At the end of January 2018, the Swiss Federal Council appointed diplomat Roberto Balzaretti to head the Directorate for European Affairs (DEA). In this role he is responsible for coordinating the entire negotiations with the EU. In his first in-depth interview since his appointment as secretary of state, Switzerland’s former ambassador in Brussels talks to Avenir Suisse about the chances of a framework agreement for Switzerland, and the pitfalls that lurk along the way.

Avenir Suisse: Mr. Secretary, every day the newspapers are talking about trade wars. How can a country as small as Switzerland possibly hope to assert its interests in the face of such giants as the United States and China?

Roberto Balzaretti: In principle, it is very easy: Switzerland can assert its interests effectively when the law applies. But as soon as there is power at stake, things get more difficult. It is important to remember that Switzerland isn’t actually so small in economic terms – and especially not when it comes to business. At least ninety nations are smaller in terms of population. The fact that we are not part of a large entity also gives us a certain amount of flexibility. It has enabled us to conclude a bilateral free trade agreement with China, for example

Roberto Balzaretti, Swiss Secretary of State. (EDA)

That from you of all people: the man who is now negotiating closer bilateral relations with the EU!

We must not ever forget where we are: right in the middle of Europe! Fifty or sixty percent of our exports go to the EU; in terms of volumes traded, Baden-Württemberg and Bavaria are just about as important to us as China; and Lombardy is around the size of Japan. We trade as much with the EU in a single day as we do with Indonesia in an entire year. That’s why developing the contractual and economic basis of our relations with the EU is so crucial. However, naturally Switzerland needs to make sure its relations are in order worldwide too.

Don’t these facts contradict the widespread distrust of supranational structures among many Swiss people?

The distrust in this country has evolved historically. Added to this, people fear the unknown, and many feel they are at the mercy of the world and the incredible speed with which it is moving. Only a few decades ago the power was still concentrated in Bern, not Beijing. Now there are international developments taking place that we can only influence to a limited extent. What Switzerland can do, however, is contribute its ideas and good offices in forums such as the UN or the Organization for Security and Cooperation in Europe. That is even possible in the context of the EU, for example in efforts to develop Schengen/Dublin. Swiss people also have good ideas!

Is this distrust of concentrated power, wherever it occurs, something typically Swiss?

It is typical for a federal state split into three political levels. I figure it is fairly similar in any postindustrial state, in any European country.

You are heading the strategically most important negotiations for Switzerland. How do you intend to sell the results at home to help reduce this distrust?

Above all, I want to avoid talking in terms of “selling.” We have to convince people in Switzerland that we are doing the right thing. Federal Councilor Cassis has started to explain what we want to achieve. That’s new. For the first time in history, we are putting our negotiating mandate clearly on the table. So far this does not extend to smaller, complicated technical issues. But we’ll be explaining these as well. Therefore, my answer to your question is that we intend to create transparency, work on the basis of facts, and persuade people. This strategy builds trust. But it also entails certain risks. It involves talking about things that maybe can’t be put into practice.

So you would say that there has been a paradigm shift in negotiations with the EU?

Absolutely. There used to be consultations and secret negotiations first before the results were announced. Only then would the political debate start at home, possibly culminating in a referendum. That’s not how it works these days. Take the negotiations on the institutional agreement: we have already started explaining what we want to achieve, and we will be providing further explanation on an ongoing basis. One of the main reasons the notion of “foreign judges” became an issue was that three or four years ago we were not prepared to explain what it was about. Now it is no longer possible to talk about foreign judges in the same sense because in the negotiations we want to work on the basis of a different model, the arbitration tribunal.

You mentioned technical issues. It is hard to explain complex matters and present a differentiated view. How do you intend to go about it?

By building trust that the basic outline is right. The key to this is transparency and honesty. In terms of Swiss/EU relations, it is about ensuring the efficient functioning of five existing agreements, and providing a basis for concluding new agreements on market access – including the electricity market agreement. The focus is on two things: making relations more dynamic overall, and settling potential disputes – in other words setting down a legal procedure for the event that something is not to our liking.

In Switzerland, there are fears that after signing a framework agreement the EU could change the rules unilaterally without us being able to do anything about it. What is your view?

The norms we are negotiating are subject to a certain amount of change. You could compare it with your smartphone: without regular updates, eventually it will not work anymore. Not immediately, but it will happen sometime. It is the same with the process of dynamization. But unlike the smartphone, this process is more transparent and controllable: the principles of the agreement are known, and we are sitting around the table to decide how they are going to develop. Therefore, we know what we are in for. And we can decide ourselves whether we want to run an update – in other words back a decision – or not. The consequence is that if we don’t, eventually the agreements will not work anymore. Naturally, it is hard to describe the consequences of not acting or maintaining the status quo, but we are trying to.

