Switzerland is one of the main economic partners of the European Union (EU):
- The EU’s third biggest export and import market of EU goods, after the United States and China (representing about 8% of the EU’s foreign trade). 70% of Switzerland’s imports originate in the EU and the EU is the destination of 52% of Switzerland’s exports. The European Union is by far the most important market for the export-oriented Swiss industry.
- Switzerland is the EU’s second most important market for EU services providers. Switzerland was the recipient of 11% of the EU services exports in 2018.
- 13% of foreign direct investments (FDI) in the EU originate in Switzerland.
An active European policy is therefore essential from an economic perspective. In order to facilitate trade, Switzerland and the EU have signed bilateral economic agreements. The Free Trade Agreement (FTA) of 1972 paved the way for of a dense network of agreements facilitating mutual access to markets and minimizing barriers to trade. After Swiss citizens refused to join the European Economic Area (EEA) in 1992, Switzerland and the EU signed the Bilateral agreements I (five of the seven agreements are market access agreements) in 1999, followed by the Bilateral agreements II (nine agreements, one of which on trade) in 2004. These treaties guarantee to a large extent a reciprocal access to markets and avoid discrimination against Swiss operators in the EU’s internal market, as well as underpinning a tight cooperation in numerous other areas (research, safety, asylum, environment and culture).
The EU’s economic and financial policies may directly impact Switzerland. They influence the economic and political relations between Switzerland and the EU. EU regulations directly affect Swiss exports. Switzerland closely follows the developments occurring in the EU and analyses their consequences for its economic operators.
Economic and monetary context
The European Union is the main economic partner of Switzerland. As a result, the macroeconomic and monetary stability of the EU is essential for Switzerland’s economy. Furthermore, the EU is by far the most important market for export-oriented Swiss industry. The Bilateral agreements ensure that both parties benefit from the removal of trade barriers: the resulting conditions foster trade and competition, stimulating competitiveness, economic growth and employment. The positive economic effects of these agreements are undisputed: since their introduction, per capita economic growth in Switzerland has increased.
After the 2008 and euro crises, the European Union launched several projects aimed at strengthening the framework of its economic governance and that of the Eurozone (Economic and Monetary Union, Banking Union, Capital Market Union). These projects are still under way. Structural reforms are necessary and the development of a capacity for macroeconomic stabilisation in the event of a crisis is a priority for the European Union. Such developments have an impact on Switzerland, which attentively monitors the progress of these projects.
The current context tied to the COVID-19 pandemic is a real challenge for the economy, as well as for trade between Switzerland and the European Union. Previously, during the economic and financial crisis of 2008, this close relationship had been challenged by overvaluation of the Swiss Franc, which negatively impacted employment rates, profit margins, investments and operating costs. This relationship had meanwhile stabilized in the wake of a return to growth and thanks to the remarkable resilience of the Swiss economy. At present, the impact of the COVID crisis on the global, European and Swiss economies is still difficult to assess.
Various agreements considerably reduce the costs of the import and export of goods, as well as the technical barriers to trade in several industrial sectors.
The Free Trade Agreement guarantees fair conditions for mutual market access by eliminating tariffs and quantitative restrictions on industrial goods. This agreement is of high importance, given that bilateral trade in goods between Switzerland and the EU amounts to over 1 billion Swiss Francs (CHF) per working day. Cross-border freight traffic is also facilitated by a customs simplification and security agreement, which allows for the import and export of goods between Switzerland and the EU without additional customs security measures. Furthermore, an agreement on public procurement ensures good cooperation in this area and guarantees the non-discrimination of the Swiss and European economic operators.
The agreement on technical barriers to trade simplifies administrative procedures required to place industrial products on the market in twenty different sectors. The agreement is based on equivalent regulations and mutual recognition. Similar harmonisation also prevails in the agricultural sector (agreement that comprises, inter alia, sanitary regulations or geographic indications). Switzerland’s access to the single market is thus commensurate to its level of harmonisation. The Joint Committees foreseen by the existing agreements are dedicated platforms to solve market access and cooperation issues.
Trade in services is mainly covered by the Agreement on free movement of people (AFMP).