Exit option: the Swiss example
Switzerland is not in the EU but trades with the EU through a series of treaties that cover different sectors from trade to transport. It is effectively in the single market for the four freedoms (movement of people, capital, services and goods), although there are tariffs on agriculture and restrictions on banking.
Switzerland negotiated its EU treaties after its people rejected a Norway-style European Economic Area membership in a referendum in 1992. It is voluntarily part of the Schengen passport-free area, but does not take part in the EU’s asylum seeker relocation program.
- Like Norway, Switzerland is able to negotiate its own trade deals, as it is outside the EU’s customs union and common external tariffs. It has been able to conclude trade deals with very large economies such as Hong Kong, Japan and China, with which the EU has no agreements. It has also been able to include services in most of its agreements, which would be a key UK interest.
- Switzerland has free trade with the EU for industrial goods and many services. It does not have to join the euro currency and is not directly controlled by the EU’s institutions.
- Switzerland pays much less into the EU budget than member states do, mainly in contributions to EU schemes that it voluntarily takes part in. If the UK left the EU and contributed on the same basis as Switzerland, it would pay about 59% less.
- Switzerland can promote its own interests in global standards setting bodies like the World Trade Organisation and parts of the United Nations. This allows Switzerland to influence the shaping of rules that many countries apply. A recent example is a revised WTO agreement on procurement contracts. In many standards bodies the EU members are represented jointly so Britain’s interests may be compromised.
- Switzerland’s agreements took seven years to renegotiate, and require constant updating as the EU introduces new laws. The Swiss must follow these laws to keep their free trade in that area. This means there is a problem with Swiss influence. It may take too long to negotiate such a deal after voting to leave.
- Switzerland’s EU agreements are held together by a rule called a ‘guillotine clause’, which means that if one agreement is broken, all must end. This is currently a problem because in 2013 the Swiss narrowly voted to restrict immigration in a referendum, but Switzerland is obliged to allow the free movement of people. The Swiss government has tried to negotiate a different immigration arrangement with the EU but there has been no compromise so far.
- Swiss banking does not have full access to the single market. Because the City of London is so important to the UK economy, it would be a key priority to retain single market access on the terms Britain has now, so the Swiss arrangement may not be ideal.
- Some argue that Switzerland’s small size means that the free trade deals it negotiates are unfair or fail to cover important product areas. This is not the finding of Civitas research on the Swiss-Japanese free trade deal.