Switzerland: Many trade associations are pushing for the framework agreement to be hurried

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The fronts in European politics have hardened. While many business representatives want the framework agreement to be finalized as quickly as possible, the trade union federation is calling for renegotiations.

On the first day after the electoral vote rejected the restriction initiative, it was clear: the free movement of people will be maintained and the break with the EU will not take place for the time being. But when it comes to European policy, Switzerland is once again in the first place: the controversy surrounding the framework agreement has only just begun - despite years of hacking. In the economy in particular, the fronts between representatives who want to get the framework agreement under wraps and the European brakes have hardened.

The former include science industries and Interpharma, which represent the interests of the pharmaceutical, chemical and biotechnology industries. We need the framework agreement with the EU. There is no getting around that, ”says the head of Interpharma, René Buholzer. In a media communiqué, his organization refers to a survey carried out by the opinion research institute GfS Bern last June. At that time, two-thirds of those questioned were in favor of signing the framework agreement. Apparently the lobbyists in the pharmaceutical industry do not consider the framework agreement to be as hopeless as it is currently being presented.

Medtech industry should be the first to experience the disadvantages

Like most business groups, Swiss Medtech, the Swiss industry association of medical technology companies, is “pleased” to note the rejection of the limitation initiative. However, the problem that Swiss medtech companies would be treated by the EU like companies from a third country from the end of May 2021 remains unsolved.

Because of the pending framework agreement, the medtech industry is the first to experience specific disadvantages. Because the EU does not ratify the agreement on the dismantling of technical barriers to trade (Mutual Recognition Agreement, MRA), the medtech industry would lose direct access to the EU internal market. By postponing the key date to May 26, 2021, Swiss companies have at least gained an additional year to prepare for this scenario.

Swiss Medtech calls on the Federal Council to “come to an agreement on a quick and pragmatic solution” with the EU on MRA matters. A decision must be made by the end of the year at the latest, says Swiss Medtech President Beat Vonlanthen. This leaves the company time for any adjustments. Swiss Medtech understands “pragmatic” to mean that the EU has waived its strict interpretation, i.e. continues to regard Swiss medtech companies as compliant with EU directives. The German Federal Association of Medical Technology (BVMed) explicitly advocated the Swiss position last month and asked its ministers to immediately update the mutual recognition of medical technology products in the interests of security of supply for patients .

Despite all its efforts, the Medtech Association does not rely on the principle of hope and advises its members to expect the worst, i.e. that the EU classifies Switzerland as a third country. Many companies have therefore played it safe and have used the grace period to submit to the additional requirements if politicians fail to reach an agreement at the last minute.

Switzerland threatens to become a third country not only for medtech companies, but also in the energy sector. The conclusion of an electricity agreement with the EU is linked to an institutional solution. The Association of Swiss Electricity Companies (VSE) has been pushing for a corresponding agreement for a long time. The VSE explains that a regulation is needed to guarantee system stability and security of supply.

Switzerland is currently excluded from parts of the European electricity market, although Swissgrid has already created the technical prerequisites for participation and Switzerland has been closely linked to Europe in the electricity business in all directions. On the one hand, this has financial consequences in the form of lost opportunities in electricity trading (pumped storage power plants) and higher costs. According to an Empa study, additional costs of up to CHF 1 billion per year must therefore be expected by 2030.

On the other hand, the exclusion of Switzerland is increasingly leading to stability problems in the network. Because of unplanned electricity flows ("loop flows") from abroad, the national operator has to intervene increasingly to keep the grid stable.

Trade unions criticize the European Court of Justice

The trade unions, among others, are the brakes on the framework agreement: Hans Hess, the entrepreneur and President of the Association of the Machine Industry, criticizes the fact that they have been insisting on maximum demands for months and rejecting a dynamic adoption of the EU posting law. In fact, the Swiss Federation of Trade Unions (SGB) speaks out against the present framework agreement. It endangers the protection of wages and jobs, explains SGB chief economist Daniel Lampart. Central parts of the accompanying measures would be jeopardized.

The European Court of Justice (ECJ) in particular is in the crossfire of criticism, which “often weighted companies' entry into the market higher than wage and employee protection”. The trade unions fear that the European Court of Justice will above all denounce the control system of the social partners, which is supposed to ensure compliance with wages and working conditions at companies. In fact, hardly any other country carries out as many controls as in Switzerland, which could be assessed as disproportionate and discriminatory. In addition, the social partners and non-governmental authorities carry out the controls in this country, which is why it is highly questionable in the judgment of the unions whether the ECJ would allow the Swiss system.

The eight-day advance notice for foreign posting companies or the deposit required by Switzerland would probably also be inadmissible in the eyes of the court. The exceptions offered by the EU Commission (shortening the pre-registration to four days, bail for repeat offenders, etc.) are not a valid substitute for the SGB. In fact, in principle, it is not a question of whether the eight-day rule is shortened or the bail is handled more liberally, but rather about the feared erosion of the “flankers”.

Negative attitude at the trade association

The Swiss Trade Association (SGV) cannot agree to this framework agreement either. The SGV had already expressed itself critical of the draft contract during the consultations at the beginning of 2019. Hans-Ulrich Bigler, Director of the SGV, has several objections: Firstly, he calls for the adoption of the Union Citizens' Directive to be explicitly excluded in the framework agreement. Such a directive would create new entitlements to social assistance for EU citizens in Switzerland, make their deportation more difficult and give them a permanent residence permit more quickly.

Second, Bigler does not like the proposed dispute settlement mechanism. "We are calling for an arbitration tribunal in which both parties have equal rights." In the present agreement, however, one party can determine what applies and what does not. A bilateral dispute settlement mechanism is necessary. Thirdly, the SGV is committed to the accompanying measures, such as wage protection and the obligation to provide a deposit. He rejects the expansion of these measures, especially since overregulation of the labor market is feared.

"Yes but . . . " at the employers' association

The employers' association is more willing to compromise: it is fundamentally clear to him that Switzerland needs a framework agreement. Otherwise, the risk of further pinpricks, such as questioning the equivalence of the Swiss stock exchange, would be too great. He calls on the Federal Council to bring the result of the domestic political consultation to Brussels and to request clarification on the three disputed areas (Union Citizens' Directive, state aid and accompanying measures). In agreement with the trade unions, he advocates maintaining the previous level of protection for workers. According to the employers' association, the social partnership control system in Switzerland, the deposit obligation and other points such as wage protection must be secured under international law. How the protection under international law could look in practice remains unclear, however. The employers' association also admits that the framework contract is a tightrope walk in domestic and foreign policy.

Noteworthy is a recently publicized letter that the employers' association, the trade association, the trade union federation and Travail Suisse wrote to the Federal Council in mid-August. Despite major differences, the social partners agree that the exceptions to wage protection in the present framework agreement are insufficient and must be expanded.

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