Switzerland and the EU: The Heavy Cost of Isolation

By Nicola Forster and Ivo Nicholas Scherrer, foraus.ch

ZURICH, Switzerland - On Feb. 9, the Swiss voted to introduce a quota system to cap immigration from European Union countries. The EU has responded quickly and unequivocally: Without the free movement of persons, Switzerland risks losing access to EU markets and institutions that help fuel a large part of the Swiss economy. In the few weeks since the referendum, Switzerland has already gotten a taste of the costs that increasing isolation brings.

The recent vote to validate the "Against Mass Immigration" referendum in Switzerland has not been one easy to digest. Photo source: Flickr/Lucas Kramer under Creative Commons.

The Lesser of Two Evils

When 50.03 percent of Swiss voters chose to validate the referendum initiative "Against Mass Immigration" proposed by the Swiss People's Party (or SVP), they decided to reintroduce quotas for all immigrants coming into their country. Now, the Swiss Federal Council and Swiss Federal Assembly are charged with implementing the legislation, and they will have to choose between the lesser of two evils.

As a first option, the Federal Council and Federal Assembly could create a quota system, which would include a cap on immigration from EU countries. But they would do so in direct violation of the Agreement on the Free Movement of Persons, a treaty between Switzerland and the EU that went into effect in 2004.

In response to this violation, the EU might agree to renegotiate the treaty or terminate it altogether. Given the EU's uncompromising stance on the principle of the free movement of persons, it seems likely that it will choose to terminate the treaty as soon as the Swiss adopt legislation that goes against it. Termination of the agreement would in turn entail the simultaneous expiration of seven other bilateral treaties, known collectively as the Bilateral Agreements I Framework. Without these agreements, Switzerland is bound to lose substantial access to European institutions and markets alike.

Alternatively, if the Federal Council and Federal Assembly manage to square the circle and conceive of a way to implement immigration quotas without affecting free movement between Switzerland and the EU, they would no doubt find themselves lambasted by the SVP.

Having held a tough stance for decades on immigration, the SVP proposed the legislation and championed it through the referendum. It managed to persuade Swiss voters that high immigration was responsible for a set of wide-ranging problems--from increasing property prices and overcrowded public transport systems to losses of farmland caused by urban sprawl. Restricting immigration is also necessary for the protection of Swiss identity, the SVP maintains. Since the party has recently found validation at the polls, any creative attempt to sidestep a hard-line quota system will surely be met by fierce SVP opposition.

Isolation's First Victims

As the Federal Council and Federal Assembly try to find their way out of this quandary, the first repercussions of the vote have already materialized. Days after the Swiss went to the polls, the European Commission called an end to negotiations on an energy treaty that would have paved the way for the step-wise integration of the Swiss electricity market into the EU's own. The EU's deregulated power market happens to be the world's largest. So long as the institutional foundations of the relations between the two entities are not clearly defined, the EU is not willing to grant Switzerland any further access to its markets. Swiss consumers are bound to lose out by remaining in an isolated electricity market. Not only would they pay less for their electricity in an integrated and more efficient European marketplace, but they would do so while adhering to the European CO2-reduction scheme, doing their bit for a cleaner environment.

The cost of seeking to distance the country from Europe became yet more tangible when the European Commission proceeded to exclude Switzerland from participation in the Erasmus+ program. Since its creation in 1987, the Erasmus+ program has facilitated exchanges between European students and universities by providing standardized application and funding procedures. At present, Swiss students who had planned to spend their autumn semester at a university in an EU country do not know whether they will be able to take up their places. The fate of EU students wishing to study in Switzerland is equally uncertain. This is the "EasyJet generation" of young people, having grown up in a borderless Europe but now seeing their freedoms infringed upon.

In addition to Erasmus+, the European Commission barred Swiss academia from Horizon 2020, a European research and innovation program worth 80 billion euros in funding grants. Being excluded from Horizon 2020 will not only limit the ability of Swiss researchers to attract grants; it will also make it more difficult for Swiss academics to establish ties with researchers at non-Swiss European universities. This in turn will harm the attractiveness of Swiss universities and slow down border-crossing innovation processes that are in the interests of all Europeans.

Unpromising Outlook & Unseen Costs

In the event that the Bilateral Agreements I Framework becomes void, Switzerland will have to face even deeper separation. For the time being, however, its relationship with the EU is tempered by a sense of uncertainty, which is poison to all Swiss stakeholders.

In the private sector, companies are worried over how they will recruit talent from Europe and overseas. If multinational companies decide to relocate, as some are considering, or if Swiss companies begin to find it difficult to compete in global markets, economic development and the demand for labor are bound to suffer. Already, leading Swiss bank Credit Suisse is estimating that the implications of the referendum will harm economic growth.

Analysts presume that Swiss voters accepted the immigration initiative precisely because they didn't expect it to have negative consequences for their economy, which until now has seen steady growth in gross domestic product and comparatively low unemployment rates, below 5 percent. How the unpromising outlook for the Swiss economy will affect public opinion remains unclear.

In addition to manifold divisions existing between the urban and local, French-speaking and German-speaking, Swiss, the nation's voters seem to have contradictory preferences. A poll conducted a week after the referendum revealed that 74 percent of the electorate wished to maintain bilateral relations with the EU at the level they were at before the vote. This suggests a large share of Swiss voters underestimated the risk of endangering bilateral relations with the EU.

Getting a Grasp of What Is at Stake

How can Switzerland find its way out of this current state of uncertainty? First and foremost, the public must lead an open and honest debate about the substantial costs that isolation from the EU entails. Secondly, these costs must be balanced against the purported gains of limiting immigration. There may be less-costly solutions to increasing property prices and urban sprawl than putting the country's relationship with the EU at risk.

Thirdly, Swiss voters have to be willing to take into account the interests and principles of the EU itself. This would be an essential condition in a realistic and coherent strategy for rebuilding bilateral relations. If, following that process, the Swiss electorate still opts for increased isolation, it will at least do so with a true grasp of its costs.

This story was originally published on studentreporter.org on 19th of March, 2014.