Growth to suffer if bilaterals scrapped, warns study

The institute believes Switzerland will suffer if it can't keep the bilateral agreements with the EU together Keystone

A new study by the KOF Swiss Economic Institute says scrapping the bilateral accords with the European Union and reintroducing limits on immigration would harm business and may have other far-reaching effects.

According to a study by the Zurich-based KOF Institute, if the bilateral agreements with the European Union were cancelled, “the working age population and the population as a whole would fall by 10,000 persons per year” hitting investments, but particularly residential construction, the hardest.

The impact on Gross Domestic Product (GDP) growth would be -0.2 percentage points per year, according to a simulation by the institute, which is part of the Zurich Federal Institute of Technology (ETHZ).

These conclusions come from a new KOF study into the influence of the bilateral agreements on Swiss economic development, and in particular the agreement on the free movement of people, published on Tuesday.

According to KOF, the Swiss economy has developed “encouragingly” over the past ten years according to international standards.

A different mix

Immigration, the institute said, “has led to an increase in ‘human capital’”. More highly qualified immigrants came, partly due to the free movement of people accord, and partly because of a higher demand from Swiss businesses.

The mix of immigrants has also changed as more came from within the EU, benefitting from their priority over non-EU states not taking part in the agreement.

The KOF says that despite the increase in annual immigration from the EU 27/EFTA countries by between 16,300 and 26,300 from 2002-2012, people from countries outside the agreement were now at a disadvantage, so their numbers dropped, offsetting around half of this increase.

The institute also argues that the immigrants “complemented existing resident employees” and did not put Swiss nationals out of jobs.

In February 2014 Swiss citizens narrowly voted to bring back quotas on EU migrants to Switzerland, contrary to a bilateral agreement with the EU on the free movement of people in place since 2002, which allows citizens from member states to live and work in any of the countries involved.

Although Switzerland is not part of the EU, it has signed numerous bilateral agreements with the bloc. Since the initiative was voted-in, tensions have been high with the EU. In July, Switzerland asked for the chance to renegotiate the free movement accord but was turned down. The Swiss government now has until 2017 to put the vote into law and reach agreement with the EU over the free movement headache.

Looking at a ripple effect of Switzerland being forced to bow out of bilateral agreements due to the vote, KOF said that a knock-on effect could be issues arising for Swiss exporters and importers, if other agreements with the EU fall through as a result.