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After the Brexit referendum, it became clear that the people had spoken. But in the days that followed, it also became clear that no one knew what had been said. And nowhere is this more apparent than with the leaders of the “Out” campaign who seem to have no real plan on how to actually leave the bloc and organize the United Kingdom’s relationship with the European Union thereafter. Boris Johnson’s surprise exit from the race to replace Prime Minister David Cameron, who announced his resignation following the vote, on top of the Labour Party establishment coup against its leader, Jeremy Corbyn, adds to this feeling of insecurity. Some observers have raised the option of the Swiss model. And there are certainly parallels worth considering, even if land-locked Switzerland has never attempted to join the EU and the island kingdom may soon be put out to sea.
Nearly a quarter century ago, in December, 1992, Switzerland held its own “In–Out” referendum. It was on whether to join the European Economic Area (EEA), which the Swiss government branded as a “training camp” for full membership into the European community and which, it argued, would come without any option for an exit. A small majority of the voters, prioritizing the protection of national sovereignty and fearing that the country would lose its cherished reputation for political neutrality if absorbed by the European Union, ticked “Out.” For this group of voters, the expected economic benefits from joining and the possible geopolitical fallout from remaining out of the economic bloc, were less important.
In the last two decades, Switzerland has twisted itself in circles to strike different economic and political deals with the EU without actually becoming a member. It has even joined, among other treaties, the controversial Dublin Regulation requiring European countries to take in asylum-seekers wherever they first land. Switzerland also negotiated a deal with the EU that made it a member of the Schengen area, which effectively abolished Swiss sovereignty over its borders. Switzerland has never adopted the euro, and yet it is a de-facto currency in many regions of the country. And over the years, Switzerland has effectively participated in the creation of a European single market that guarantees the free movement of goods, capital, services, and people. Only in 2014 did the Swiss hold a popular vote demanding the restriction of immigration, but negotiations with EU leaders turned out to be next to impossible because restricting immigration would also lead to Brussels’ withdrawal from key bilateral agreements. After the Brexit decision, it is very unlikely that Switzerland will reach an agreement over this issue, at least within the three-year period set by the Swiss referendum.
The Swiss model is not a viable plan for the United Kingdom or other countries curious about life outside the union. Switzerland has never joined the EU (and so never had to negotiate an exit). In view of Brussel’s fear of protracted insecurity and a domino effect of other countries asking to leave the union, the British government is in a more difficult position to negotiate an exit. Furthermore, time constraints—invoking article 50 of the European Treaty that allows for two years tops for leave negotiations—do not favor the United Kingdom’s bargaining position, as trade negotiation requires intense preparation that may be difficult, if not impossible, to achieve within such an amount of time. After all, the trade deal between Canada and the EU took seven years of negotiations and it is still unclear whether it will take effect.
If the United Kingdom were to follow the Swiss example, it would still have to follow all of the rules of the EU without being able to veto the bad ones.
Switzerland is also geopolitically insignificant. It is not a member of NATO and does not play an active role in global military conflicts. Its “permanent neutrality” gives it a role in security and peace negotiations and allows it to trade without regard to political affiliation. But, as a comparably small country surrounded by four large EU nations, it is radically economically dependent on the European Union. More than 50 percent of all Swiss exports go to EU countries, and almost 75 percent of all imports into Switzerland come from EU countries. That is why Switzerland has every reason to play nice with the EU.
The United Kingdom has equally vital interests in continuing its trade relations with the EU, which amount to about 50 percent of its imports and exports, respectively. The Swiss model shows that it is certainly feasible to reach a strong bilateral trade agreement, but there are tradeoffs for doing so, namely obliging Brussels on immigration, which was at the heart of the Leave campaign. In Switzerland’s case, it became clear that becoming part of the single European market would mean accepting the free movement of people. When it comes to enforcing bilateral treaties with the EU, Switzerland is habitually forced to agree to laws decided by the union, in which it has no say, in order to keep trade unhindered. Right now Switzerland has to pay a “toll,” as the EU critics call it: The Swiss are providing the Eastern EU members with $1.32 billion over ten years (from 2007 to 2016) in economic aid, which is set to be renewed beyond this year. Given that the Leave campaign promised to save the country money by leaving the EU, such an agreement would not sit well with the British people.
So in essence, if the United Kingdom were to follow the Swiss example, it would still have to follow all of the rules of the EU without being able to veto the bad ones; the country’s bargaining position is hardly better than Switzerland’s. Of course, it can use London as leverage. It would hurt Europe too, at least temporarily, if the international financial hub were suddenly shut out of the single market. U.S. and European stock markets tumbled alongside the British one on Friday, and since the vote, global markets have lost $3 trillion. In Germany, the United Kingdom’s third-biggest export market, Chancellor Angela Merkel has, unsurprisingly, called for an unrushed, reasoned approach. The United Kingdom is also eyeing a new regulation, slated to go into effect in 2018 (which is right around when Leave negotiations would wrap up) that would allow it to retain most of its “passporting” rights, which give its financial sector unfettered access to the EU market. But the United Kingdom has more to lose as Frankfurt prepares to accommodate a large portion of the London banking business should the British government invoke Article 50. And in general, EU market access would almost certainly mean accepting the freedom of movement rules and contributing to the EU budget.
Given the novelty of Brexit and the size and importance of the United Kingdom, it is difficult to make any meaningful predictions about the upcoming exit negotiations. Over the next few weeks, London and Brussels will begin discussions on how to translate the current chaos into sensible policies, but whether that means joining the EEA (like Norway and Iceland), following a bilateral Swiss model, or carving out an entirely new path is yet to be determined.