Bilateral treaties

Economic effects of the abolition of the Bilateral Agreements I


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The abolition of Bilateral Agreements I will have a considerable negative economic impact on Switzerland as a location for investment, research, production and exports.

Switzerland's GDP excluding Bilateral Agreements I 7.1 per cent lower in 2035

BAK shows the economic development of Switzerland without Bilateral Agreements I for the period 2018 - 2035. Overall, it can be seen that Switzerland's real macroeconomic performance (GDP) without the Bilateral Agreements I in 2035 is likely to be 7.1 percent or CHF 64 billion lower than with the retention of the Bilateral Agreements I. However, the effects on GDP are not the same in all years, but build up over time. Looking at the effects over the entire period from 2018 to 2035, the cumulative loss amounts to around CHF 630 billion. This means that Switzerland will almost lose the overall economic performance of the whole year 2015 in the simulation period.

Every Swiss citizen loses up to CHF 36,000

Although the abolition of Bilateral Agreements I also reduces population growth, the per capita performance is also significantly lower. The loss of macroeconomic welfare in 2035 will amount to around CHF 3,400 per capita. Cumulated per capita sales for the years 2018-2035 will be around CHF 36,000 lower.

Elimination of the Bilateral Agreements I reduces GDP growth by a quarter

In a scenario excluding Bilateral I, the average GDP growth rate for the period 2018-2035 is reduced to 1.2 per cent per year, while BAK expects 1.6 per cent per year in the reference scenario. This corresponds to a reduction of the growth rate by a quarter.

Restricted free movement of persons with the greatest effect

Even if the effects of the individual agreements interact and cannot be subdivided completely, the analyses also allow an assessment of the significance of the individual agreements. In terms of the real economic effects accumulated over the entire period (2018-2035), the largest retroactive effect by far results from the restricted free movement of persons (CHF 258 billion) at 39 percent, followed by the agreement on air traffic (19 percent or CHF 117 billion). The economic impact of increasing technical barriers to trade and the exclusion from the EU Research Framework Programme amounts to 7 percent (CHF 44 billion). The negative damage potential of the abolition of agreements on public procurement and land transport is lower at 3 percent (CHF 17 billion) and 2 percent (CHF 10 billion) respectively. The smallest macroeconomic effect is expected from the abolition of the agricultural agreement (<1%, CHF 2 billion). However, the losses are considerable for the agricultural sectors directly affected. In addition, the so-called systemic effect (accumulated CHF 140 billion), which describes the additional loss of location and investment attractiveness resulting from the interaction of all agreements, has an impact of 22 percent.

The discontinuation of the individual agreements has different effects over time

While the abolition of air and land transport agreements and public procurement have had their negative effects right from the start, the following years will be increasingly dominated by the restricted free movement of persons and systemic effects. Exclusion from the EU Research Framework Programmes and generally restricted access to the EU sales market also have a more negative impact with increasing duration than in the first few years.

The results show what is at stake

The study approach and the results cannot be equated with past effects of the introduction of Bilateral Agreements I. Similarly, the results do not describe the potential future situation of Switzerland without Bilateral Agreements I, because expected political reactions to a discontinuation are explicitly not part of the contract description. Effects on other agreements (e.g. Schengen) or future agreements are also not taken into account. These could change the effects. Overall, the study shows what is at stake for the Swiss economy if the Bilateral Agreements I are dropped. From an expert - i.e. economic - point of view, the discontinuation of the Bilateral Agreements I will have considerable negative economic effects on Switzerland as a location for investment, research, production and exports. This is explicitly not accompanied by a socio-political evaluation.


Background

The new constitutional article 121a provides for the independent control of immigration through the introduction of maximum numbers and quotas as well as the principle of national priority. This is not compatible with the Agreement on the Free Movement of Persons between Switzerland and the EU. There is a risk that the Bilateral Agreements I will be terminated in response to the restrictions on the free movement of persons in their entirety.

Macroeconomic effects of the discontinuation of the Bilateral Agreements I

With this study, BAK shows the macroeconomic effects of the elimination of Bilateral Agreements I for Switzerland. On the basis of detailed agreement specific analyses and their implementation in the extensive model world of BAK, the effects of the discontinuation of all seven individual agreements as well as the resulting systemic overall effect were calculated.

Comparison of Switzerland's future development with and without Bilateral Agreements I

Two scenarios were calculated using BAK's macroeconomic structural model to best illustrate the effects. The reference scenario describes Switzerland's future development while retaining the Bilateral Agreements I. The alternative scenario compares this with Switzerland's future development without Bilateral I from 2018. The detailed and stringent comparison of the two scenarios allows a consistent analysis and comprehensive presentation of the macroeconomic implications until 2035.