Brexit – Lessons to Switzerland

Great Britain and Switzerland are ready for free cooperation between sovereign states

by Dr iur. Marianne Wüthrich

The lamentations about the expected horrors of a No-Deal-Brexit* are set at a similar level of volume and excitement as the warning calls for a Switzerland without an institutional Framework Agreement with the EU. On closer inspection, many of the things feared in both cases will in all likelihood turn out to be nothing much at all. For example, Switzerland already has some experience with unconventional solutions itself, “thanks” to various illegal sanctions from Brussels. In addition, free cooperation between states is much more pleasant and flexible than an EU-esque authoritarian standardisation of the most diverse legal systems and cultures. The anxious glances we keep sneaking at Brussels sometimes make us almost forget natural behaviour and dealing between two states. In any case, the Federal Council has already negotiated a whole series of treaties with the British government for the period after the Brexit (whether with or without a deal), naturally subject to the approval of Parliament and the sovereign.

Professor of Economics Patrick Minford on the effects of Brexit

The media often talk of chaotic conditions after a “hard” Brexit, the collapse of the British economy and much more. This inevitably reminds us Swiss of the gloomy prophecies for Switzerland as a business location in the event of the sovereign’s refusal to join the EEA in 1992. It is well known that none of this has happened, quite the contrary. Corresponding signs can also be observed in the British economy: the Swiss newspaper “Finanz und Wirtschaft” (Finance and Economy)writes: “Since the summer of 2016 the unemployment rate has fallen continuously to 3.9 %. This is the lowest level in over forty years.”1
In Switzerland, we do not often hear comments of British economists on the consequences of the Brexit. One of those, and a person who calls a spade a spade, is Patrick Minford, Professor of Applied Economics at Cardiff University. He says that he can see no major problems for the British economy, because once Britain left the EU, trade in goods would be conducted according to the rules of the World Trade Organisation (WTO), and thus on a very solid basis. In addition, London would then have the opportunity to conclude free trade agreements with other states: “The sooner we get out of the customs union and are free to conclude free trade agreements with countries outside the EU, the better”. It is also interesting to note Professor Minford’s comment that the warning against kilometre-long truck traffic jams at the border is unrealistic: “According to WTO rules, customs clearance today takes place electronically even before the border is crossed. This is why the demarcation between Ireland and Northern Ireland is not a problem.” This is a problem artificially conceived by the EU as a political weapon”, said Minford.2
What are the consequences we can draw for Switzerland from all this? First, the freedom to conclude treaties with other countries without interference from outside is part of the foundation of state sovereignty – we have always had this freedom, so let us preserve it! Secondly, Switzerland has more options with respect to Brussels than the WTO rules. If we do not sign a Framework Agreement, we will be left with the basic 1972 Free Trade Agreement with the EU, and the Bilateral Agreements I and II will remain. Although the EU Commission and the EU turbos in Berne claim that without “modernisation” these treaties would stagnate and become obsolete, we should not forget that the Orwellian term “modernisation” means the future obligation to adopt any new EU laws, which Switzerland would then have agreed to with the institutional agreement.

The more a country is involved, the more difficulties it will have to get out again

The authoritarian way in which EU leaders deal with a country that has done nothing other than making use of its contractual right of termination should be a particularly clear warning sign to us. As Professor Minford notes, the song and dance about the border between Ireland and Northern Ireland is only to keep Britain in the Customs Union, and so in fact to prevent its withdrawal for years to come. This would also serve as a deterrent to other states wishing to withdraw.
The fact that exactly the same regulations concerning all areas of life apply to 28 states – for example in the regulation of the movement of persons and goods across borders – highlights the absurdity of the EU construct. Why should London and Dublin not regulate their border traffic by direct agreement? That is precisely why the majority of Britons want to leave: so that they can again negotiate their own affairs with other states.
For Switzerland, the lesson to be learnt from these events is clear: the deeper we get entangled in the Brussels networks, the more difficult it will be for us to get out again. It is true that, according to the Framework Agreement, we would theoretically retain the right to call for referendums against the flood of EU decisions pouring in over us, but this would be stalled by guillotine threats. For the Framework Agreement would entitle the EU to suspend one or more of the bilateral treaties as a “compensatory measure” for an undesirable referendum (Article 10 (6) of the Agreement). This might well soon include the Free Trade Agreement (FTA), which Switzerland concluded with the EEC in 1972, and the more than one hundred other treaties based on this, as the annex to this agreement announces early negotiations on their “modernisation”.3 We must not allow Brussels to modify this contractual structure for trade between Switzerland and the EU states, which has been tried and tested for 47 years.

