Switzerland is one of the main economic partners of the European Union (EU):
- The EU’s third biggest export and import market of EU goods, after the United States and China, it covers about 8% of the EU’s foreign trade. Two thirds of Switzerland’s imports originate from the EU and the EU is the destination of 54% of Switzerland’s exports.
- Switzerland is the EU’s second most important market for EU services providers. Switzerland was recipient of 14% of the EU services exports in 2017.
- 11% of the foreign direct investments in the EU originate from Switzerland.
An active European policy is therefore essential from an economic point of view. In order to facilitate trade, Switzerland and the EU have concluded and signed bilateral economic agreements. The Free Trade Agreement of 1972 has opened the way towards the development of a dense network of agreements. These agreements cater for a mutual access to the markets and structure the cooperation between the two parties. After the Swiss citizens’ rejection to access the European economic area (EEA) in 1992, Switzerland and the EU signed the Bilateral Agreements I (seven agreements) in 1999. The Bilateral Agreements II (nine agreements and one exchange of letters) were signed in 2004. These treaties guarantee to a large extent a reciprocal access to markets and make sure there is no discrimination against Swiss operators in the EU’s internal market. They also underpin the tight cooperation in numerous other areas (research, safety, asylum, environment and culture).
The EU’s economic and financial policies may impact Switzerland. They influence the economic and political relations between Switzerland and the EU. EU-level regulations directly affect Swiss exports. In order to defend its interests, Switzerland follows and analyses the consequences of developments occurring in the EU.
Economic and monetary context
The European Union is the main economic partner of Switzerland. As a result, the macroeconomic and monetary stability of the EU is essential for Switzerland’s economy. The Bilateral Agreements ensure that both parties benefit from the removal of trade barriers. Hence, trade competition is fostered, as well as competition, growth and employment. The agreements’ positive effects on the economy and on economic growth per habitant in Switzerland are today recognized.
The European Union is by far the most important market for Switzerland’s export-oriented industry. During the financial crisis in 2008, this tight relation was challenged by the overvaluation of the Swiss Franc, which negatively impacted the labor market, as well as profit margins, costs and investments of firms. Nowadays, the European economy is recovering and the general situation is stable again, which is beneficial to Switzerland’s remarkably resilient economy.
The EU is implementing several projects focusing on strengthening the economic governance of the EU and of the Eurozone (Economic and Monetary Union, Banking Union, Capital Market Union). The recovery is a favorable context for the reinforcement of the economic and budgetary economies. Structural reforms are necessary and the warranty of a macroeconomic coverage in case of a crisis are priorities of the EU. Such developments have an impact on Switzerland, which follows these projects.
Various agreements considerably facilitate the import and export of goods, as well as reduce the technical barriers to trade in several industrial sectors.
The Free Trade Agreement guarantees fair conditions concerning the mutual access to the markets by eliminating tariffs and quantitative restrictions on industrial goods. This agreement is of high importance, since bilateral trade in goods between Switzerland and the EU amounts to approximately 1 billion Swiss Francs (CHF) per working day. Agreements in the area of the customs and public procurement ensure a cooperation and guarantee the non-discrimination of the Swiss and European economic operators.
The agreement on technical barriers to trade reduces the administrative burden of procedures required to place industrial products on the market in about twenty different sectors. The agreement is based on equivalence of the legislation and on mutual recognition. A similar harmonization also exists in the agricultural sector (agreement that comprises, inter alia, sanitary regulations, geographic indications). Hence, Switzerland has a privileged level of access to the European internal market for goods. The Joint Committees foreseen by the existing agreements constitute platforms to solve market access and cooperation issues.
Trade in services is mainly covered by the Agreement on free movement of services.
The financial sector is an important and competitive economic branch for Switzerland, also thanks to the export of financial services. The financial crisis has – besides other impacts – triggered a number of regulatory projects to increase stability and transparence in financial markets, and to deepen the harmonisation of the internal market. For third countries such as Switzerland, a market access regime need to be created, which harmonises the so far fragmented national rules.
EU financial markets regulations proposed by the European Commission, foresee different conditions for market access depending on sectors and include the following elements:
- Equivalence between the Swiss and EU regulations concerning the financial markets;
- Equivalence as for the regime of the monitoring authorities (implementation of the monitoring);
- A cooperation agreement between the interested monitoring authorities (of the Member States and the EU) and the surveillance authorities of the third country.
Other general conditions apply to combating money laundering and to increasing the cooperation in fiscal matters. In some cases, regulations on market access negatively affect Swiss undertakings, such as the obligation to establish a subsidiary branch in the EU.
Switzerland has also taken measures in response to the financial crisis. Important legislative changes, such as the Basel III framework, the adaptation of the Collective Investment Schemes or a regulation mitigating the issue of “too big to fail”. Other projects such as a Swiss law on financial services are in preparation. Accessing the single market requires a prior evaluation by the authority to determine whether the equivalence with the EU law is reasonable and useful.