Switzerland-EU Relations: The Bilateral Way in a Fragilized Position * René SCHWOK Relations between Switzerland and the European Union are in bad shape and the Swiss are tearing each other apart on this issue. There are two major issues at stake. First, the Swiss government is dithering over whether or not to initial a new Institutional agreement with the European Union (EU), although it was finalized by the negotiators in November 2018. In the event of non-acceptance by Switzerland, the European Union has already announced retaliatory measures. Secondly, in September 2020, Swiss citizens will have to vote on a popular initiative to scrap the agreement on the free movement of persons between Switzerland and the EU. A positive vote would sound the death knell for the bilateral treaties between both entities as they are bound together by a guillotine clause. These difficulties between Switzerland and the EU are certainly not new. But two fresh developments have arisen. On the one hand, the support of the socialists and trade unionists for the bilateral way is waning. On the other hand, the European Union has become less flexible than it previously was. The worst should, logically, be avoided because the Swiss have always been a pragmatic people and solutions are relatively easy to find. But an accumulation of blunders, combined with misperceptions of the actual power relations, could prove fatal. Keywords: Switzerland, EU external relations, EU external agreements, European Free Trade Association (EFTA), European Economic Area (EEA), Institutional agreement, Free movement of people, immigration, referendum, Brexit 1 INTRODUCTION Relations between Switzerland and the European Union (EU) are being chal- lenged by a new crisis. This is troubling the Confederation and has given rise to much internal debate on the topic. The Swiss were already known to have had, by far, the most referendums on European integration as they have voted no less than seventeen times, directly or indirectly, on the issue of their relationship with the EU1! But the rest of Europe shows little interest in this, even though Switzerland is * Full Professor of European Politics at the University of Geneva and was Visiting Fellow at the Robert Schumann Centre, European University Institute, Florence when he wrote this article. Email: [email protected]. 1 This number (seventeen) is debatable. Indeed, some of the popular initiatives have aimed at under- mining the bilateral approach with the EU, but they do not explicitly mention the term ‘EU’. This is for instance true of the 2014 popular initiative ‘against mass immigration’. See part III for further details. Schwok, René. ‘Switzerland-EU Relations: The Bilateral Way in a Fragilized Position’. European Foreign Affairs Review 25, no. 2 (2020): 159–176. © 2020 Kluwer Law International BV, The Netherlands 160 EUROPEAN FOREIGN AFFAIRS REVIEW the EU’s fourth-largest economic partner after the United States, China, and the United Kingdom2 and its Gross Domestic Product (GDP) is about a quarter of that of the UK.3 There are two issues of concern. First, the Federal Council (government) refuses to initial a new Institutional agreement with the EU, although it was finalized in November 2018, after five years of negotiations between Swiss and European diplomats. This is a spectacular slap in the EU’s face. Especially coming from a Swiss government that has historically always been extremely careful not to upset its neighbours. Most political parties are also reluctant about this deal, including those, such as the Socialist Party, which have traditionally supported bilateral agreements with the EU and even EU membership. The European Union has announced retaliatory measures, which has led to a crisis. Secondly, in September 2020, Swiss citizens will be called to vote in a referendum launched by the Swiss People’s Party (SPP),4 on whether or not to withdraw from the agreement on the free movement of persons with the EU. Should the people vote ‘yes’, almost all bilateral agreements with the EU would be endangered by virtue of a ‘guillotine clause’. The tension would then reach its peak. Before looking in detail at these issues, we must first recall the main aspects of the relationship between Switzerland and the European Union.5 Following the negative referendum on the European Economic Area (EEA) on 6 December 1992, Switzerland and the EU decided to put in place sectoral bilateral agreements. This bilateral way can be divided into three periods. The first period began in 1993 with negotiation towards a first series of bilateral agreements, the BA1. These were signed on 21 June 1999 and became effective on 1 June 2002.6 From a legal point of view, the different sets of bilateral agreements (BA1) are interconnected. In other words, if Switzerland terminates one of them, then all the others can be cancelled by the EU. This is what the concept of ‘guillotine clause’ refers to. The negotiation was extremely difficult and 2 European Parliament, The European Union, and Its Trade Partners (Brussels May 2019), https://www. europarl.europa.eu/factsheets/en/sheet/160/l-union-europeenne-et-ses-partenaires-commerciaux (accessed 15 June 2020). 