Sunday, February 16, 2014

Uncertainty following Swiss immigration referendum

Last weekend, the Swiss voted in a referendum to impose strict migration levels. The campaign was rough. The Swiss government, a clear majority of the parliament and the business community campaigned against this initiative, given the negative impact it may have on the attractiveness of Switzerland as a business location. Only one major party, the nationalist Swiss People’s Party was officially in favour of the quotas. They exploited concerns among the people such as housing shortage, low-wage dumping or congestion of the infrastructure.

The initiative was approved by just 50.3% of the votes and was passed by a majority of cantons, though there was a clear gap between cities and the countryside. In metropolitan areas where a lot of immigrants live and work, the initiative was defeated. But in rural areas, there is a significantly smaller number of foreigners, the acceptance of the initiative was much higher. There was also a gap between the often more open minded French speaking part and the rest of Switzerland.

Those who voted 'yes' in the referendum may not have understood the potential consequences of voting as they did, as they aren't direct beneficiaries of free trade and free movement of people, but they may not like what happens next much.

First, there is legal uncertainty. Nobody knows how the relations with the European Union will evolve and when companies will be able to engage in long term business planning. Even if all persons without a Swiss passport who currently live and work in Switzerland are not directly affected until their visas expire, Switzerland will face problems attracting talent from all over Europe and the world. It is also not clear how Switzerland will be able to participate in the single market. The image of the country as an open community with a successful economy will suffer for a long time.

Second, the adoption of this initiative creates a new bureaucratic burden for companies: while the principle of free movement of people stipulates that everybody within the European Union is entitled to work in any EU country without discrimination (including Switzerland as a non-EU Member State), the referendum initiative demands a prioritization for domestic persons. These two principles cannot be combined and will lead to difficult negotiations with the EU without any prospect of solution. In the not so distant future Swiss companies will be obliged to prove that there is no Swiss employee with similar qualifications for the job before hiring a non-Swiss worker.

Third, the "Bilateral-one-package" negotiated between Switzerland and the EU (dating from 1999 and coming into force in 2002) is at stake. There are further negotiations over, among other things, energy, the financial market, agriculture, food and participation in EU programmes on research, education & culture. The EU has already suspended the negotiations of a framework agreement to resolve the “institutional questions” between Switzerland and the EU (implementation of EU legislation, interpretation, supervision, dispute settlement) and those of the electricity agreement.

What the Commission and the Council of Ministers do next will be keenly watched by UKIP and Eurosceptic Conservatives alike. The latter see the future of the UK as outside the European Union, but with bilateral agreements, like those of Norway and Switzerland, but with immigration controls such as those which Switzerland has just voted in favour of.

Acknowledgments:
Jonathan Fryer
Mark Valladeres
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