Switzerland–European Union relations

Trade

The European Union is Switzerland's largest trading partner, and Switzerland is the EU's fourth largest trading partner. Switzerland accounts for 5.2% of the EU's imports; mainly chemicals, medicinal products, machinery, instruments and time pieces. In terms of services, the EU's exports to Switzerland amounted to €67.0 billion in 2008 while imports from Switzerland stood at €47.2 billion.

Treaties

Switzerland signed a free-trade agreement with the then European Economic Community in 1972, which entered into force in 1973.

Switzerland is a member of the European Free Trade Association (EFTA), and took part in negotiating the European Economic Area (EEA) agreement with the European Union. It signed the agreement on 2 May 1992, and submitted an application for accession to the EU on 20 May 1992. However, after a Swiss referendum held on 6 December 1992 rejected EEA membership by 50.3% to 49.7%, the Swiss government decided to suspend negotiations for EU membership until further notice. However, its application was not formally withdrawn until 2016.

In 1994, Switzerland and the EU started negotiations about a special relationship outside the EEA. Switzerland wanted to safeguard the economic integration with the EU that the EEA treaty would have permitted, while purging the relationship of the points of contention that had led to the people rejecting the referendum. Swiss politicians stressed the bilateral nature of these negotiations, where negotiations were conducted between two equal partners and not between 16, 26, 28 or 29, as is the case for EU treaty negotiations.

These negotiations resulted in a total of ten treaties, negotiated in two phases, the sum of which makes a large share of EU law applicable to Switzerland. The treaties are:

1. Free movement of people
2. Air traffic
3. Road traffic
4. Agriculture
5. Technical trade barriers
6. Public procurement
7. Science

1. Security and asylum and Schengen membership
2. Cooperation in fraud pursuits
3. Final stipulations in open questions about agriculture, environment, media, education, care of the elderly, statistics and services.

The Bilateral I agreements are expressed to be mutually dependent. If any one of them is denounced or not renewed, they all cease to apply. According to the preamble of the EU decision ratifying the agreements:

The seven agreements are intimately linked to one another by the requirement that they are to come into force at the same time and that they are to cease to apply at the same time, six months after the receipt of a non-renewal or denunciation notice concerning any one of them.

This is referred to as the "Guillotine clause". While the bilateral approach theoretically safeguards the right to refuse application of new EU rules to Switzerland, in practice the scope to do so is limited by the clause. The agreement on the European Economic Area contains a similar clause.

Prior to 2014, the bilateral approach, as it is called in Switzerland, was consistently supported by the Swiss people in referendums. It allows the Swiss to keep a sense of sovereignty, due to arrangements when changes in EU law will only apply after a joint bilateral commission decides so in consensus. It also limits the EU influence to the ten areas, where the EEA includes more areas, with more exceptions than the EEA has.

From the perspective of the EU, the treaties largely contain the same content as the EEA treaties, making Switzerland a virtual member of the EEA. Most EU law applies universally throughout the EU, the EEA and Switzerland, providing most of the conditions of the free movement of people, goods, services and capital that apply to full member states. Switzerland pays into the EU budget and extended the bilateral treaties to the new EU member states, just like full members did, although each extension requires the approval of Swiss voters in a referendum.

In a referendum on 5 June 2005, Swiss voters agreed, by a 55% majority, to join the Schengen Area. This came into effect on 12 December 2008.

In 2009, the Swiss voted to extend the free movement of people to Bulgaria and Romania by 59.6% in favour to 40.4% against. While the EU Directive 2004/38/EC on the right to move and reside freely does not directly apply to Switzerland, the Swiss-EU bilateral agreement on the free movement of people contains the same rights both for Swiss and EEA nationals, and their family members.

By 2010, Switzerland had amassed around 210 trade treaties with the EU. Following the institutional changes in the EU–particularly regarding foreign policy and the increased role of the European Parliament–European Council President Herman Van Rompuy and Swiss President Doris Leuthard expressed a desire to "reset" EU-Swiss relations with an easier and cleaner way of applying EU law in Switzerland. In December 2012, the Council of the European Union declared that there will be no further treaties on single market issues unless Switzerland and EU agree on a new legal framework similar to the EEA that, among others, would bind Switzerland more closely to the evolving EU legislation. José Manuel Barroso, the President of the European Commission, later affirmed this position. However, a second referendum on Swiss EEA membership isn't expected, and the Swiss public remains opposed to joining.

The 2014 referendum

In February 2014, the Swiss voters narrowly accepted a referendum limiting the freedom of movement of foreign citizens to Switzerland. The European Commission said it would have to examine the implications of the result on EU–Swiss relations.

