The pressure is building on British prime minister Theresa May. Recently, she lost an important vote in the House of Lords, the upper house of parliament; in May come crucial votes among MPs in the lower chamber. With a wafer thin government majority of just 13 and the ruling Conservative party divided between “Brexiters” and “Remainers”, success is not guaranteed.
The core issue in the tortuous negotiations between London and Brussels has narrowed to Britain’s future trading relationship with the European Union, and, above all, whether Britain will stay in the EU’s customs union. That is the external wall around member states, which levy joint tariffs on goods from outside but allow seamless tariff free trade among themselves.
Mrs. May has pledged to leave the customs union, part of her determination to “regain control” of British affairs and let London negotiate its future trade agreements with other countries. The problem is first that many exponents of a “soft” Brexit think staying in the customs union is essential to minimise the disruption, and possibly chaos, looming for the British economy on leaving. Forecast British growth rates are already sharply down on pre-Brexit estimates. Continued membership of the customs union would also defuse the problem of the Irish border – seemingly minor to the uninitiated, but in fact potential dynamite.
Many have suggested Mrs. May should look for ideas to other European countries that are not part of the EU, but retain an intimate relationship with it. The primary candidate has been Switzerland, given its location at the heart of Europe but its steely determination to avoid EU membership.
Brussels negotiators have made clear a rehash of Switzerland’s web of bilateral treaties is definitely not on the agenda for Britain: the EU is pushing hard for Bern to simplify its relationship via a framework treaty, not lumber itself with a similar, but inevitably even more complex, set of sectoral deals with the Brits.
Nevertheless, as Peter Grünenfelder, Avenir Suisse’s director, says, the talk in London is increasingly of examining the “Swiss Model.”
On the face of it, London and Bern may have similar interests when it comes to future relations with the EU. And the two countries are close trading partners, as well as important sources of direct foreign investment in each other’s economies.
Switzerland is a global top 10 export market for the UK, taking 2.8 percent of all exports, amounting to £20.7bn in 2016, and making Switzerland the UK’s third largest non-EU export market for goods after the US and China. Sales to Switzerland were larger than those to India and Canada combined; 70 percent larger than to Japan and larger than to India, South Africa, Nigeria and New Zealand combined.
But the UK’s and Switzerland’s relations with the EU have altogether different starting points, and the bilateral relationship is actually more complex and skewed than initially meets the eye. Common interests, beneath the superficial, are limited.
“Our country is seeking a convergent relationship with the EU, while the UK is following the path of divergence”, writes Grünenfelder. “A market access agreement should put the Swiss-EU ‘cohabitation’ on a stable and simultaneously dynamically viable basis. By contrast, London has filed for divorce”, he observes.
Some have suggested London and Bern should somehow co-ordinate their approaches, while recognising they do not have identical positions towards Brussels. Switzerland would like to seal a deal with the EU as quickly as possible to eliminate uncertainty and, ideally, improve access for the country’s important financial services sector. But, realistically, some Swiss observers have argued for restraint, aware that sorting out Brexit is far more important for the EU than any outstanding Swiss issues.
That is undoubtedly true. But it should not, argues Grünenfelder, be used as a cover for Swiss passivity or docility. Keeping abreast of the Brexit talks – and, not least, ensuring Switzerland in time cuts its own beneficial trade deal with London – is important. But much more important for Bern us to press ahead with settling its own future relationship with its closest European neighbours.