Referendum on accords to open new chapter in EU-Swiss relations with EU referendum on future ties with EU

Date: 18/05/2000

As the Swiss public prepares to go the polls this weekend to vote on a package of agreements with the Union covering issues ranging from the free movement of people to transport, Warren Giles examines the significance of the expected 'yes' vote for the country's future ties with the EU

AS THE countries of central and eastern Europe prepare for full membership of the European Union, at the continent's heart Switzerland is busy debating how far it wants to dip a toe into the sea of surrounding blue and yellow.

If the country's seven million inhabitants vote in favour of seven sectoral agreements with the EU in their referendum this Sunday (21 May), Switzerland's relations with the Union will be simplified. Swiss citizens, and eventually EU nationals, would have greater access to each other's job markets and the Union's 40-tonne trucks would be admitted to Switzerland's trans-Alpine network of roads.

Although the accords are not a formal prelude to an application by Bern for full EU membership, both ends of the political spectrum argue that a 'yes' vote this weekend would be a step towards Union accession.

Popular approval of the package would bring the EU and Switzerland closer in seven sectors: air and overland transport, scientific research, agriculture, public procurement, technical barriers to trade (industrial product testing) and the free movement of persons. "It is a political deal," says a senior European Commission official, who admits that the Union executive was non-plussed by the 1992 vote. "Our main interest is to make progress in our relations with Switzerland. To us, Switzerland is a natural member."

The agreements, which were ratified by the European Parliament earlier this month, must also be sanctioned by each of the EU's 15 member states. Public support for the package in Switzerland appears to be declining slightly in the run-up to the vote, but it is nevertheless expected to receive solid electoral backing.

The latest opinion polls indicate a nationwide 'yes' vote of around 65%, with the 'no' camp running at around 25%.

The level of support varies along linguistic lines, from French-speaking regions where it stands at around 80% to German-speaking areas where 'no' campaigners are gaining ground.

Europhiles point to tangible economic spin-offs from the package. Although it is the most controversial element of the deal, the accord on the free movement of people is widely expected to do the most to boost Switzerland's economic growth. The benefits of closer ties to the Swiss economy are estimated by a Geneva University study to be worth an increase in gross domestic product of 2% - or €5.13 billion - thanks to tougher wage competition and a much more mobile labour force.

Under the freedom of movement agreement, Switzerland would have to phase out the quota system which it currently operates to limit the numbers of foreigners admitted annually after five years. To address concerns voiced by opponents of the deal who have warned that it could lead to a massive influx of Union workers because of 'wage dumping', Switzerland would retain the right to reduce EU residence and work-permit quotas for two successive years.

This flexibility is expected to have most impact on the professional, high-earning sectors of the Swiss work force, which have until now been artificially protected from Union competition by the restrictive permit practices and the bureaucratic hurdles facing firms which want to employ foreigners. Swiss companies, especially the country's €13.46-billion export-oriented pharmaceutical industry, are looking forward to being able to fill vacancies faster and more easily.

Opposition to the accords has been almost inaudible. With the exception of the Swiss Democrats, who were responsible for launching the referendum, opposition is diffused amongst a series of incoherent interest groups which have painted the agreements as a threat to Swiss culture, jobs or the unwanted manifestation of 'globalisation'. These include 'Youth against the Bilaterals', the 'Neutral Switzerland Movement', 'A Switzerland for our Children', and conservative religious or right-wing groups created specifically to campaign ahead of the referendum.

In reality, says the government, the number of EU citizens resident in the country has fallen in the past five years by around 25,000, and the Union's own experience does not point to large labour migrations. Studies suggest that there could be a net increase in the number of EU nationals living and working in Switzerland of around 8,000 a year.

The most immediate beneficiary of the air transport agreement would be SAirGroup, SwissAir's parent company which two weeks ago increased its share of Belgium's national airline Sabena from 49.5% to 85%. In return, Sabena becomes the largest single SAirGroup shareholder with 3.3%.

The deal depends on a positive outcome to this weekend's referendum, because without it, Sabena cannot close the agreement without losing its Union identity and subsequent rights. Under current rules, SAirGroup is prevented from owning a majority share in any EU enterprise.

The road transport agreements are designed to limit the number of vehicle trips through the Alps each year to 650,000, thus halving their projected 2012 levels. This will in part be achieved by encouraging greater use of railways with higher heavy-goods vehicle charges, as well as improving the trans-Alpine rail network (known as NEAT). The Swiss Green Party supports the plan, despite the proposed axle-weight rise, on the grounds that the number of journeys will be limited and increasing levies and taxes will force vehicles onto a rail network revitalised with investment.

Swiss farmers, accustomed to one of the most protected markets in the world, have greeted the agricultural agreement with apprehension. Core products such as dairy, fruit and vegetables face increased competition from their Union counterparts, as the accord allows for a reduction or eventual elimination of tariffs in farm products. However, Swiss products will all benefit from better access to the EU's consumers.

Despite reforms to the dairy sector which have cut the price of Swiss milk by one-third, it remains more expensive than its Union equivalent and farmers fear they will not be able to take advantage of the lower border restrictions because of higher production costs. Farmers have warned that some 40,000 livelihoods could be at risk. The federal government expects farm export subsidies to the EU will be cut by at least €108 million annually. Although competition will increase, the cost of products such as feed and fertilisers should fall.

The implications of sweeping away 'technical' barriers to trade are significant, according to pharmaceutical industry representative Conrad Engler. "Our production standards will be accepted in the EU," he says. "If the accords were rejected, it would be a huge problem for the industry because we would then need special regulation." Under the agreements, final batches of Swiss drugs, as well as industrial machinery and chemicals, can be tested within Switzerland against standards acceptable in the Union.

Politically-motivated moves towards EU accession are not new, but the Swiss are unwilling to abandon their independence without concrete economic advantages. Although it has ruled out any attempt to reactivate accession negotiations within the 2004 lifetime of its mandate, the Swiss government is continuing discussions about extending the accords. "If the agreements go through, the main psychological obstacles to Union membership will have been overcome," says a Commission official, citing the transport and free movement accords as key to this.

The EU executive argues that the remaining legislative obstacles to membership - such as gradually increasing Switzerland's value added tax rate from the current 7.5% to the Union's 15%, competition rules and working-hours limits - must be addressed unilaterally by the Swiss government. Other outstanding issues, such as Switzerland's secretive banking sector and its reputation as a haven for organised crime, are included in a list of "prerequisites for membership". "After seven years, Switzerland has to decide whether to go on with the agreements," says a Bern spokesman, but he adds that for the next general elections in 2003, "everything is possible".

Whatever preparations the Swiss federal government may make for closer ties within the EU after this weekend's referendum, the traditionally conservative electorate remains resolutely split over whether full Union membership would be a good or bad thing.

As the Swiss public prepares to go to the polls to vote on a package of agreements with the Union covering issues ranging from the free movement of people to transport, author examines the significance of the expected 'yes' vote for the country's future ties with the EU.