The Pros and Cons of a UK-Switzerland Trade Union: A New Path Forward?
As Britain considers alternative trade deals post-Brexit, Switzerland emerges as a key partner. This article explores the potential of a UK-Switzerland trade union and the benefits and drawbacks of such a union compared to the European Union (EU).
Switzerland: A 10th Largest Trade Partner
Switzerland, the UK's 10th largest trade partner, holds a significant place in the global economic landscape. With trade worth nearly ￡53 billion, Switzerland is not only a major trading partner but also the UK's 10th largest export destination. The value of services exported between the two countries reaches ￡15 billion annually, encompassing sectors like finance, law, accounting, and architecture. This strong economic relationship makes Switzerland a prime candidate for a UK-Switzerland trade union.
Current Challenges and Future Opportunities
However, the current UK-Switzerland Free Trade Agreement (FTA) is based on an EU-Swiss deal from over 50 years ago. This agreement, which predates the digital age and both the home computer and the internet, is now outdated. It fails to cover essential areas like services, digital, and data, areas in which the UK excels. With 69% of UK services exports to Switzerland delivered electronically in 2020, this is a critical gap to address.
The UK is keen to rectify this during upcoming negotiations. Trade Secretary Kemi Badenoch's visit to Switzerland on May 15th underscores this commitment. She aims to update the trading relationship to reflect the strengths of companies in finance, law, and other service sectors. This modernized deal could significantly enhance trade between the two service superpowers, showcasing their combined strengths in services, innovation, and digital trade.
The Potential of a UK-Switzerland Trade Union
A UK-Switzerland trade union offers numerous advantages. For instance, it would allow member countries to trade freely with each other without the barriers imposed by the EU. This could lead to lower tariffs on UK exports to Switzerland, reducing annual duties for UK businesses by around ￡7.4 million. Additionally, it would streamline trade rules for goods of origin, customs procedures, and digitization, benefiting more than 14,000 UK businesses that already export to Switzerland.
A new agreement also supports the financial sector by fostering cooperation, trade, and mobility. The Switzerland-based exchange operator SIX welcomes this move, supporting open and international capital markets. A trade union with Switzerland could further boost investments between both countries, as Switzerland is a key investment partner for the UK, with a total stock of Swiss direct investment worth ￡74 billion in 2021.
Drawbacks and Challenges
While a trade union with Switzerland offers many benefits, there are also challenges to consider. For instance, the UK might lose the leverage it had within the EU when negotiating trade deals. The EU forbids its member states from dealing unilaterally with third countries. Thus, a UK-Switzerland trade union might not gain the same level of leverage as the full EU bloc.
Another concern is the divergence from the EU. Brexit has led to a divergence in trade policies and regulations, which could lead to potential inefficiencies and complexities in the UK's trade relationships. A trade union with Switzerland might need to navigate these divergences carefully to ensure a smooth trading partnership.
Conclusion
In conclusion, a UK-Switzerland trade union presents a promising pathway for enhancing trade between the two service superpowers. It offers the potential to remove market access barriers, improve regulatory cooperation, and enable UK firms to compete on an equal footing in Switzerland. However, the trade union comes with its own set of challenges, including the potential loss of EU leverage and navigating divergences in trade policies and regulations.