field. This relationship has been built up over decades; starting in ’72, then expanded to more sectors in both 1999 and 2004.

 

Most other goods however, and crucially services, fall by the wayside. In order to trade, they must tackle the same tariffs and bureaucratic burdens as the rest of the world. Businesses may employ someone cross-border to provide a service for no more than 90 days per year. The insurance market struck a special deal in 1989, as did transport in 1999, but further economic integration is scarce. Talks to find an agreement on services were abandoned in 2003, largely down to disagreement over just how much EU law Switzerland were prepared to adopt.

 

(Bear in mind that all of this is a simplification. With a relationship so complex, any statement has twenty exemptions. If you want to get a full, undiluted view on the situation, you’ll have to read the texts yourself.)

 

The country’s economy has flourished under this arrangement; boasting the world’s second highest GDP per person, and £191 billion of EU trade every single year (62% of their total). It would be amiss not to mention they also hold the second highest inequality rate, however their priorities in negotiations needn’t be ours. We can take a different attitude.

 

Should we seek the Swiss model, obviously we’d prioritise different sectors; the areas of trade producers and citizens depend on the most. In Scotland, whisky would be a top priority. Moving from full to partial membership does of course mean some people lose out, some prices rise. However, the argument could easily be made that on balance, it’s worth it. On the whole, people will be better off.

 

Borders

 

A common critique of Freedom of Movement, even from supporters, is over the posted migrant workers’ directive. This allows corporations to export workers to another country, paying them the minimum wage of the nation they came from - be it higher or lower. This gets as low as €235 per month in Bulgaria, compared to €1397 in the UK. Wages are undercut, everyone loses out.

 

Not the Swiss, though. Their deal on migration is to die for. Citizens on both sides of the border get all the European luxuries of Shengen and Freedom of Movement, able to work in and travel to whatever country they please. Unlike with the EEA, undercutting of wages is specifically prohibited - they get a special deal on that. Every time the EU extends its borders, a gradual transition on immigration is allowed. No other single market member gets that, a major concession.

 

Just like Switzerland, EU-born workers play an essential role in propping up our economy; totalling 1.8 million. On this, the Swiss really do get to have their cake and eat it. Promoting an open, flexible society, while protecting citizens from the ugly effects of globalisation. The four freedoms aren’t an all or nothing matter; there is indeed room for leeway. We’d be mad not to use that to our advantage - especially protecting an open border for Northern Ireland.

 

Trade Deals

 

This is where the model’s big advantages shine through. As members of the European Free Trade Association (EFTA), they don’t participate in the EU customs union. What that means, in practice, is they get to forge their own trade deals, on their own terms. They negotiate collectively with the other three EFTA members if they desire (Norway, Iceland, Liechtenstein), but are under no obligation to do so.

 

Corporate deals such as TTIP, CETA, and the recently confirmed EU-Japan agreement don’t apply. Whether or not the many deals they’ve struck are any better in ethical terms is a separate argument, but the fact they get freedom to negotiate for themselves is what matters. Not having to operate as a 28-member block also means you get those texts agreed a hell of a lot faster.

 

Outside the EU, we can do the same - pioneering a new, humanitarian approach to global trade. No more corporate courts for big business, holding us to ransom. No more imperialist tariffs, undermining progress in poorer countries. We can prove we’re better than that.

 

Other Areas

 

Per person, Switzerland pays 59% less than us to the EU. Obviously there are many factors at play there, but a similar arrangement would (in theory) save us £5.2 billion net per year for public spending. Nothing gamechanging, but not insignificant either; just £100 million short of lifting the public sector pay cap.

 

Europol to Eurojust. Media to the environment. Pensions to satellite navigation. Switzerland cooperates with the EU in all these areas through further deals, by their own decision. To some extent, you really could argue they get to pick and choose. Cooperation on overland transport and research also exist, no bad thing in itself, yet under that ominous 1999 ‘guillotine clause’.

 

One of the few downsides - the country is bound under that clause to open its public services (railways, electricity, etc.) up to private competition. National government has no choice; corporations get the divine right to bid for infrastructure supposedly meant for the public good. This could severely hamper future plans to nationalise these services, in both the UK and Scotland.

 

Crucially, the Swiss are not members of the Common Agricultural, nor Common Fisheries Policies; both widely criticised for their environmental impact. Utilising the Swiss model, we could maintain all the benefits of those schemes (eg. subsidies), while taking a step ahead of the EU on protecting the planet.

 

Structure

 

In all 28 members of the European Union, EU law automatically applies to the country. The line from A to B is direct; no action by national government required. In Switzerland, this isn’t the case.

 

More than 20 committees maintain almost all agreements signed between the two sides (exemptions include pensions and taxation of savings). In theory, this means ensuring Swiss law is kept updated with EU regulations in the relevant areas, while resolving any disputes. In practice, the European Commission themselves admit on their website Switzerland has breached these agreements multiple times, yet the dreaded ‘guillotine clause’ has not been triggered.

 

No doubt, this way of operating is extremely bureaucratic. To replicate it, we’ve got to make dramatic improvements to our civil service, not to mention capacity to negotiate in the first place. A transitional deal would have to be struck, giving both sides the time to cover all areas. However, it’s definitely possible. The flexibility to get away with stuff we previously couldn’t may well yield some practical benefits.

 

Another disadvantage of the Swiss model, compared to full EEA membership, is lessened influence over EU legislation. Built into the EEA treaty is guaranteed input for Norway, Iceland and Liechtenstein when new laws are being drawn up. That’s where most of the politics happens; they may not get the privilege to vote, but by then the outcome is more or less pre-determined. Switzerland is excluded from that process.

 

Conclusions

 

While neither the UK nor an independent Scotland should look for the exact settlement the Swiss have struck, their way of operating could be key to getting the best deal possible.

 

Obviously, our trade-offs would be different. It may be we have no problem with EU services law; giving us single market membership in that area. Instead of pushing for quotas on immigration, we could seek something more progressive. The point is, Switzerland has proven a customised deal is possible, if you put in the effort.

 

Leaving the EU doesn’t mean trashing all your ethics and standards. We can imitate and opt into aspects that undeniably benefit the population, like freedom of movement. At the same time, we can better them in other areas, such as the environment and undercutting of wages.

 

To achieve that however, we’ve got to go for it. We have to recognise that Freedom of Movement is, in itself, a wonderful thing. We’ve got to admit single market membership does bring us lower prices, and greater prosperity. We’ve got to step up our game on the diplomacy front, building an efficient, experienced negotiating team.

 

We’ve got to want it, and got to work for it.

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