An End to the Bilateral Path?
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An End to the Bilateral Path?

Switzerland's politico-economic partnership with the EU is on shaky ground following the acceptance of the Mass Immigration Initiative. At the meeting for employees of Credit Suisse holding political mandates, participants discussed the potential consequences.

86 employees of Credit Suisse who exercise a political function alongside their professional duties partook in the annual meeting of political mandate holders at Forum St. Peter in Zurich on May 18, 2016. In his opening address, Thomas Gottstein, CEO of the Swiss Universal Bank, thanked the audience for their political commitment and emphasized that the continued existence of Switzerland's bilateral agreements with the EU was of paramount importance to the Swiss economy. Two guest speakers subsequently discussed the issue from different perspectives, Eric Scheidegger, Head of the Economic Policy Directorate and Director of Switzerland's State Secretariat for Economic Affairs (SECO), presented and discussed two studies commissioned by the Swiss Confederation on the economic repercussions of discontinuation of the agreements of the Bilateral I series of agreements as a result of the possible termination of the Agreement on the Free Movement of Persons. The second speaker, Alexis Lautenberg, Chairman of the Swiss Finance Council and former Swiss ambassador, focused on the relationship between Switzerland and the EU from a Brussels perspective. In the afternoon, a panel discussion took place, which in addition to the two above-mentioned speakers also included National Councilor Kathy Riklin of the Christian Democratic People's Party and National Councilor Luzi Stamm of the Swiss People's Party. The event was chaired by René Buholzer, Head Public Policy Swiss Universal Bank and Global Head Sustainability at Credit Suisse.

Major Annual Decline in Economic Output

The acceptance of the Mass Immigration Initiative (MII) by the Swiss electorate on February 9, 2014 jeopardizes the Bilateral I agreements between Switzerland and the EU dating back to 1999, which are legally connected through a so-called guillotine clause. This clause stipulates that in the event of one of the agreements in the series being terminated, all the other agreements would automatically be rendered null and void. What economic consequences would that have for Switzerland? The studies presented by Eric Scheidegger show that the effect could be considerable. On aggregate, over the period from 2018 to 2035, the country's gross domestic product is projected to decline by CHF 462 to 630 billion relative to a scenario in which the Bilateral 1 agreements are maintained. "This is the equivalent of the current annual output of the entire Swiss economy," observed Eric Scheidegger, adding: "It is also approximately the equivalent, to make a comparison, of the economic output of the Canton of St. Gallen or the entire Swiss construction industry which would be lost every year." In terms of per capita income, this would be tantamount to the equivalent of CHF 23,000 to 36,000 lost every year. The research institutions commissioned to draw up the studies, Ecoplan and BakBasel, anticipate that net immigration would decline by 25 percent. This figure reflects the immigration effect experienced by Switzerland in recent years, which according to the Swiss Institute for Business Cycle Research (KOF) of the Swiss Federal Institute of Technology (ETH Zurich) can be largely attributed to the Agreement on the Free Movement of Persons. "We have also undertaken an appraisal of the repercussions of termination of each individual agreement," explained Eric Scheidegger toward the end of his presentation. And the Agreement on the Free Movement of Persons is by far the most economically significant.

The Weaker the Union, the Fewer the Concessions

Can Switzerland hope for concessions from the EU in its implementation of the MII? Alexis Lautenberg believes this to be improbable (see also interview below). In his view, the free movement of persons is a core pillar of the integrative development of the EU, so fundamental, in fact, that without it a single European market could not exist. Given that the European Union is currently in a very weak position – both institutionally and politically – he believes that it will be loath to grant wide-reaching concessions to a third-party country that could weaken it further. From the perspective of Brussels, however, the challenges currently being faced by Switzerland are mostly a disturbance. "Issues in the sphere of energy policy, such as the planned doubling of the gas pipeline from Russia to Germany or topics related to migration, for example, are preoccupying politicians much more," he asserts. Potential negotiations with the EU, the former ambassador says, should take account of Switzerland's and the EU's bilateral agreements as much as possible. Quantitative solutions, however, he thinks will be hard to reach. He also believes that the Swiss labor market should be analyzed on a sectoral basis with a view to establishing where migration in recent years has exceeded the European average enough to create further challenges and issues.