Lessons for Switzerland: Conclusion

For reasons of constitutional law and policy, it is advisable not to let ourselves be impressed by the alleged billions in losses that the trade association economiesuisse predicts the Swiss economy to suffer without a Framework Agreement. Instead, let us concentrate on the essentials: Switzerland’s well-positioned economy, its low unemployment rate and its high quality of life are mainly caused precisely by the special characteristics of the Swiss model: directdemocratic decisions with a view to the common good, small-scale, federalist and provident organisation, our dual vocational training system, and our neutrality (and therefore no war participation). In other words, the more freedom and sovereignty Switzerland retains to shape its own future, the better it will be for the population – and that not only in the material sense!

Federal Council creates basis for new economic relations with Great Britain4

Since the British decision of 23 June 2016 to leave the EU, the Federal Council has swiftly negotiated with the British government on the most pressing intergovernmental issues. The reasons: “The United Kingdom is an important partner of Switzerland. At the end of 2018, around 43,000 UK citizens were living in Switzerland. Conversely, the Swiss community in the UK was about 34,500 persons. In 2017, the UK was the fifth most important sales market for Swiss exports worldwide (CHF 11.4 billion).”5 In contrast to the secrecy surrounding the Framework Agreement, here everything is above board: the most important agreements for the period after Britain’s withdrawal from the EU are ready and open to be read by everyone. One of the treaties is currently undergoing the consultation procedure. That is how uncomplicated is the cooperation between two states pursuing common goals.

–    Federal Council “Mind-the-Gap” Strategy of 19 October 2016

    Shortly after the British referendum, the Federal Council adopted its “Mind-the-Gap” strategy to ensure the fullest possible continuation of mutual rights and obligations in all areas in which the two states maintain relations.

–    Trade agreement signed on 11 February 2019

    As a basis for their future economic relations, the plenipotentiaries of the two governments have initialled (provisionally signed) an agreement which will enter into force in accordance with Art. 9 para. 3 thereof when the trade agreements Switzerland-EU are no longer applicable to the United Kingdom.6

–    1972 Free Trade Agreement (FTA) will continue to form the basis

    Whether Great Britain leaves the EU with or without an agreement: “The trade agreement signed by Switzerland and the United Kingdom provides for the reciprocal rights and obligations laid down in the FTA to be continued on a bilateral basis from the date of withdrawal”7.

Swiss exporters well prepared

Swiss exporters will fill any gaps in electronic customs clearance or other regulations by transporting their goods to Great Britain for storage and stacking them in local warehouses there, so for example the Jonschwil cheese exporter Hardegger or Stihl Kettenwerke in Wil. Stihl is a global corporation based in Germany and has “sufficient experience in dealing with different regulations, customs clearance and transport in markets without free trade agreements,” says media spokesman Stefan Caspari. This will also be the case for other companies in the EU: Because they are interested in the smoothest possible continuation of trade, they will already have taken their measures by now. The Bühler Group in Uzwil, for example, has “developed strategies for all possible variants of withdrawal from the EU, in order to be able to continue to operate profitably,” says media spokesman Samuel Eckstein. And Hardegger Käse AG is banking on the new agreements that the Federal Government has negotiated with Great Britain: “These are a first step towards a secure future.”8
Three decisions by the Federal Council on the topic of migration after Brexit

–    Consultation Procedure on the Agreement of 25 February 2019 on the reciprocal rights of British and Swiss citizens in the field of the free movement of persons

    British and Swiss citizens living in the respective other state at the time of the UK’s withdrawal from the EU are to retain their rights under the Swiss-EU Agreement on the Free Movement of Persons (residence rights, coordination of social security schemes, mutual recognition of professional qualifications).9 On 22 March 2019, the Federal Council opened consultation procedure on this draft agreement; these are due to end on 29 May 2019.

–    Separate quotas for employed British citizens

    For the current year of 2019, the Federal Council has approved a quota of 3,500 employed persons from the time of the British withdrawal from the EU.10

–    Visa exemption

    The Federal Council has made the necessary amendments to the Ordinance on the Entry and Visa Procedure (OPEV), so that British citizens are exempt from the visa requirement to enter Switzerland, even after Brexit, and even for longer-term residence.11
The question of a research agreement between the two top rankers arises
According to international rankings, ETH Zurich, together with the British universities of Oxford and Cambridge and a handful of US centres, is one of the world’s leading research institutions. If the EU were indeed to downgrade Great Britain – like Switzerland – in the “Horizon” research programme, an international network of excellence between the two countries and others would be an appropriate response.
Strangely enough, neither Fritz Schiesser, president of the ETH Board, nor Antonio Lopreno, president of the Swiss Academies of Sciences, is pushing for such a consolidation, because: “From the point of view of industry and research, there is probably no alternative to the Framework Agreement,” said Schiesser, and very similarly Lopreno. Yet the alternative is presented to us by the British Department of Education. It is planning “a worldwide Champions League of the best universities” and explicitly invites Switzerland.12     •

