Switzerland has decided to put an end to the seven years of negotiations with the European Union that were supposed to modernise their bilateral relations.
The two partners were struggling to sign a draft version of the EU-Swiss Institutional Framework Agreement, a text designed to ensure Switzerland's access to the EU's single market is fair and equal, a balance that Brussels usually calls the "level playing field".
Negotiations began in 2014 and a full draft text was reached in November 2018, setting in motion a back-and-forth between Bern and Brussels to add clarifications and amendments. Two years went by without progress until discussions were resumed earlier this year.
The Swiss Federal Council concluded on Wednesday that there remain "substantial differences between Switzerland and the EU on key aspects of the agreement" and "the conditions are thus not met for the signing".
The main stumbling blocks were freedom of movement, the level playing field and state aid rules.
The Swiss government argues that incorporating a 2004 EU law called Citizens' Rights Directive (CRD), which gives citizens from the European Economic Area (an area that includes the 27 EU countries, Iceland, Norway and Liechtenstein) the right of free movement and residence, could entail "higher social security costs" and "effectively constitute a paradigm shift in Switzerland's migration policy".
Among the particular objections, Switzerland didn't want to incorporate the notion of permanent residence for EU citizens and access to social security for non-employed residents, such as job-seekers and students. Switzerland was not comfortable either with the concept of EU citizenship, although Brussels insisted that this aspect was not part of the deal.
Regarding the level playing field, the Commission proposed a dynamic alignment with EU law, meaning any new relevant legislation inside the bloc would also have to be adopted by Switzerland in order to maintain equal conditions inside the single market. Brussels wanted to give the EU Court of Justice the power to rule on disputes arising from the agreement.
The Commission believes a dynamic alignment is essential to modernise the relation because it would help the two sides stay up-to-date with policy developments and avoid regulatory cherry-picking. The executive wasn't willing to accept alignment in some areas but not in others.
The exceptions to the Citizens' Rights Directive and the level playing field requested by Bern were not granted, leading to the collapse of the talks.
"The Federal Council nevertheless considers it to be in the shared interest of Switzerland and the EU to safeguard their well-established cooperation and to systematically maintain the agreements already in force," the Swiss government added. "Even without an institutional agreement, Switzerland remains a reliable and committed partner for the EU."
The President of the Swiss Confederation, Guy Parmelin, personally informed Ursula von der Leyen, President of the European Commission, before making the announcement public. The two leaders met in Brussels for the last time in late April.
Reacting to the news, the European Commission, which leads the negotiations on behalf of all member states, said it regrets "the decision, given the progress that has been made over the last years to make the Institutional Framework Agreement a reality".
"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," the Commission noted.
"Already today, they are not up to speed for what the EU and Swiss relationship should and could be."
An EU official said that the breakdown of the talks was "not really a huge surprise" and nobody had "high hopes" for their success given the inconsistent pace of negotiations. The Commission will discuss with member states what steps to take next, although "there is no urgency at all".
"The door is still open," the official remarked.
A history of partnership
The European Union and Switzerland are close political and economic partners. More than 1.4 million EU citizens reside in Switzerland, and around 400,000 Swiss nationals live in the bloc.
According to numbers provided by the Commission, Switzerland is the EU’s fourth largest trading partner after China, the United States and the United Kingdom. Switzerland accounts for 6.9% of the EU’s exports and 5.7% of its imports.
Meanwhile, the bloc is Switzerland’s largest trading partner by far. The EU accounts for around 42% of Switzerland’s exports in goods and for 50% of its imports.
Additionally, Switzerland participates in several EU-funded initiatives, like Erasmus+ and Horizon 2020.
The first EU-Swiss free trade agreement was signed in 1972, with another package of bilateral deals concluded in 1999. The texts cover numerous issues like free movement of people, public procurement, agriculture, research and civil aviation.
In total, more than 120 agreements govern the relations between the two partners. However, none of them serve to ensure a level playing field, the Commission says.
The executive was hoping that the new framework deal could finally fill this regulatory void. "Privileged access to the Single Market must mean abiding by the same rules and obligations", it said on Wednesday.
None of the existing deal will be jeopardised by Bern's decision to terminate negotiations of the Institutional Framework Agreement.
Nevertheless, the Commission warns that a failure to modernise the relations could lead to less free trade, more difficulties for food imports and air carriers, and Switzerland's exclusion from EU agencies and mechanism, like the European Centre for Disease Prevention and Control (ECDC) and the EU4Health programme.