The improbability of legal islands

In our first course week, we saw that Switzerland may appear like an island in the legal landscape of Europe. However, in today’s interconnected world no country can exist as an island. As a consequence, each country must find ways to establish a political and legal framework with its neighbours that allows for the necessary or desirable level of exchange, also on the economic level.

This is particularly true for Switzerland. A small country with no other natural riches than its people and its landscape (which includes a lot of clean water as the only raw material of which the country can boast), Switzerland has long been relying on economic exchange with other countries. Though small in terms of territory and population, Switzerland has succeeded in being one of the economically strongest countries worldwide.

Switzerland’s most important export sectors are neither cheese nor chocolate, but rather chemical and pharmaceutical products, precision instruments, clocks, watches and jewellery and, finally, machines, appliances and electronics. Today, by far the most important economic partner of Switzerland is the EU. The statistics for the year 2017 show that, 61 % of the Swiss overall trading volume relates to the EU. In contrast, the figures for the US are 12 , for China, with whom Switzerland concluded a bilateral trade agreement in 2013, 6 % and for Japan, with whom Switzerland also has a bilateral trade agreement, 3 % (data according to the Federal Department of Foreign Affairs; with respect to the EU, see also this link and, for more details generally, Swiss-Impex.

In terms of legal and economic cooperation between the European States, we heard last week that Switzerland is fully surrounded by the European Union (EU) and the European Economic Area (EEA), but not part of either. Instead, it is part of the European Free Trade Association (EFTA), of which also Liechtenstein, its tiny neighbour to the East, is a member. As for the EU, Switzerland has a large number of agreements in place, many of which cover economic matters. You can see the ‘legal landscape’ for Western and Central Europe in the chart that you will find in the download section below (note that outside this focus, there are also other trading blocks – we will come to that in a subsequent step in this course week).

In practice, by far most of the Swiss–EU trade concerns the border regions, ie those parts of the neighbouring countries that are geographically closest to Switzerland. Some circles in Switzerland that are critical of the EU argue that it would be better not to have trade arrangements with the EU as a whole but rather focus on the neighbouring EU Member States and the border regions. However, this argument disregards an important legal fact: being an EU Member State means that the external trade policy is a matter determined together, on the EU level, rather than by individual Member States. In legal terms, the EU enjoys an exclusive competence in this field. As a consequence of this, it is no longer possible for Austria, France, Germany and Italy to conclude individual trade agreements with Switzerland.

Against this background, our second course week looks at regional economic integration in Europe. In this context, there will be a particular focus on the EU and the EEA. We will first take a somewhat closer look at regional economic integration in Europe. Thereafter, we will ask why Switzerland is not a member of either the EU or the EEA. We will then look into the development of the Swiss–EU legal relationship over time, up to the present situation where we have a large number of agreements. Finally, we will discuss the nature of these agreements.

Further reading

For more information on the Swiss foreign trade statistics check out the websites of the Federal Customs Administration (FCA) or the Swiss Federal Department of Finance (FDF).