Could the Swiss model serve as a template for Brexit?

Matthew Partridge talks to Swiss former diplomat and negotiation expert Professor Michael Ambühl about whether what works for Switzerland could work for the UK.


Switzerland is outside the customs union
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The mounting pressure on the government to moderate its stance on Brexit has led to an increased interest in the Swiss model as a template for future UK-EU relations. To fully understand how this model operates, we've decided to turn to Professor Michael Ambhl of ETH Zurich, who is an international expert on negotiation and conflict management.

Before working at ETH, Ambhl worked for the Swiss diplomatic service and was permanent secretary in the Foreign Ministry and in the Finance Ministry. As well as being involved in international negotiations over Iran's nuclear programme, and between Switzerland and the US and UK tax authorities, he was the Swiss chief negotiator in the second bilateral talks with the EU, giving him plenty of experience of dealing with Brussels.

According to Professor Ambhl, the "Swiss model" is built on three key points. Firstly, Switzerland has 16 bilateral agreements plus a free trade agreement that govern access to the single market and compliance with European law on a sector-by-sector basis. At the same time, Switzerland is outside the customs union. Secondly, there are also additional technical agreements that cover areas such as environment, trade, customs and research. Thirdly, Switzerland also contributes to "Europe's architecture", both directly via the cohesion fund but also involving projects such as the decision to take a large number of refugees or the construction of transalpine railway-tunnels to bring northern and southern EU markets closer together.

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Ambhl thinks that this bespoke model has several advantages. Swiss firms have a "good degree of market access, as well as legal certainty". At the same time, Switzerland has "freedom to legislate independently" on issues such as agriculture, taxation and foreign affairs as well as being able to negotiate its own trade deals with third parties (such as China). The drawbacks are that Swiss companies don't have full access to the single market; Swiss banks don't have full passporting rights, for instance. Another drawback is that Berne does not have full participation in EU decision-making, although it is often subject to it.

Of course, the Swiss deal also involves freedom of movement, something that is very controversial in the UK. Although the Swiss-EU agreement on immigration contains an abstract "safeguard clause", Ambhl admits that attempts to turn it into something more specific have been difficult. Indeed, a Swiss vote in 2014 to restrict immigration eventually led to tense negotiations, culminating in a compromise whereby employers in certain sectors would be required to initially advertise vacancies domestically.

Ambhl is reluctant to specify what concessions Britain would be able to negotiate, because "the proof of the compromise is in the negotiation" as he says. However, he could imagine that once the principle of free movement is accepted, the two parties might more easily negotiate the necessary flexibility over its implementation, for example through a safeguard/emergency clause in case of relatively high immigration. Professor Ambhl has developed a model, based on net migration rates over a set period, that defines in concrete terms what relatively high immigration could mean.

Another area of concern that has been raised by many people is the impact that leaving the customs union could have on supply chains in terms of the need for additional physical checks. The good news is that Ambhl thinks that these concerns might be overstated. He points to the fact that 700,000 people, 20,000 lorries and a total of CHF1bn (£800m) of goods cross the border each day. While customs officers on both sides of the border carry out checks to make sure Switzerland isn't being used to smuggle in goods from third countries, he is "not aware of any serious problems or of pressures to join the customs union".

In terms of the Brexit negotiation, Ambhl doesn't think the UK needs advice "since British diplomats are very professional and used to dealing with the EU as they have been part of the club". In general, he believes that the key to any good negotiation is to "be clear about what you want from the process". To improve the chance of getting what you want, you "should be the one making the proposals". When trying to make radical changes to an existing status, it is "also helpful to have realistic demands".

Ambhl notes that processes as complex as Brexit can end up taking some time to negotiate. He thinks that the next two years will be spent on the main issues surrounding the divorce, the final destination and a transitional agreement. After these are agreed (hopefully by March 2019) the final details can be thrashed out during the transitional period.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri