At the end of March, Germany and Switzerland agreed in principle on a double taxation agreement. Although the details remain to be negotiated (or disclosed), it is clear that the agreement and similar ones to follow with other EU member countries will end the delicate distinction between tax fraud and tax evasion that Switzerland has used to block inquiries from other countries and that has made possible a business model with a suspected volume of 500 billion untaxed Euros. It will also endanger an important economic niche that Switzerland had secured in an economically integrating Europe. Even though the tax issue created an especially heated political debate, it represents only one symptom of deeper structural problems that Swiss EU policy has run into and that put into question the Swiss bilateral sonderweg in Europe.
From a Swiss perspective, the beauty of bilateralism appeared to lie in the ability to conclude agreements with the EU in fields of Swiss interest without compromising the sovereignty and (direct) democracy cherished by the Swiss people. As a pragmatic model of selective economic integration without political and legal integration, the bilateral way has stood the test of several referendums and has replaced the earlier membership aspirations of the Swiss political and economic elites.
Yet the structural problems result exactly from the clash of an institution of international law (bilateralism) with the EU’s system of supranational legal and political integration under conditions of asymmetric interdependence. Bilateralism requires international negotiations, domestic ratification, and the implementation and elaboration of policies in many mixed committees. By contrast, EU policy rules and decisions result from negotiations between the EU Commission, Council, and Parliament as well as from rulings by the EU courts and do not require domestic ratification. The EU thus continuously produces rules and decisions that go beyond the negotiated status quo of the bilateral treaties.
As the Swiss economy is highly interconnected with the EU internal market, and many EU policies (such as asylum or research) present Switzerland with interesting opportunities, Switzerland is affected immediately by these rules and decisions. As a non-member, it cannot influence them formally, and as the weaker partner, it cannot block them informally. The consequence is the “autonomous adaptation” of EU law and the “EU-compatibility” of Swiss law. According to Thomas Cottier from the University of Berne, around 50 percent of Swiss law is shaped by Community law – a figure that is comparable to any member state. Nevertheless, Walter Stoffel, president of the Swiss competition authority, has recently complained that his work is undermined by the inability to fully cooperate with his EU colleagues.
The bilateral way has thus failed to meet the expectations on three accounts. First, as the banking secrecy issue has demonstrated, it provides no ultimate protection of Swiss economic niches against the EU. Second, whereas it preserves the formal sovereignty of Switzerland, de facto autonomy has weakened. Finally, rather than safeguarding Swiss democracy, it has abetted a technocratic incorporation of EU rules through bureaucracies and transgovernmental expert networks and detached from the democratic political process and the public sphere – at the same time when the EU policy-making process has become more accountable.
And yet, bilateralism is here to stay. De facto integration has progressed so far that the economic costs of non-membership as well as the additional economic benefits of membership are perceived to be low. By contrast, the creeping loss of autonomy and democracy takes place largely under the surface of public attention and is symbolically compensated by the preservation of formal sovereignty. Under these circumstances, the parties of the center are reluctant to enter into a new debate about membership that would be grist on the mill of the Swiss People’s Party (SVP). At the same time, the pragmatic majority of Swiss citizens are unlikely to follow the SVP on the way to ending the freedom of movement, which would shake the entire bilateral edifice. For the time being, Switzerland seems to be stuck with a sonderweg that is increasingly seen as an impasse by friends and foes of European integration alike.