How would dynamic incorporation of the law differ from the current arrangement?

Most agreements are currently static. But the EU is constantly developing, and is inviting – but not forcing – Switzerland to incorporate EU legislation. This takes place in the relevant joint committees. It can happen that legal disparities arise that can pose obstacles to Swiss companies when they export. If we do not update our laws, there are generally discussions with the EU. Introducing a dynamic process would mean undertaking in advance to adopt developments in the law according to our circumstances. It is about ensuring homogeneity of the legal bases between Switzerland and the EU in the agreements on market access. A failure to adopt by Switzerland would give the EU the right to take compensatory measures. These, however, would have to be proportionate. The costs of non-dynamic incorporation with a framework agreement would be more transparent than is currently the case, and we would have the option of taking legal action – something that is not possible at present.

Switzerland often faces the accusation that its political processes take too long. This could be a problem, especially in the event of the dynamic adoption of law that we are talking about. But don’t these slow processes sometimes prevent us from making mistakes?

We are thorough. We have to be. This is why we already know what the EU is preparing in key areas. With an institutional agreement we would be more closely involved, and could exert an even greater influence than is presently the case. We could be part of the EU’s deliberations rather than having to wait to be presented with a fait accompli in the form of a new legislative act. In connection with “Schengen”, we have already adopted around 140 legislative acts, and there has never been a major time problem. When it came to adopting the rules on biometric passports there was even a referendum. No one in the EU disputes our specific Swiss way of going about things. Under an institutional agreement we would have two years for national implementation plus an additional year in the event of a referendum. That should be sufficient. It would be a good, practicable solution.

While we are on the subject of the pace of negotiations: the talk in various quarters is of a window of opportunity until this summer, or fall 2018 at the latest. Does this match the facts? Is this time pressure more of a help or a hindrance?

We don’t feel we are under time pressure. What’s important is getting a good outcome from the negotiations. In terms of dispute resolution, we are discussing the idea of an arbitration tribunal. We have a clear mandate from the Federal Council that stipulates among other things that certain matters, so-called no-go areas − for example the accompanying measures − are not up for discussion. If we are not satisfied with the outcome of the negotiations, we will not be signing any agreement.

But nothing would be gained from that. On the contrary.

Of course, in 2019 everything will get more complicated with the elections to the European Parliament, a new EU Commission, and our own elections. Ultimately, the agreement has to be right for Switzerland. If we achieve too little we will be stuck with the status quo and all its pros and cons. We are not engaging in art for art’s sake.

After this year when would be the next realistic opportunity for negotiation?

Anything I could say would be pure speculation. If we got to that point, though, we would have to define a new line of negotiation before resuming talks. Failure this year, however, would not mean that we would be in a legal vacuum from 2019. We simply would not be able to modify the agreements as we would wish for the sake of our businesses. The EU has also made it abundantly clear to us that without a framework agreement we will not be able to conclude any new agreements on market access for specific sectors. We have to be aware of that.

Will the UK’s departure from the EU create new opportunities for Switzerland?

No. On the contrary. We need a strong EU. The weaker it is, the harder it is for the community to grant Switzerland exceptions. Not only that, but we rely on good relations with both the EU and Britain. We hope that the transitional phase post-Brexit will run smoothly. For the last twenty years, the EU has been growing closer and closer in legal terms, and all our neighbors, except Liechtenstein, are part of it. This means that the most important question for Switzerland is always the same: do we have access to the market? The borders to our neighbors will still be there in twenty years’ time.

Where do you see Switzerland’s relations with the EU ten years from now?

Ten years is a short time. Now we have to create a basis to ensure we still have the freedom to choose what we want to do in the future. With a signed framework agreement in place, we could take a more relaxed view of the future. Without this foundation, it will be harder to express our wishes, or even make demands, in eight or ten years’ time – I am thinking of additional agreements on market access. In the short term we need more calm and composure; in the medium term a new order in our relations with the EU; and longer term, greater potential to develop as an economy.

Roberto Balzaretti will speak on Switzerland's new EU strategy on 18 April 2018 in the series of events entitled "Foreign Policy Hall" in Berne. The event is organised by the Swiss Society for Foreign Policy SGA ASPE in cooperation with Avenir Suisse (Wednesday, 18 April 2018, 18:15 to 20:00, Aula der Universität Bern, Hochschulstrasse 4, Room 210, 3012 Bern). Registration here.