Trade Relations between Switzerland and the EU

Switzerland and the European Union (EU) are linked by close bilateral cooperation, with a gradual shift over time from pure trade integration (Free Trade Agreement of 1972) to more economic integration (Bilateral I) and finally to political integration steps (Bilateral II). After negotiations on an institutional framework agreement between Switzerland and the EU failed due to various disagreements, the question arises for Switzerland whether it should not deepen bilateral relations with the EU primarily in the economic sphere in view of the common interests. This study calculates the economic effects of a modernized free trade agreement between Switzerland and the EU as a baseline scenario and compares the effects with a complete disintegration (WTO rules-based only) and a complete integration (EU accession) as reference scenarios. The study shows that significant welfare gains can also be achieved with a modern, additional free trade agreement as a sovereignty-preserving alternative to further political integration into the EU. Such a deepening of market access would have to be in the interests of both sides: a modernised free trade agreement increases prosperity for both economies and has already been outlined in the draft institutional framework agreement. At the same time, the terms of the CETA agreement have been signed by the EU, which makes the feasibility of a similar agreement seem viable.