EU-Swiss trade relations and the institutional framework agreement

Briefing 19-07-2021

On 26 May 2021, the Federal Council of Switzerland (Swiss executive authority) announced that the country will not formally sign the institutional framework agreement (IFA) agreed at political level with the European Union (EU) in 2018, thereby ending the negotiation process. The objective of the IFA was to create a horizontal governance framework that would have covered five major EU-Swiss trade-related bilateral agreements signed in 1999, part of the 'Bilaterals I' package. It also provided for dynamic alignment of standards in the domains covered by the IFA, a dispute settlement mechanism with jurisdiction of the Court of Justice of the EU on EU law, and State aid rules. The EU considers that Switzerland does not respect all of its commitments in the existing agreements, which give the country access to parts of the EU's single market; it perceives the current situation as unbalanced, partly due to the absence of dispute settlement mechanisms in the existing agreements. In addition, the dynamic alignment and State aid rules envisaged in the IFA would have enhanced fair competition between EU and Swiss businesses ('level playing field'). Switzerland, although it aims to 'deepen' its relations with the EU by means of new sectoral agreements, is concerned by the potential application of the EU Citizens' Right Directive, as well as the potential future removal of the labour market exemptions provided by the IFA protocols. To a lesser extent, it is also concerned with the IFA's State aid rules. Switzerland consequently requested 'explicit clarification' from the EU on these points in 2019, then resumed talks in 2021. According to the European Commission and European Parliament, 'the door is always open', but new agreements are unlikely to be signed without a framework agreement. The Commission has also emphasised that the upgrading of existing agreements – necessary whenever new EU standards are adopted to maintain their applicability – will be assessed on a case-by-case basis to prevent unintended effects. Medical device equivalence, previously covered by provisions of the EU-Swiss Mutual Recognition Agreement, is the first no longer to be applied as a consequence of changes in EU standards.