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FANvoices | Switzerland

Will there forever be a Swiss-shaped hole in the heart of the European Union?

By Michael Weinold and Mark Ballandies, Club Alpbach Switzerland

In May, efforts to reach a comprehensive bilateral agreement between Switzerland and the European Union finally broke down. This ended eight years of negotiations that included threats and the implementation of various sanctions on both sides.

Before negotiations on the Institutional Agreement commenced in 2013, relations between the EU and Switzerland had been governed by a large number of bilateral agreements on trade, services, education and research. The importance of these agreements to both parties is obvious: The European Union, on one hand, represents the world’s largest single market. Switzerland, on the other hand, is located right at the heart of Europe. It is home to the world’s largest cluster of IT companies outside of Silicon Valley, and hosts Europe’s largest agglomeration of financial and pharmaceutical industry as well as the continent’s best research institutions and universities. No other nation is home to an equally large number of international institutions such as the UN, the WTO, the WHO, CERN and the Red Cross.

Why then would the Federal Council of the Swiss Confederation decide to cease negotiations on such a comprehensive and evidently mutually beneficial treaty? The reasons for the breakdown of negotiations can be primarily traced to two sensitive topics:

First, the erosion of Swiss wage level protections that currently ensure “equal pay for equal work”. Wages in Switzerland are, on average, double those in its neighboring countries and up to ten times higher than those in Eastern EU member states. In a groundbreaking 1992 popular referendum, the Swiss electorate agreed to open its economy to EU labor only if Swiss labor organizations could enforce equal pay for equal work. The current agreement would have eroded these protections and removed the protection offered by swiss labor unions. While unions and worker’s rights organizations all across Switzerland have warned of this development, economically liberal thinktanks have instead tried to sway public opinion in favor of further market liberalization.

Second, the dynamic, that is, automated Swiss adoption of EU laws pertaining to free movement, trade, taxation and environmental protection. Some agreements, such as Schengen, already include dynamic adoption of laws. However, this would further decrease the autonomy of the Swiss electorate in domestic matters. It also illustrates the potential for conflict between Swiss direct democracy and EU centralized lawmaking. Guillotine clauses in the agreement would have relegated popular votes to mere symbolic events, as all major topics would have been off limits for fear of a complete suspension of all bilateral agreements.

Where can bilateral relations go from here? The answer is simple: a re-invigoration of bilateral agreements that account for the many unique aspects of the Swiss economy and the country’s history of direct democracy. Looking beyond Switzerland, the EU should reflect both on its foreign and domestic priorities.

Abroad, it has made a commitment to accept the developing countries of the Western Balkans as full EU members, and ascension talks with Turkey have still not been suspended. Yet notably neither Switzerland, Norway nor Iceland have intentions of joining the Union any time soon. Sweden even refuses to adopt the Euro, despite its clear obligations under the Maastrich treaty. A Union whose appeal to new members lies only in generous financial aid, paid for by the “frugal five”, will remain an easy target of Eurosceptics and conservatives.

Domestically, the fragility of the many lauded freedoms that union memberships affords its citizens has been demonstrated in the past year. Countries unilaterally closed borders and the commission botched centralized vaccination procurement efforts. With the rejection of the Institutional Agreement, Switzerland has shown that it is unwilling to compromise social cohesion in favour of more liberal market access.

With the union deeply divided on immigration, foreign policy and domestic affairs, the question of EU Swiss relations seem like a diplomatic side note. But perhaps what will save the Union going forward are two principles that lie at the heart of the Swiss political system: Direct democracy and true subsidiarity. But this is a whole different question.


Michael Weinold is a data scientist working for a major Zurich-based financial institution. He was previously with the University of Cambridge and ETH Zurich as a researcher in technology management and energy efficiency for climate change mitigation. He is the current president of Club Alpbach Switzerland.

Mark Ballandies is a researcher at ETH Zurich, working on multi-dimensional incentive systems for information sharing where he combines the fields of semantic networks, ethical data sharing and cryptoeconomics. He is the current treasurer of the Club Alpbach Zurich, as well as president of the NGO Education Matters e.V..