Coface sees chances for negotiations between Switzerland and the EU
There are signs of movement again in trade relations between Switzerland and the European Union (EU) according to experts oft the credit insurer and risk manager Coface. Switzerland had broken off talks on a framework agreement in May 2021, although it had initiated the agreement.
It was supposed to clarify institutional trade issues between the EU and Switzerland. The EU now sees this as a prerequisite for the continuation of bilateral relations in their current form, which began with the Free Trade Agreement in 1972. It was in this context that the comprehensive Bilateral Agreements 1 and 2 were negotiated in 2002 and 2005. Negotiations on a comprehensive framework agreement resulted in a negotiated treaty in 2018, but it was not signed by the Swiss government when it became clear that it would not gain the necessary popular support. When Switzerland wanted to renegotiate and the EU refused to do so, the talks were broken off in 2021.
The consequences are noticeable. Since the talks broke off, some existing contracts have not been updated. For example, in the area of medical technology, conformity assessments are no longer mutually recognized. Switzerland could not be integrated into the European electricity market as planned and both the EU and Switzerland have banned the trading of shares of the respective other economy on their own stock exchanges. Furthermore, Switzerland is now considered a non-associated third country and can only participate in the EU's Horizon Europe framework program for research and innovation to a limited extent.
In March, the Federal Council commissioned the Federal Department of Foreign Affairs (FDFA) to determine the cornerstones for a new negotiating mandate with the EU by the end of June. The Vice-President of the European Commission, Maroš Šefčovič, wants to strike an agreement on institutional issues by the summer of 2024. In 2021, the EU was Switzerland’s most important trading partner, accounting for a 58 percent share in the total trade volume, ahead of the USA (13 percent) and China (7 percent).
Since the breakdown of negotiations, however, the mood music has changed, observes Coface. A survey from March of this year revealed that although the Swiss electorate would reject a referendum on EU membership, support for joining the EEA now stands at 60 percent. According to Coface, a possible alternative solution could take the form of a free trade agreement similar to the CETA agreement between the EU and Canada, which would be introduced alongside the Bilateral Agreements 1 and 2 in addition to modernizing them.
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