Relations between Brussels and Bern have reached a low point.

It did not come as a complete surprise. “We have been expecting this somewhat”, said a senior EU official.

Yet Wednesday’s decision by the Swiss government, the Federal Council, not to sign a new “institutional framework agreement” (InstA) between the EU and Switzerland and to abandon talks nonetheless made big waves in the European capital Brussels.

“The Federal Council today took the decision not to sign the agreement, and communicated this decision to the EU. This brings the negotiations on the draft of the InstA to a close.” The planned pact was intended to simplify and boost relations between Switzerland and its biggest trading partner, the EU. Nonetheless, the government in Bern concluded that “the conditions are not met for the signing of the agreement.”


Swiss critics of closer European integration recently warned of a curtailing of Swiss sovereignty and independence through the agreement. However, Brussels has been adamant that Switzerland should not be allowed to cherry-pick the positive aspects of being part of the EU free trade area whilst rejecting certain obligations, such as allowing free movement of EU citizens into Switzerland who were not entering for work-related purposes. The Swiss said the EU was not willing to make concessions in this respect. Also contentious were state aid rules and questions related to the expulsion of people with a criminal record.

So far, relations between the two sides have been governed by over 100 bilateral agreements. These will continue to remain in effect. However, the failure to upgrade the relationship is likely to have longer-term consequences for Switzerland’s position. It will now be excluded from a future deepening of the EU’s domestic market, for example the creation of an “electricity union” or a closer research cooperation.

Moreover, some of the existing bilateral agreements have already expired or will expire eventually, with no replacement in sight. For instance, an EU-Swiss accord on bilateral trade in medical technology products ended last week.

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Photo: Shutterstock


The European Commission reacted with dismay. “We take note of this unilateral decision of the Swiss Government. We regret this decision, given the progress that has been made over the last years to make the Institutional Framework Agreement a reality. The EU-Swiss Institutional Framework Agreement was intended as the foundation to enhance and develop EU-Swiss bilateral relations for the future. Its core purpose was to ensure that anyone operating in the EU Single Market, to which Switzerland has significant access, faces the same conditions. That is fundamentally a matter of fairness and legal certainty. Privileged access to the Single Market must mean abiding by the same rules and obligations,” the Commission said in a press release.

The statement added: “This is why, back in 2019, the EU insisted that this agreement was so essential for the conclusion of possible future agreements regarding Swiss further participation to the Single Market, and also an essential element for deciding upon further progress towards mutually beneficial market access. […] Without this agreement, this modernisation of our relationship will not be possible and our bilateral agreements will inevitably age: 50 years have passed since the entry into force of the Free Trade Agreement, 20 years since the bilateral I and II agreements. Already today, they are not up to speed for what the EU and Swiss relationship should and could be.”

Potential fallout

In 2020, more than 1.4 million EU citizens were residing in Switzerland while around 400,000 Swiss nationals (4.6 percent of all citizens of Switzerland) lived in the EU. Nineteen percent of the resident working age population in Switzerland have the nationality of one of the 27 EU member states.

In addition, there are around 344,000 foreign cross-border commuters working in Switzerland. Two-thirds of them work in the service sectors.

The European Commission pointed out that 37 percent of doctors working in Switzerland hailed from outside the country or possess a foreign diploma, and that a majority of foreign medical professionals come from Germany. In the gastronomy sector, around 45 percent of workers do not have Swiss citizenship.

The Commission said that if Switzerland does not sign up to the new framework agreement, it would not have the possibility to fully participate in the operations of the newly established European Labour Authority, such as the participation of Swiss enforcement bodies in joint inspections, and would have only limited possibilities to sanction fraudsters in this area.

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Photo: Shutterstock

In addition, Switzerland could not be granted access to the Internal Market Information system for administrative cooperation with EU Member States. This system, according to the EU, “greatly facilitates the implementation and application of the EU posting rules and helps to effectively enforce fines in cross border situations.” Moreover, the Swiss will also lose access to the European cooperation network of employment services, designed to facilitate the free movement of workers.

Another repercussion would be in the trade relationship. Currently, the EU is Switzerland’s most important trading partner, accounting for almost half of its imports of goods and about 42 percent of its exports of goods. In contrast, Switzerland is the EU’s fourth largest trading partner after China, the United States and the United Kingdom. The Swiss market represents about 7 percent of EU exports and 6 percent of its imports.

Trade benefits

According to a study carried out by the Swiss Economic State Secretariat in 2015, the loss of the bilateral agreements would reduce Switzerland’s GDP by €425 to €580 billion for the period of 2018 to 2035.

Without the extension of the scope of the Trade in Agricultural Products Agreement to the whole food chain, issues such as food labelling would remain not harmonised, smaller companies from exporting from Switzerland into the EU and vice versa, argues the EU. Not upgrading the agreement would also deprive Switzerland of the opportunity to negotiate better market access for some of its agricultural products, notably meat and dairy.

The Swiss government complained that the EU wanted to exclude Swiss organisations from key EU programmes and was thus treating Switzerland worse than other non-member states.

What next?

It is unclear if there is a viable alternative path to reach a closer alignment between the two sides. On Wednesday, the EU seemed unwilling to countenance further talks with the Swiss. In Bern, the Federal Council was more upbeat and said it wanted to enter into a “political dialogue” with Brussels on how the bilateral relationship could be further developed.

Instead of an all-encompassing agreement, Bern said it wants to solve concrete problems with the EU and ensure that the existing  bilateral agreements are applied as smoothly as possible. With regard to possible retaliatory measures by the EU, Foreign Minister Ignazio Cassis said that Switzerland should not be placed in a worse position by the EU than other third countries. Existing agreements needed to be updated.

Author: Michael Thaidigsmann