The Swiss government has not yet signed the draft framework treaty complementing existing agreements with the EU. Instead it has initiated public consultations . The fate of the draft framework treaty in Switzerland is therefore rather uncertain: with heavy opposition from both ends of the political spectrum and a lack of commitment from the government, those supporting the treaty are currently in the minority.
Much like the British in the case of the Brexit withdrawal agreement, the Swiss are concerned over the role of the ECJ in the supervision of the bilateral relations. However, given sectoral integration of third states in the common market, the EU has a legitimate regulatory interest in securing uniform interpretation of applicable EU law. Needless to say that given the history of bilateral relations between Switzerland and the EU, some sort of dispute settlement mechanism is also in the interest of third states. Thus, those in support of the draft framework agreement focus on the fact that the suggested dispute resolution is likely to increase legal certainty and is therewith an improvement of the current situation.
Linked with this is the fact that sectoral integration is bound to collide with sectors not currently integrated in the bilateral agreements, which are most prominently services, state aid and competition. All of these are covered by EU law but remain outside of the scope of the treaties between Switzerland and the EU. Not having to play by EU-rules gives Swiss industries a sectoral competitive advantage in the common market and enables Switzerland to protect its internal market to a certain extent against EU competition. For example, trade in services is closely linked with free movement of persons. Regulating one but not the other may therefore likely result in regulatory incoherence. State aid and competition, on the other hand, are linked with all of the sectoral integration agreements: playing by the same rules can be considered a necessary prerequisite for the abolition of all barriers to trade between Switzerland and the EU in any given sector. The EU therefore insists on at least partial regulatory alignment in services, state aid and competition as a pre-condition to negotiate new market access agreements. Partial regulatory alignment, however, is considered a red line in Switzerland, given that it would bring Switzerland ever closer to being a de factomember of the EEA.
Squaring the Circle
The draft framework treaty, while resolving the issue of dispute resolution, fails to address the underlying regulatory discrepancies following the partial market integration of third states. As long as the EU is not prepared to further pursue the idea of a multi-speed Europe, partial market integration of third states is likely to continue to come at the price of constant renegotiation, power politics and a considerable level of legal uncertainty. Abandoning the idea of sectoral market integration of third states, on the other hand, will come at an economic price – for both sides.
More on the DCU Brexit Institute Blog.