1    “Das Brexit-Chaos/Starker Arbeitsmarkt - The Brexit Chaos / Strong Labour Market”. In: “Finanz und Wirtschaft” (Finance and Economy) from 30 March 2019
2    Florian Schwab. “Britanniens glänzende Zukunft – Britain’s bright future.” In: Weltwoche No. 06.19 from 6 February 2019
3    “Abkommen zur Erleichterung der bilateralen Beziehungen zwischen der Europäischen Union und der schweizerischen Eidgenossenschaft in den Bereichen des Binnenmarkts, an denen die Schweiz teilnimmt” (Agreement to facilitate bilateral relations between the European Union and the Swiss Confederation in areas of the internal market in which Switzerland participates) [Institutional Framework Agreement]. “Gemeinsame Erklärung EU-Schweiz zu den Handelsabkommen” (EU-Switzerland Joint Declaration on Trade Agreements), p. 32 www.eda.admin.ch/dea/de/home/verhandlungen-offene-themen/verhandlungen/institutionelles-abkommen.html (in German)
4    “Bundesrat schafft Basis für die zukünftigen Wirtschafts- und Handelsbeziehungen mit dem Vereinigten Königreich“ (Federal Council creates the basis for future economic and trade relations with the United Kingdom). Federal Council press release from 14 December 2018
5    see Federal Council press release from 14 December 2018
6    Trade Agreement between the Swiss Confederation and the United Kingdom of Great Britain and Northern Ireland from 11 February 2019
    www.eda.admin.ch/dea/de/home/verhandlungen-offene-themen/offene-themen/brexit.html (in German) and uk_trade_agreement_pdf
7    Economic relations between Switzerland and the United Kingdom after the “Brexit”. Status 29 March 2019. www.eda.admin.ch/dea/de/home/verhandlungen-offene-themen/offene-themen/brexit.html) (in German) and https://www.eda.admin.ch/dam/dea/en/documents/fs/FS-Brexit_en.pdf
8    David Grob. “In der Schwebe“ (In limbo). In “Wiler Zeitung” from 29 March 2019
9    Agreement between Switzerland and the United Kingdom on the rights of citizens following the withdrawal of the United Kingdom from the EU and the abolition of the Agreement on the Free Movement of Persons (FMPA).
10    Revision of the Ordinance on Admission, Residence and Employment (VZAE) of 22 March; Federal Council press release from 22 March 2019
11    Federal Council press release from 22 March 2019
12    Florian Schwab. “Brexit. Descent into the bush league”. In the journal “Weltwoche”from 27 February

Internal consultation on the Framework Agreement: Goal achieved?

mw. On 16 January 2019, the Federal Council launched so-called “consultations” with selected “actors”, which have apparently now come to an end. The evaluation for the attention of the population is vaguely postponed to “early summer”. The Federal Council has explicitly not chosen the democratic instrument of the consultation procedure, where the views of all cantons, parties and associations, citizen groups and individual citizens are drawn up in writing and publicly accessible. Rather, according to the Federal Council, there were “direct meetings and contacts” with the aim of “conducting interactive discussions on the advantages and disadvantages of the draft agreement, identifying the positions of the most important Swiss actors and working out a consolidated position with regard to the open points” (Federal Council press release of 16 January).
So is this a kind of “processing” of people with an unwanted mind of their own? Included among the “most important actors” (a term that is almost unbearable for a Swiss citizen accustomed to democracy!) were, for example, not the 26 cantons, but only the head of the Conference of Cantonal Governments (KdK), not all political parties, but only those “with appropriate power in parliament” – i.e. those who are then to bring together the majority for the agreement during the vote in parliament ...
Despite serious reservations, for example on the part of cantonal governments opposing a ban on state aid because they want to retain their federalist sphere of influence, or of the Swiss Trade Union Confederation, which wants to keep to a wage protection system worthy of its name, the federal administration team apparently managed to persuade most of the “actors” to accept unpalatable compromises.
The editors of “Finanz und Wirtschaft” (Finance and Economy) wrote quite openly on 2 April: “At first, things looked bad for the institutional agreement with the EU (InstA): after the publication of the Framework Agreement negotiated by the Federal Council with the EU, the government was confronted with harsh rejection. The treaty seemed to have no chance. [...]
Now it appears that the consultation was probably not a bad idea. In talks with interested parties the Federal Council apparently succeeded in softening the criticism and in awakening understanding for the agreement. The consultation has thus achieved its goal.” (Peter Morf. “Erfolgreiche Konsultation – Successful consultation”. In the magazine ”Finanz und Wirtschaft” from
2 April 2019)