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Switzerland offers some valuable lessons for Brexit The British economy is the same size as the 19 smallest EU countries put together

Political Insider

It’s hard to ignore Switzerland’s experience when looking at Brexit.

Here we have another country that isn’t a member of the European Union, the single market or a customs union. It’s also a country that trades heavily with the EU. And it has an arrangement that avoids passport checks at its border. Last but not least, its decision not to join the internal market was met with grave warnings from its business community that trade would be disrupted.

So where is Switzerland’s experience with the EU instructive for Brexit Britain and where does it diverge?

Similarities between Brexit Britain and Switzerland

1. Switzerland isn’t in the single market

In 1992, the Swiss voted against joining the European Economic Area or single market, which was then about to be founded. In return for full access to the single market, non-EU countries like Norway and Iceland agreed to accept all the rules of the bloc without being able to vote on them.

There have been some numbers put about on how much of a “rule-taker” these countries really are. The only figure based on official data has come from the Icelandic government, which recently declared that Iceland had only taken on 13 percent of the internal market’s regulations. That’s twice as high as the figure cited back in 2006, but may still sound surprisingly low.

The explanation is simple: Iceland and Norway don’t have to implement single market rules when they aren’t relevant to them. For instance, they both enjoy an exemption from EU rules on beehives. The EEA is really a constant negotiation between the EU and the non-EU members of the single market on whether EU rules are relevant.

At the same time, Norway has just given in and agreed to adopt the EU’s updated “Energy Package” regulations – an indication that the haggling can only go so far. The Swiss voted against joining the EEA out of concerns over national sovereignty, and not a lot of explanation should be needed that this isn’t a sustainable place for Brexit Britain, even if it has more or less accepted to be a “vassal state” during the transition period until the end of 2020.

For Switzerland, there is another, more specific reason that automatically adopting the EU’s rules wouldn’t be acceptable. As the Swiss Finance Minister, Ueli Maurer, noted earlier this year, “to completely accept EU law would damage [the Swiss] economy”, as it would threaten the existing regulatory divergence between the country’s 26 cantons.

2. Switzerland isn’t in a customs union with the EU

The Swiss have their own independent trade policy and can set higher or lower tariffs on imports. They have a trade deal with China, unlike the EU. This does mean when goods cross the border they have to be inspected, which means delays and bureaucracy, particularly for small companies.

Still, only about two per cent of road freight is physically inspected, which is about the same as the number of containers entering Europe’s second biggest port, Antwerp.

The Swiss controls are often carried out away from the border. Small traders are often not checked and technology is increasingly being used to reduce the administrative burden. Indeed, the head of Swiss customs, Christian Bock, has told MPs that he thinks a soft border on the island of Ireland could be “possible”.

To make this happen, he suggested “common patrols between the United Kingdom and Republic of Ireland”, an intelligence-led strategy to ensure safety of cross-border trade, controls away from the border, a pre-qualification system for trusted traders, and a streamlined system to manage “low-risk” or regular trade. However it still isn’t entirely clear how much “physical infrastructure” the British government, Ireland and the EU are willing to accept, and there are a host of political and cultural sensitivities to bear in mind.

3. Switzerland has a passport-free travel arrangement with the countries it shares a border with

The Swiss are a member of the Schengen Zone, which allows travel without passport checks as a general principle, although in recent years the European Commission had to allow a lot of flexibility in the implementation of this, due to the refugee crisis. The Swiss backed Schengen in a 2005 referendum with a solid majority of 54.6 %.

In Britain too there is firm support for the Common Travel Area with the Irish Republic, which was established in 1923, long before either country joined the EU. It’s important not to confuse the right to settle somewhere, called “freedom of movement” in EU lingo, with the right to cross a border without being checked. The former has been subject to heated political debates, both in Switzerland and the UK.

4. Cross-border traffic between Switzerland and the EU is much heavier than between Northern Ireland and the Republic

Roughly 30,000 people cross the U.K.-Irish border every day, while the number of people crossing the Swiss-EU border is more than 300.000.  There is also more than twenty times as much cross-border shopping in Switzerland compared to the EU’s future border in Ireland.

As for trade, one can safely say that EU-Swiss commerce is of a different scale and complexity to that between Northern Ireland the Republic.   The Irish border sees only about 5 billion euros worth of trade a  year, a figure dwarfed by the 184bn euros between Switzerland and its four EU neighbours.

Swiss authorities open more than 30.000 smuggling cases per year. In Northern Ireland this issue isn’t entirely absent either, especially when it comes to fuel laundering and tobacco smuggling. Of course, the key difference here is the history of the Troubles, but as much as one needs to keep this in mind, it is also worth looking at certain precedents that can be helpful to provide solutions.

5. Swiss-EU negotiations got off to a bad start

The EU leadership at the time wasn’t exactly delighted to see the Swiss reject their preferred model for involving non-EU member states economically, especially just after the Danes had just rejected the Maastricht Treaty and the French had come close to doing so.

It took the Swiss and the EU at least five years – from 1994 to 1999 – to work out a deal, whereby the Swiss basically agreed to voluntarily take over EU regulations in return for market access. For the Swiss, it was important this happened “voluntarily”, so as to respect the referendum result, while for the EU it was important to have some restrictions to avoid undermining countries like Norway which had agreed to automatically accept EU rules in return for full access.

6. The Swiss government was also split on ideological lines

Even after their deal with the EU was concluded, severe ideological differences persisted. These worsened after the Swiss narrowly voted against freedom of movement in 2014, a decision which was all but ignored. Regarding an updated relationship with the EU, the seven cabinet members from the four parties that compose the Swiss government only managed to agree in March 2018 on a unified platform for talks, “a major step forward after their squabbling hampered years of negotiations and frustrated the EU”, as Reuters put it.

In a nutshell: internal divisions and some healthy political discussions shouldn’t necessarily prevent a deal with the European Union.

Areas of difference

1. Switzerland accepts freedom of movement

The British government’s insistence that freedom of movement must end after Brexit will of course make it harder to obtain concessions in other areas. Given the importance of workers from Southern and Eastern Europe for the UK economy we might expect a degree of latitude here. Perhaps maximum quota per EU member state, or another arrangement that can reassure citizens there is sufficient control.

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