The implementation of this referendum would entail the renunciation of the agreement on the free movement of people and, absent agreement otherwise, the triggering of the Guillotine clause collapsing the other six Bilateral I agreements. The EU withdrew from negotiations about Swiss participation in the new EU scientific agenda, which resulted in the (at least temporary) exclusion of Swiss students and universities from the Erasmus Programme, European Research Council grants, and downgrading Switzerland from associated to third country in Horizon 2020 calls. It signed an agreement in December 2014. On March 4, 2016, Switzerland and the EU signed a treaty that would extend the accord of the free movement of people to Croatia, which had been on hold since the 2014 referendum, something which is expected to lead to Switzerland's full readmission into Horizon 2020. The treaty was ratified by the National Council on April 26 on the condition that a solution be found to an impass on implementing the 2014 referendum. The treaty was passed in December 2016. This will allow Switzerland to rejoin Horizons 2020 on January 1, 2017.

The referendum, which requires Switzerland to have annual quotas for immigrants, does not take effect immediately but requires the Swiss government to implement a quota system within three years. A final implementation measure was formally approved on December 16, 2016. It was described as being watered down and a compromise with the EU, as it did not include quotas but only required employers to prioritize Swiss residents rather than foreign workers in locations where the unemployment rate is above average, and it requires foreigners to demonstrate that they are integrated in Swiss society in order to receive a residence permit.

Chronology of the Swiss votes

Chronology of Swiss votes about the European Union:

Among these twelve votations, three are against further integration with the EU or for reversing integration with the EU (6 December 1992, 4 March 2001 and 9 February 2014); the other nine are votes in favour of either deepening or maintaining integration between Switzerland and the European Union.

Proposals for EU membership

The bilateral approach has superseded Swiss enthusiasm for full membership. The popular initiative "Yes to Europe!", calling for the immediate reopening negotiations for EU membership, was rejected in a 4 March 2001 referendum by 76.8%. The Swiss Federal Council, which had been in favour of EU membership, had advised the population to vote against this referendum since the preconditions for the opening of negotiations had not been met.

With the ratification of the second round of bilateral treaties, the Swiss Federal Council downgraded their characterisation of a full EU membership of Switzerland from a "strategic goal" to an "option" in 2006.

The result of the referendum on extending the freedom of movement of people to Bulgaria and Romania, which joined the EU on 1 January 2007 caused the left-wing Green Party and the Social Democratic Party to state that they would renew their push for EU membership for Switzerland.

In March 2016, the Swiss National Council voted to withdraw its suspended application for EU membership. The motion was passed by the Council of States and then by the Federal Council in June. In a letter dated 27 July the Federal Council informed the Presidency of the Council of the European Union that it was withdrawing its application.

Foreign policy

In the field of foreign and security policy, Switzerland and the EU have no overarching agreements. But in its Security Report 2000, the Swiss Federal Council announced the importance of contributing to stability and peace beyond Switzerland’s borders and of building an international community of common values. Subsequently, Switzerland started to collaborate in projects of EU's Common Foreign and Security Policy (CFSP). Switzerland has, contributed staff or material to EU peace keeping and security missions in Bosnia and Herzegovina, the Democratic Republic of the Congo, Kosovo, Macedonia and Aceh in Indonesia. Close cooperation has also been established in the area of international sanctions. As of 2006, Switzerland has adopted five EU sanctions that were instituted outside of the United Nations. Those affected the former Republic of Yugoslavia (1998), Myanmar (2000), Zimbabwe (2002), Uzbekistan (2006) and Belarus (2006).

Use of the euro in Switzerland

The currency of Switzerland is the Swiss franc. Switzerland (with Liechtenstein) is in the unusual position of being surrounded by countries that use the euro. As a result, the euro is de facto accepted in many places, especially near borders and in tourist regions. Swiss Federal Railways accept euros, both at ticket counters and in automatic ticket machines. Also many public phones, vending machines or ticket machines accept euro coins. Many shops and smaller businesses that accept euros take notes only, and give change in Swiss francs, usually at a less favourable exchange rate than banks. Many bank cash machines issue euros at the traded exchange rate as well as Swiss francs.

On 6 September 2011, the Swiss franc effectively switched to a euro peg: the Franc had always floated independently until its currency appreciation became unsustainable during the eurozone debt crisis. The peg involved a minimum exchange rate of 1.20 francs to the euro, with no upper bound in place. The Swiss National Bank committed to maintaining the exchange rate to ensure stability. However, they abandoned the peg on 15 January 2015.

Swiss financial contributions

Since 2008, Switzerland has contributed CHF 1.3 billion towards various projects designed to reduce the economic and social disparities in an enlarged EU. One example of how this money is used is Legionowo railway station, Poland, which is being built with CHF 9.6 million from the Swiss budget.