The Swiss model for Brexit?
The case for a “hard Brexit” continues to collapse as it finally starts to become clear to people in the UK that the kind of Brexit the hard right wants to see – out of the single market, out of the EU, out of ECJ jurisdiction, out of everything – would be a catastrophic act of self-harm. Now that message has finally got through, people are starting to look at which of various “options” might be the best model for the UK’s future relations with the European Union which if it wants to retain the benefits of being in the single market while still obeying the dubiously-expressed “Will of the People” to leave the EU.
A popular model to talk about at the moment is that of Switzerland. Switzerland is (as it is in pretty much every constitutional matter) weird. It has a parliamentary system of government which defers to direct democracy when things get contentious. Its head of state is a 7-person cross-party committee. Its political processes rely to a great degree on consensus and compromise. Its 26 cantons are self-determining to a degree that rivals US statehood despite the whole country being no bigger than a couple of eastern US states combined (and a tenth the size of California).
The United Kingdom, on the other hand, has a parliamentary system of government where Parliament is supreme and the head of state wears a crown. Its political processes, while getting things done using consensus when that’s appropriate, are usually adversarial. The leaders of the two biggest parties in Parliament literally shout at each other every week in the House of Commons. And while the UK has regions where much power has been somewhat grudgingly devolved over the last 20 years government remains largely stuck in, and overwhelmingly directed from, London.
In case the above two paragraphs aren’t clear enough: Switzerland and the UK are two very different countries.
The UK is currently a full member of the EU. It has negotiated various opt-outs with the EU, of which the most immediately obvious to travellers are not joining the Euro or ERM-II and not signing up to the open borders part of the Schengen agreement. It has various other opt-outs which are mostly technical in nature, so we won’t bother with them here.
Switzerland is not a member of the EU. It isn’t in the EEA (the European Economic Area), the trading bloc that allows Iceland, Norway and Switzerland’s tiny neighbour Liechtenstein to be members of the EU’s single market through their membership of the European Free Trade Association (EFTA). Instead, Switzerland’s relations with the EU are governed by a set of individually negotiated bilateral agreements that grant it access to the single market on certain conditions. While it contributes to the EU, its per capita contribution is a lot lower than the UK currently pays. In return it gets to play in the big European trading pond without having to worry about tariffs, but that is more or less all it gets. It has a negotiated opt-out from EU banking regulations to allow Swiss banks to maintain their independence (even though the US has done a lot to destroy said independence since the 2008 crash) and retains control over its own workplace regulation, but in return it has virtually no say in the EU regulations which it has to obey in most other areas.
Sounds just right for the UK, no? All that “with Europe, but not of it” stuff seems like just the ticket! Well, maybe, but having lived in Switzerland for eight years before moving to Austria last year there’s one big problem. All of the above is great if you’re a company, but if you’re a private individual the difference in day-to-day life is a lot less noticeable.
One obvious advantage (if you’re not Swiss) is that we got to live in Switzerland without going through any painful and bureaucratic visa processes. As a condition of access to the single market Switzerland has to accept freedom of movement. When Swiss voters narrowly voted to restrict immigration (by 50.3%, a sliver of a margin) in 2014 the EU promptly suspended Switzerland’s participation in a key European research funding programme on the grounds that it couldn’t fund research in Switzerland without nationals of any member state having the guaranteed ability to work on that research. You can’t pick and choose the four freedoms, and Brussels made it clear that terminating freedom of movement would terminate the other three pillars as well. In the end, Switzerland and the EU worked out a fairly meaningless fudge that allowed (not required) Swiss employers to give priority to “Swiss-based” employees while not changing freedom of movement in practice.
The fallout from the 2014 vote continues to impact life in Switzerland — the country is still suspended from the highly popular Erasmus student exchange scheme as part of the fallout from the vote (again, freedom of movement is an obvious necessity if students are going to move around).
Switzerland’s membership of the Schengen zone is another positive thing. Hundreds of thousands of workers commute across the Swiss border every day from homes in Germany, France, Austria, Italy and elsewhere. Not having to wait in a long queue to have their passports glanced at, or wait while the bus stops and border guards check everyone’s papers, improves their lives no end. It’s now possible a lot of the time to cross in and out of Switzerland without even breaking stride. During this summer’s controversy over long queues at airport immigration in France and Spain which caused such anger in the British tabloids, any travellers arriving on flights from Basel or Zürich or Geneva would have been able to simply walk off the plane and out into fresh air.
