Prime Minister Rishi Sunak has denied reports that the UK is reconsidering its relationship with the EU. The “Swiss-style deal” rumoured to be favoured by some in the government would result in a softer form of Brexit, six years after the referendum.
Although not a member of the EU, Switzerland is a part of the Schengen agreement, which creates an area in Europe that allows people and goods to move across borders without checks. As a result, trade agreements between Switzerland and the EU have been easier to negotiate and implement. There are more than 100 agreements between the EU and Switzerland covering a range of sectors such as pharmaceuticals and machinery.
In return, Switzerland commits to abiding by EU law and accepting EU regulations in some of these sectors. To ensure this deal is upheld, there are 20 joint committees between the EU and Switzerland, making a lot of work for both parties.
Despite the government’s optimistic promises to “get Brexit done”, the UK is still waiting to reap the rewards of the 2016 referendum result. Dealing with the crises currently facing Europe while outside the trading bloc has reinforced the new, more complex reality the UK now faces alone. The UK ranks last in forecast growth out of all OECD countries struggling with the cost of living crisis and energy crisis triggered by the war in Ukraine.
Because of this harsh reality, the novelty of the UK being able to negotiate its own trade deals outside of the EU has quickly worn off. Now no longer a member of the largest consumer market on earth, it is difficult to find suitable trade partners. The so-called historic deal signed with Japan by Liz Truss in October has been, so far, unable to remedy years of declining trade with the country.
The attractiveness of a Swiss-style deal for the UK now is owed to the idea of accessing the trade benefits of EU membership without the official label of being a member. Even then, it is surprising to hear such an idea resurface.
During the Brexit negotiations our research found that a Swiss-style deal had potential to work for both the UK and the EU from a trade perspective. But it would have relied on the UK accepting a degree of EU regulation, something that was unworkable for the government.
Instead, the Johnson government preferred a clean break from EU membership, leading to years of debate that has divided the country and has driven a wedge in UK-EU relations.
Is a Swiss-style deal possible?
The UK and Switzerland have similarities. The EU is one of their most important potential trading partners, their currencies are outside the euro zone and both have a strong finance sector.
But these similarities struggle to bridge some important differences. Switzerland is at the continent’s heart and therefore surrounded by EU countries, making trade easier. The UK is comprised of islands isolated from mainland Europe. Since leaving the EU, trade across the channel has become much more difficult, as the challenges surrounding the Northern Ireland protocol highlight.
A further difference between the two is that the UK lacks the political will to accept the legal framework that underpins Switzerland’s deal. Switzerland must accept a number of restrictions issued by the EU on specific policy areas, such as immigration. The agreement on the free movement of persons, for instance, reduces Switzerland’s ability to limit immigration from EU citizens.
Such an agreement is unlikely to be reached in the UK, given how divided it has become on immigration. While businesses have acknowledged the need for both short-term, low-skilled contracts and high-skilled labour to support the economy, increasing immigration is unpopular with Brexiteers. The natural result is that the UK’s position has not changed and thus a Swiss-style arrangement remains unlikely.
To make this clear, Sunak’s response to the reports of a Swiss-style deal was that UK would not pursue any relationship “that relies on alignment with EU laws”. Indeed, the government is hoping to abolish 4,000 EU laws that the UK is still party to.
The political divisions that started with Brexit – and have only worsened since – are holding the UK back from being able to seriously negotiate even a Swiss-style deal.
The UK is already outside the EU, which undermines its bargaining position when it comes to being an attractive partner in trade deals. This has been weakened further by the pandemic and current recession. While EU member states are receiving support through EU funds for their economies, the UK is experiencing one of the biggest economic and social crises of the post-war period.
If the UK decides to renegotiate its relationship with the EU, it needs to think differently. Instead of revisiting options that remain unworkable, such as a Swiss-style deal, it needs to strengthen its bargaining position and find a common purpose that brings about cooperation with the EU.
Reaping the economic benefits of the EU comes with legal compromise that the UK is, thus far, not willing to embrace. But the fact that this is even a rumoured possibility shows that some in government are not happy with the current arrangement. A UK-specific deal may yet be in the cards, but the government has work to do at home first.