3 UK GDP = 2,824,850MD, Switzerland GDP = 703,165MD, Country Comparison, United Kingdom v. Switzerland, https://countryeconomy.com/countries/compare/uk/switzerland (accessed 6 May 2020). 4 The Swiss People’s Party (SPP) is an anti-immigration, anti-EU right-wing nationalist party. It is the party with the highest vote share (over 25%) and is represented in government by two ministers (out of seven). 5 For a subtle up-to-date historical synthesis, see C. Church, Switzerland and European Integration (Oxford Encyclopaedia of European Union Politics May 2019). 6 Agreement Between the Swiss Confederation, of the One Part, and the European Community and Its Member States, of the Other Part, on the Free Movement of Persons, Concluded on (21 June 1999), https://www. admin.ch/opc/fr/classified-compilation/19994648/index.html (accessed 15 June 2020). THE BILATERAL WAY IN A FRAGILIZED POSITION 161 diplomats took a long time to find compromise solutions. They were not based on a pre-established model and were not intended as long term solutions. Throughout this period, the negotiations were jeopardized on several occasions by popular votes on land transport sector (road and rail). But the negotiations were finally successfully completed and 67.2% of Swiss citizens voted in favour of the agree- ment in a referendum in May 2000. This percentage of favourable votes, which may seem surprisingly high today, can be explained by the combination of two factors. First, the SPP had not opposed this agreement, although it provided for the free movement of EU nationals. Secondly, the Socialist Party and the trade unions successfully negotiated compensation measures, called flanking (or accompanying) measures to verify compliance with minimum working and wage standards to reduce the risk of wage dumping. The second period was characterized by the consolidation and extension of the bilateral way. It started in 2002 with the effective implementation of the BA1 set of agreements and the signing of a series of new bilateral agreements, BA2. The main one pertains to Switzerland’s participation in the Schengen Area and the Dublin system. This phase was also punctuated by several referendums on the abolition of free movement of persons, in which the majority of voters rejected the abolition. The third period is marked by fragility and uncertainty. It began in 2014 with the success of the popular initiative, launched by the SPP, against ‘mass immigra- tion’, which threatened the bilateral agreement package as a whole. At present, relations between the EU and Switzerland are therefore at a dead-end precisely because of the two issues examined in this article. 2 THE INSTITUTIONAL AGREEMENT (2018)7 In general terms, this agreement stems from the European Union’s desire to modify its relations with Switzerland.8 Indeed, the former considers that the bilateral agreements are inadequate because they give Switzerland too many 7 Federal Department of Foreign Affairs, Accord facilitant les relations bilatérales entre l’Union européenne et la Confédération suisse dans les parties du marché intérieur auxquelles la Suisse participe, [Agreement facilitating bilateral relations between the European Union and the Swiss Confederation in those parts of the internal market in which Switzerland participates],(Berne, 23 Nov. 2018). There is no English translation, https://www.dfae.admin.ch/dam/dea/fr/documents/abkommen/Acccord-inst-Projet- de-texte_fr.pdf (accessed 15 June 2020). 8 In fact, this project was originally of Swiss origin and was only intended to consolidate the bilateral path. However, in the course of the negotiations, the European Union changed its nature and transformed it towards more institutional integration of Switzerland into the EU system. See F. Muller, Kleine Geschichte des Rahmenabkommens (Zurich NZZ Libro 2020). 162 EUROPEAN FOREIGN AFFAIRS REVIEW opportunities to depart from European law and to undermine the homogeneity of the Internal Market. Switzerland’s response to EU pressure has been mixed. The Federal Council would have preferred to maintain the existing mechanism. Any shift towards a more supranational solution, which would give more powers to European institu- tions, would be met with serious resistance within the country. As a result, the Swiss government has, for years, pursued a policy of procrastination in an attempt to buy as much time as possible. It is important to note in order to understand the Swiss position on this issue that the bilateral and sectoral agreements governing relations between Berne and Brussels are relatively unburdensome. Except for the Schengen and air transport agreements, they do not require the Confederation to adopt the developments of the ‘EU acquis’ relevant to those bilateral agreements. Nor do they confer upon a supranational institution such as the European Commission, the power to verify that Switzerland is applying European law correctly.