Partners in trade: despite a defiant refusal to join the EU, Switzerland is nevertheless irrefutably dependant on the greater European economy, the source of a third of Swiss revenues. Were something to go awry in the carefully maintained relationship with the EU, the Swiss would surely pay a price.

Author:Brunjes, Justin

The European Union is by far Switzerland's biggest trading partner--a market of 450 million people buying about 60 per cent of our exports and providing 85 per cent of our imports. Europe also makes direct capital investments of about SFr 110 billion here.

Currently these lucrative trade relations are governed by two sets of bilateral agreements signed in June 1999 and October 2004. The agreements set guidelines ranging from approval of new technologies to taxation to political issues--asylum, cooperative efforts against crime and the free movement of people, known as Schengen/Dublin.

The fine points make rather dry reading, but their renewal is vital if the Swiss remain intent on avoiding EU membership.

To join or not to join is ... out of the question?

Debate over joining the EU polarised the Swiss political landscape in the 1990s. Now, as long as the right-wing Swiss People's Party holds more parliamentary seats than other parties, the point is possibly moot.

Despite this, Switzerland's application for membership has yet to be withdrawn, so the issue remains open on both sides.

There is a camp of steadfast Swiss-EU supporters. The New European Movement of Switzerland (NEBS) is simulating Swiss participation in EU parliamentary decisions on their website. This organisation polls 18 actual politicians from five political parties on EU decisions, records how they would have voted, then evaluate: how Swiss votes might have swayed the outcome.

NEBS says remaining on the sidelines has only handicapped Switzerland, and as a member of the EU, Switzerland would have access to the European court, would be able to vote on issues and would take an active rather than passive role in the European economy.

It also argues that the bulk of imports are from EU countries and that--despite bilateral agreements--these goods are stopped, controlled and sometimes taxed at Swiss borders, increasing their price.

Currency exchange rates either inflate the cost of EU imports or undermine Swiss competitiveness depending on which direction they swing.

The opposing camp maintains that Switzerland's present course of action not only protects its interests but also upholds its sovereignty.

Tax controversy

One of the largest blips on the CH-EU radar of 2007 appeared when the executive branch of the European Union, the European Commission, announced that certain Swiss cantonal tax exemptions to companies constitute 'forms of state aid' that are 'not compatible' with the 1972 Free Trade Agreement.

The European Commission argues that such schemes deprive the EU of 'billions in tax...

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