EU-Switzerland relations head for trouble as partnership deal unravels

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Switzerland on Wednesday pulled the plug on years-long efforts to sign a landmark partnership agreement with the EU, handing a major defeat to the European Commission and risking a deterioration of economic ties.

The decision by the Swiss Federal Council to end talks with Brussels, which had been ongoing since 2014, means that both sides won’t be able to upgrade a patchwork of bilateral treaties covering issues ranging from trade over transport to medical devices — some of which are almost 50 years old. In statements, Brussels warned that these bilateral deals “will inevitably age,” and threatened that without the broader partnership treaty, “no new agreements with Switzerland will be concluded and the existing agreements may not be updated.”

The tense reaction indicates that relations with the Alpine state are heading for turbulence. There’s plenty at stake: Switzerland is the EU’s fourth-largest trading partner, while Switzerland trades more with the EU than anyone else.

In the health sector, the Swiss decision will even have an immediate impact. By coincidence, a mutual recognition agreement for medical devices expired on Wednesday, meaning it will be more complicated for manufacturers to trade such devices between the EU and Switzerland. The mutual recognition agreement would have been renewed as part of the partnership treaty, also known as the Institutional Framework Agreement.

Politically, the Swiss rejection of the agreement deals a huge blow to the Commission, which has been heavily investing at the highest level to make the deal work — first under former Commission President Jean-Claude Juncker and then his successor Ursula von der Leyen, who both personally took charge of the file. Juncker said in 2019 that one of the three “biggest regrets” of his tenure was his inability to finalize the deal with Bern.

Brexit had complicated the talks as the Commission’s hard negotiating position toward the U.K. government on issues such as protecting the EU’s single market meant that Brussels did not want to be perceived as being more flexible with the Swiss.

Von der Leyen had been hoping to take a big step toward completing Juncker’s task when she met Swiss President Guy Parmelin last month, but instead, the meeting failed to bridge differences on three key areas in which the Swiss demanded exemptions: state aid rules, EU citizens’ ability to access the Swiss welfare system and protection of higher Swiss wages. Right-leaning Swiss politicians argued that without concessions in these areas, the agreement would be at risk of being voted down in a referendum.

The Commission has rejected such exemptions as “simply not acceptable,” arguing that Switzerland’s “privileged access” to the EU market means it must abide by similar rules as the bloc’s member countries: “That is fundamentally a matter of fairness and legal certainty.” An EU factsheet said the bloc had wanted to keep the door open to further negotiations and claimed that Brussels “formulated compromises which go a long way towards the Swiss concerns.”

Yet Parmelin said Wednesday that the Swiss Federal Council had concluded following domestic consultation in recent weeks that “necessary solutions” could not be reached, which is why it “decided to terminate the negotiations.”

The Swiss president said, however, that Bern is seeking to “open a new chapter in our relations,” adding that it will be “hopefully a fruitful one.”

In limbo

The Commission’s refusal — at least for now — to engage in negotiating any alternative deals with Switzerland means there’s little reason to expect such fruitful cooperation in the near future.

A senior European Commission official remarked Wednesday that EU countries had expressed a similarly tough stance in 2019 when they declared that the “conclusion of the Institutional Framework Agreement on the basis of the present text is a precondition for the EU for the conclusion of future agreements on Swiss participation in the EU’s internal market.” EU ambassadors were convened for an emergency meeting on Wednesday evening to discuss the consequences of the Swiss decision.

“To give you one example, we have been in a conversation with the Swiss for quite some time on an agreement on electricity,” the senior Commission official said, referring to talks on a deal that would better regulate the power exchange between the closely interlinked electricity grids of the EU and Switzerland.

Bern has long been interested in being granted “equal, free and fair market access” to the EU’s energy system, but the senior Commission official said that “this cannot be done” as a result of the collapse of talks. Similarly, the mutual recognition of medical devices was “put in a limbo” by the Swiss decision, the official said.

Disturbances are also expected in broader economic relations. Even though the EU-Switzerland free trade deal from 1972 remains unchanged by Wednesday’s scuppering of the framework agreement, the German-Swiss Chamber of Commerce warned in a statement that a failure to undertake “necessary updates” to the trade deal, for example concerning new machinery directives or data equivalency, will create costly hurdles for companies.

“For companies in Switzerland, but also for those in the EU, market access risks to become significantly more complex and expensive, as products must be re-certified for the respective markets, for example, and legal representatives must be appointed,” the statement said, adding: “In addition, disruptions in the supply chain may also arise, as exporting products from the EU to Switzerland may no longer be worthwhile.”

Other problems could emerge in the food sector, where there’s no harmonization on issues such as food labeling. The EU says the framework agreement would have also allowed Switzerland to negotiate better market access for some agricultural products, particularly meat and dairy.

Finally, the failure to finalize the agreement means that Swiss airlines have less access to the EU aviation market, with equal restrictions for EU carriers on the Swiss market.

Andreas Schwab, chair of the European Parliament’s delegation on Switzerland, called the decision of the Swiss government “quite detrimental” and expressed regret that “more than seven years of negotiations and patient waiting have been senselessly wasted.”

However, he called on the EU not to slam the door shut on future negotiations, which he said was particularly important for citizens living in the Swiss-EU border regions: “We need to continue to provide pragmatic solutions for the people in the region who have no sympathy for the supposedly patriotic bickering in Bern.”

Aitor Hernández-Morales contributed reporting.

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