# 2 / 2022

Swiss – EU relations: it is now time to act

Blockade in European policy hurts the economy

Erosion of the agreements

Due to the EU Commission’s unwillingness to adapt the existing bilateral market integration agreements to the changes in the EU acquis, the erosion of Switzerland’s ability to participate in the European single market is already directly and concretely apparent in various areas. It affects in particular local SMEs and innovative industries with high value added and a high export share. MNEs with large production facilities in Switzerland are also affected.

Financial services

  • Non-recognition of stock exchange equivalence by the EU

Non-recognition of the equivalence of Swiss stock exchange regulation by the EU (since July 2019) affects the Swiss stock exchange SIX and companies listed on the Swiss stock exchange. The Federal Council's protective measure has so far been able to prevent the migration of trading in Swiss equity securities from Switzerland. On the other hand, non-recognition has negative effects on the activities of EU companies listed in Switzerland.

  • Non-recognition of equivalence in financial market regulation/comprehensive revision of EU financial services law in the area of the third-country regime complicates market access for banking services

The ability of Swiss banking institutions to provide services from Switzerland to their clients in the EU is increasingly restricted due to the blocked equivalence recognition procedures. In addition, there is a trend in the EU to make cross-border business more difficult for banks from third countries, and thus from Switzerland. The partial relocation of certain banking services to the EU cannot compensate for the probable damage due to the lack of market access. Moreover, relocations harm the Swiss financial centre.

Technical barriers to trade

  • Blocked update of the Mutual Recognition Agreement (MRA) for medical devices

The Swiss medtech industry is already affected. Since 26 May 2021 it has been obliged to export its products to the European domestic market in accordance with third-country conditions. The one-off adjustment costs for the industry are estimated at 110 million Swiss francs and the recurring annual costs at about 75 million Swiss francs. Since medical devices from the EU must also be imported into Switzerland on third-country terms, problems arise as the import of small volumes is not profitable. About an eighth of all medical devices currently imported from the EU could be affected. Simplification of the import of EU products, temporarily adopted by Switzerland at the end of December 2021, is therefore appreciated by the industry.

  • Predictable blockage of further industrial products

In 2023, a machinery regulation will replace the existing machinery directive and will be applicable from 2025/2026. From this point, machinery from Switzerland covered by the regulation will be treated as products from a third country. In practice, only a minority of machines will be subject to third-party certification. Nevertheless, the one-off adaptation costs are estimated at 300 million to 700 million Swiss francs and the annually recurring costs at 250 million to 500 million Swiss francs.

The revised EU general pharmaceuticals legislation is scheduled to come into force from 2025/2026. The Swiss pharmaceutical industry will be particularly affected by this. One-off adjustment costs of 450 to 900 million Swiss francs and annually recurring costs of 250 to 700 million Swiss francs are expected.

In summary, the industries concerned face additional annual costs of between 0.6 billion and 1.3 billion Swiss francs as a result of the non-actualisation of the MRA.

Research and operational innovation

Switzerland lacks full association with the EU research programmes Horizon Europe, Euratom, Digital Europe and ITER, leading to disadvantages for Switzerland as a location for research and innovation. Switzerland is excluded from a third of all research programmes, while the others require direct funding by Switzerland. In addition, project management by Swiss institutions is excluded – a very important area for leading research institutions. Business innovation funding also faces negative consequences. For example, start-ups and SMEs no longer receive contributions for international innovation projects.

Electricity sector/security of supply

The EU refuses to conclude a bilateral agreement with Switzerland in the area of electricity. The exclusion from the European electricity market leads to steadily rising costs of about 120 million Swiss francs per year. By 2030, these costs could amount to more than 300 million Swiss francs. In addition, supply bottlenecks in the winter half-year and an increased risk of blackouts must be expected from 2025, primarily as a result of insufficient domestic electricity production. The costs of a blackout are estimated at 4 billion Swiss francs per day and would affect the entire economy. In addition, grid stability is no longer guaranteed, as the EU wants to exclude Switzerland from the European coordination platforms for electricity and ENTSOE (European Network of Transmission System Operators for Electricity).