Tense year looms in EU relations

Brussels has other problems to deal with before tackling its relationship with Switzerland Keystone

While there was little movement in 2011 owing to the Swiss elections, 2012 looks like being a crucial year for relations between Switzerland and the European Union.

This content was published on January 6, 2012 minutes

Bern and Brussels will have to find a solution to what is known as the institutional issue.

Among the objectives for 2012 presented in early December by the Swiss government, “clarification of institutional relations between Switzerland and the European Union” is one of the ten biggest priorities.

Beginning in 1972 with the initial agreement on free trade, the patchwork of ad-hoc arrangements between Bern and Brussels has grown steadily; today there are about 120. They range from rather technical matters, such as cooperation on statistics, to issues that are much more tangible for the ordinary mortal, such as the agreement on the free movement of people – the Schengen accord.
Apart from these arrangements, Switzerland and the EU have been negotiating on around ten other issues which are far from secondary. In particular, tax policy is a topic which the EU will likely want to get back to in 2012 in view of the dramatic financial situation the member states are currently facing. But there is also the electricity market, agriculture, the trading of emission credits, and so on.

“If you take the example of the electricity market, until now it wasn’t a big deal not to have an agreement,” said Jean Russotto, a Swiss lawyer who has lived and worked in Brussels for 40 years.

With the phasing out of nuclear energy and the new importance being attributed to renewable energies and energy efficiency, the situation is changing rapidly, however. What is more, Switzerland represents a very important hub for the trading and transit of electricity and is thus a basic piece of the puzzle as regards the security of supply in Europe.

Without an agreement on the electricity market, Swiss firms wanting to operate in EU countries - selling renewable energy, for example – are likely to find everything becoming more difficult for them, emphasises Russotto.

No progress

The negotiations are currently in limbo. The reason is not hard to find: the EU is insisting that, before there are any new bilateral accords, the “institutional issue” has to be resolved.
The accords concluded hitherto are traditional-type treaties under international law.

“European law, just like Swiss law, is evolving. The rules are changing for the areas involved in these accords, and discrepancies keep emerging between Swiss law and European law,” noted Giorgio Pompilio, deputy information manager at the Swiss-EU Integration Office, the entity which coordinates Switzerland’s European policy.

At present it is up to joint Switzerland-EU committees to iron out these discrepancies and adjust the agreements in consequence. Given the number of agreements and the constant changes to European law, these committees are finding it harder and harder to keep up.
There is one situation that Brussels really wants to change: “For the European Union, the main problem is that agreements with Switzerland, with a few exceptions like Schengen, do not provide for future development of the law,” noted Pompilio.

“Brussels would like Bern to commit itself to taking future changes on board from the community acquis, the body of EU law. Switzerland does not want to sign any blank cheques, however, so it doesn’t want these automatic adjustments.”

All-inclusive approach

Bern is not in principle against the creation of an institutional framework which would resolve the issue of adjusting to the community acquis; as it is, Swiss legislation often gets adjusted ad hoc to the European equivalent.

But the willingness to adjust is subject to certain conditions. Switzerland wants to be able to take part in the decision-making process, as is already happening in the case of the Schengen agreement. Furthermore, it wants this framework to include arrangements that give Swiss sovereignty its due, notably the right to hold referendums.
Brussels does not seem too receptive at present. For example, the idea of creating an arbitration panel composed of EU and Swiss judges, responsible for monitoring the application of the accords and ironing out any disagreements, was rejected in no uncertain terms by the EU’s former ambassador in Bern, Michael Reiterer, and the head of the Swiss desk in Brussels, Gianluca Grippa. Such a judicial body, they say, would be in competition with the European Court of Justice.
”For now the two sides are not really listening to one another,” said Russotto. Yet the status quo is not really an option, because of the interests at stake on both sides.

Fiscal policy

“In the course of this year, the situation could thaw and many problems may be put on the table to try to get an all-inclusive approach,” said Russotto.

The catalyst here might be the thorny issue of fiscal policy, which includes taxation of savings income, the accords concluded with Germany and Britain, the tax policy of the cantons, the new regional policy and the code of conduct.
“In one sense, the EU is asking something from Switzerland here. It wants Bern to sign up to the fiscal policy on savings income, which would put an end to some privileges granted by the cantons, it wants dialogue on the code of conduct, and it does not like the accords with Germany and Britain for issues of European compatibility,” emphasised Russotto.
So fiscal policy could be a card that Bern has an interest in playing well. “In my view, by being open to negotiating on fiscal policy, Switzerland can get something back - for instance, in terms of the whole institutional issue,” he said.

Free movement of people

 One hot topic that risks jeopardising relations between Switzerland and the EU is the issue of the free movement of people. As many as three people’s initiatives, still at the signature-gathering stage, aim to limit immigration to Switzerland.
The people’s initiative launched by the Swiss People’s Party – entitled “against mass immigration” - would expressly forbid the making of international treaties which do not allow for Switzerland to manage immigration as it sees fit, and calls for an adjustment of the existing treaties if the initiative succeeds.
Swiss voters will not be asked to decide on these initiatives for a few years, seeing as the deadline for collecting the 100,000 signatures needed has been set for the end of 2012 or the beginning of 2013.
So far, Swiss voters have been consulted three times on the matter of free movement of people. In 2000, 67.2% accepted the first package of bilateral accords with the EU, which included the agreement on free movement of people. Five years later, 56% of voters approved an extension of the accord to cover ten new member states that joined the EU in 2004. The last vote was in 2009: 59.6% were in favour of renewing the accord after 2009 and extending it to cover Bulgaria and Romania.
The private sector and most politicians have always been strongly in favour of the free movement of people, emphasising that it has been a source of growth for the country. More recently, however, the ranks of those opposing the agreement have increased, in view of demographic growth (due mainly to immigration from EU countries) and the problems it causes, particularly as regards housing.

The free movement of people is also seen to be at least a partial cause of the increased pressure on wages. In 2010, according to a report by the State Secretariat for Economic Affairs, 41% of employers failed to respect minimum wage levels fixed in collective agreements, as compared with 30% in 2009.

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