Economic importance of the bilateral agreements

A heap of Swiss coins.
Over 440 million people live in the European single market, one of the largest markets in the world. The single market is also of key economic importance for Switzerland. © Pixabay

Trade barriers between Switzerland and the European Union (EU) were removed by the bilateral agreements, which complemented the 1972 Swiss–EU free trade agreement (FTA) and opened new markets in a controlled and gradual manner. Both sides have benefited from the easing of trade conditions and stronger competition, leading to increased growth, stability and job creation.

Switzerland has a highly export-oriented economy and maintains close trade relations with the EU. The basis for this is the 1972 FTA between Switzerland and the EU, which created a free trade area for industrial products. Thanks to the bilateral agreements that have been in force since 1999, market access in other sectors was gradually opened.

This means that Swiss companies can operate more easily in the single market and benefit from the advantages of economies of scale. A discontinuation of these agreements would result in much weaker economic growth and a loss of legal certainty in Switzerland, and reduce its appeal as a place to do business.

Bilaterals I: Agreement on the Free Movement of Persons (AFMP), removal of trade barriers, market access

The AFMP is central to the bilateral agreements and a key contributor to the close economic ties between Switzerland and the EU. Studies show that of all the agreements under Bilaterals I, the AFMP has the greatest economic impact. It gives companies access to a large labour force, particularly skilled labour, in a way that is both flexible and minimises administration. In Switzerland, this helps secure jobs, strengthen the economy, and boost the country's competitiveness and appeal as a place to do business.

The Agreement on Mutual Recognition in relation to Conformity Assessment, which eliminates technical barriers to trade, simplifies the marketing of a number of industrial products. Products must be tested for compliance with the applicable regulations and whether they can be placed on the market (conformity assessment). For the areas covered by the agreement, this only has to be approved once; thereafter, the product may be marketed both in Switzerland and in the EU.

Swiss companies also benefit from agreements covering air and land transport, public procurement and agriculture, granting them access to these sectors in the single market. In European airspace, for example, Swiss airlines are treated under the same conditions as their European competitors. This includes the principle of non-discrimination, a free tariff policy and a free choice of destinations, allowing for greater efficiency in fleet utilisation and lower flight costs.

With EU-based suppliers also having free access to the Swiss market in these sectors, competitive pressure has tended to increase and incentives to raise productivity have also been created.

The research agreement enables Switzerland to participate fully in the EU's framework programmes for research and innovation, granting it a number of scientific, technological and economic advantages.
 Swiss research facilities have the chance to take part in world-leading research projects, to which Switzerland can contribute vital expertise. As well as the considerable financial and other resources on offer, Switzerland also benefits from the cooperation partnerships built up over many years. Participation in previous projects within the research framework programmes led to greater sales turnover (approx. 30% of all project participations by corporations and SMEs) and to business start-ups (approx. 10% of all project participations), which in turn made Switzerland more competitive.

Bilaterals II: market access for food sector, free border traffic and European cooperation on migration and security (Schengen/Dublin)

Under Bilaterals II, only the Agreement on Processed Agricultural Products, which facilitates exports for the food sector, can be categorised as a market access agreement in line with Bilaterals I.  However, Switzerland's association with Schengen/Dublin is also of great importance for the Swiss economy. Discontinuing the association would likely result in an annual loss of income of between CHF 4.7 and 10.7 billion by 2030. The Schengen visa system and the abandonment of systematic border controls at internal borders, making travel easier, have the greatest impact, especially for Switzerland's border regions and tourism sector. Because of the savings made possible by Dublin in the area of asylum, Schengen/Dublin has also been positive in financial terms. But the benefits of the association extend beyond monetary gain; they affect the framework conditions of a successful economy overall. There would also be considerable gaps in Switzerland's internal security without Schengen's police cooperation instruments. In addition, virtually unrestricted cross-border movement in urban border regions like Geneva and Basel has created bi-national and tri-national areas where people can live and work. Without the Schengen/Dublin association agreements, Switzerland's national borders would once again become economic and residential boundaries.

Switzerland–EU: key economic and demographic data

Over half of Switzerland's foreign trade is with the EU. In 2020, 48% of Swiss goods exports (approx. CHF 110 billion) went to EU countries. Meanwhile, 66% of Swiss goods imports came from the EU (approx. CHF 120 billion). In 2020, the EU was Switzerland's most important trading partner by far, while Switzerland was among the EU's top four trading partners, after China, the USA and the UK.

At the end of 2020, more than 440,000 Swiss nationals were living and working in an EU or EFTA state. In 2020, the number of citizens of an EU/EFTA state or the UK living in Switzerland stood at 1.4 million; an additional 340,000 cross-border commuters from the EU/EFTA/UK worked in Switzerland.

(Sources: Federal Customs Administration (FCA), Federal Statistical Office (FSO) and Swiss National Bank (SNB)