Government approves launch of Bilaterals II

Switzerland and the EU are expected to lock horns over banking secrecy Keystone Archive

The government has given the green light for what promise to be difficult negotiations with the European Union on 10 key areas.

The cabinet approved the negotiating mandates for three final dossiers, thus clearing the way for negotiations to be launched on a second raft of bilateral agreements. However, it did not reveal the contents of the mandates.

“Our message is clear: Switzerland is ready to negotiate in all 10 domains,” said José Bessard, spokesman for the Foreign Ministry’s integration office.

The first batch of seven accords – approved by the Swiss people in a referendum and ratified by all 15 EU national parliaments – will come into force on April 1.

Showdown

But Bilaterals II, as they are known, are being billed by analysts as a showdown over Swiss banking secrecy, even if neither side would describe it as such officially.

The negotiations proper cannot get under way until the EU Council of Ministers gives the green light to the European Commission to proceed. Bessard told swissinfo that Switzerland was hopeful that would happen in the near future.

The three mandates approved on Wednesday are among the most contentious of the 10 topics. They concern the taxation of savings, liberalisation of services and the Schengen and Dublin accords. Negotiations on a fourth financial question – customs fraud – are already under way.

Concessions

Customs fraud is being seen as a make-or-break issue, and the discussions have stalled over the EU’s demand that Switzerland makes further concessions. A number of EU states see these negotiations as an ideal opportunity to breach the fortress of Swiss banking secrecy.

Bessard played down the impasse in the customs fraud talks, saying it was normal for two sides to adopt different positions at the start of a negotiating process.

“It’s irrelevant to prognosticate too much,” said Bessard. “This (the exchange of fiscal information) will be one of the great subjects of the negotiations. We are still trying to determine where the boundary is – where we should start to give assistance, and where we should not.”

“We are ready to find an equitable solution. We hope the EU will play the game,” he added.

In its first reaction to the Swiss government’s announcement, the European Commission repeated its warning that without concessions on customs fraud, there would be no progress on Swiss admission to the Schengen and Dublin accords. Schengen is also likely to be used as a carrot in negotiations on the taxation of savings – another area that threatens banking secrecy.

Welcoming the fact that the mandates had been adopted, especially the one for taxation of savings, the commission nonetheless said it would reserve judgement until it had seen precise details. That will happen next Monday, when the heads of the two negotiating teams – Michael Ambühl and Percy Westerlund – meet in Bern.

“We expect certain terms in the mandate (on fraud) to be modified. It is good to have the mandates, but what counts is their exact content,” the commission said.

Cabinet divisions

Unblocking the impasse on customs fraud, then, is the key to progress in the other dossiers, and there are known to have been divisions within the cabinet as to which strategy to adopt. The economics minister, Pascal Couchepin, and foreign minister, Joseph Deiss, favour a more flexible approach, while the finance minister and current president, Kaspar Villiger, is opposed to giving any ground.

Analysts have been portraying the dilemma facing the government as a clear choice between maintaining banking secrecy and closer integration with Europe.

Ministers are adamant, however, that banking secrecy is not up for discussion. They feel the problem could be tackled just as effectively with a better taxation regime within the EU.

Popular support

The government has to bear in mind that any concessions it makes must meet with the approval of parliament and the people – and the Swiss people overwhelmingly support confidentiality in their financial affairs.

Before it could give the green light for negotiations to start, the government had to await parliament’s approval. When it came, it was on the condition that Switzerland should not be forced into a “process of systematic notification of fiscal information”, which is one of the EU’s principal aims within the taxation of savings dossier.

Other potential stumbling blocks exist. In the negotiations on the Dublin and Schengen accords, Switzerland will push for the cantons to continue to take precedence in policing matters, while on the liberalisation of services, the Swiss will insist that World Trade Organisation rules should take priority.

In addition to the four financial issues, the areas covered by Bilaterals II include: the environment, processed agricultural products, statistics – on which negotiations are already under way – education and training, media and the double taxation of pensions.

The EU wants talks to advance rapidly on customs fraud and taxation of savings. The Swiss want all 10 dossiers to be treated in parallel.

by Roy Probert