But what would happen when they flew home to Switzerland? Well, while they wouldn’t have to go through passport control they would have to go through customs. One thing people outside Switzerland may not appreciate is that in Switzerland, free movement of goods only really applies at the commercial trade level. It means Stadler can sell trains to Germany without paying whatever import tariff the EU may wish to charge them as a protectionist measure to make Deutsche Bahn buy its trains from Siemens instead. But it doesn’t mean you can carry a 1.5kg piece of meat across the border from Konstanz into Kreuzlingen without declaring it and paying duty.
Switzerland is not part of the EU customs union. If you live in the UK, the customs union is the thing that allows you to bring home as much stuff as you can buy in Spain or as much booze as you can fit into your car in Calais without even having to declare it in most cases. It’s the thing that makes it possible to order something from a mail-order company in Italy or Finland and have it appear on your doorstep without a bill from the Post Office for VAT and customs fees. It’s the customs union that removes friction at the border and means Operation Stack isn’t blocking half of the M20 every day of the year. And Switzerland isn’t a member.
What this means is that if you’re a private individual, customs is still just like it was in the UK before the EU. When entering the country there are strict and rather miserly duty free limits and anything more than that requires payment of VAT, duty or both. It’s a popular pastime to go shopping across the border at the weekend as both Germany and France are quite a bit cheaper thanks to lower cost of living and the strong franc, but the amounts that can be brought back are highly restricted. Long queues build up at major border crossings, particularly at the weekend, as Customs look out for people bringing in an extra bottle of wine or an iPad they haven’t declared. Yes, you can often get the foreign VAT refunded in exchange for paying the lower Swiss VAT at the border, but this means paperwork and long lines and usually having to return to the shop where you bought the goods in the first place to get the refund paid out. Not exactly hassle-free.
There are plenty of unstaffed border posts — why not just nip through there and “forget” what you’re carrying? Well, you can, but you’re taking a risk. Even if you aren’t stopped at the border for a spot check (and by the way, informal observation is that a disproportionate number of those chosen for spot-checks have noticeably darker skin than most other local residents), Customs can still stop you once you’re inside the country. If you’re found to be carrying smuggled goods, expect a hefty fine at best.
How about ordering stuff on the Internet? Well, unless you can find a Swiss retailer who will sell you what you want, you’ll normally end up buying it from outside the country. A lot of goods are cheaper even paying the foreign VAT when bought from Germany than they are in Switzerland (see below when we talk about supermarkets and importers), so mail order is often better value. At least it is until your package reaches the border, whereupon it will wait for a day or two while Customs examines it and either lets it go for free (if it’s worth under about 60 francs including shipping costs) or sends it on to you with an invoice for about 20 francs of processing costs plus whatever VAT and duty may be due.
If you’re really unlucky, you’ll find yourself dealing with online sellers who don’t understand that Switzerland isn’t in the EU and don’t include any customs documentation. If that happens, your package will be stuck for a week or more while the customs people write to you to ask you what this is and how much it is worth so they can charge it accordingly. At that point the fees for processing it might be anything up to 40 francs (about £32 right now) and your bargain pair of £100 glasses is now a pair of £140 glasses.
The final pain point I’d like to mention is the supermarket shelves. While a lot of goods on sale in your local Coop or Migros are imported, because of the bureaucracy involved in clearing, say, Pampers made in southern Germany through customs any given brand is usually in the hands of a single importer who will mark the goods up as far as they can because they know that changing suppliers is not simple. They won’t pass on currency savings when the franc strengthens but they’ll readily hike the price when it weakens. This even got to the point a few years ago where some Swiss chains were taking various brands off their shelves and replacing them with signs explaining that they weren’t going to restock them until the suppliers stopped extorting them (and in turn, consumers who paid higher prices).
Switzerland’s a beautiful country with a lot going for it, but one thing it’s probably not a good idea to copy is its relationship with the EU. On a macro level it’s obviously a good thing to have those bilateral treaties in place, as single market membership in itself helps trade happen and thus creates jobs and ensures continued employment. This is obviously good for individuals. But insofar as people run into it on a day-to-day basis, it doesn’t add that much convenience at all.
In summary — having lived in Switzerland, I can strongly recommend that the UK avoids the Swiss model even if the EU is in a mood to allow the UK to negotiate its way there (which it might not be). Instead I’d like to suggest an excellent alternative which includes full access to the single market, allows your Amazon purchases from Germany to get to you without being held up in customs and helps keep prices down in the shops. It’s called EU membership.
