The Compass movement rejects a new bilateral agreement with the EU. One of the things she dislikes is that it is too bureaucratic. Swiss companies find it difficult to evade many EU laws.
Federal President Viola Amherd (left) and Ursula von der Leyen: The new bilateral agreement should be in place by the end of the year.
The EU, the “bureaucratic monster” – this image sticks to the confederation of states. There have already been two decades of overregulation in the EU, said Alfred Gantner, financial entrepreneur and co-founder of the Kompass organization, a week ago. Economically, the confederation would therefore lose its skin.
Kompass has therefore launched a popular initiative. The organization wants to prevent Switzerland from concluding a new institutional agreement with the EU. Among other things, the Kompass promoters dislike the dynamic adoption of EU law, which is supposed to be part of the new agreement. The initiators fear that the bureaucratic monster that is the EU will swallow up the comparatively liberal-minded Switzerland.
Europe’s entrepreneurs are complaining
Compass thus hits a sore point in the confederation of states. European companies and business associations have been complaining for some time that regulation in the EU has become excessive. Recently, however, the tone of these complaints has sharply escalated.
“The EU is the main driver of bureaucracy and has lost both measure and center,” says Moritz Hundhausen, head of European policy at the Family Business and Politics Foundation, in Brussels. European companies are the main victims of this. “Instead of setting the framework, the EU gets lost in small-scale regulation.” An employee of Business Europe, the association of European companies in Brussels, believes that this can hardly be managed anymore.
Even a respected person like former ECB President Mario Draghi has spoken to the EU’s conscience. The confederation of states must make do with fewer rules and laws, and these should become simpler, more coherent and more suitable for everyday use, he wrote in a report published three weeks ago that Commission President Ursula von der Leyen had ordered.
However, the Commission under von der Leyen has imposed a lot of regulatory burdens on companies since 2019. Whether supply chain law, deforestation regulations or sustainability reporting – all of these regulations have imposed new reporting obligations on companies, which, according to business representatives, are often duplicated or tripled.
To do them, companies now have to hire skilled workers who contribute nothing to the output but incur costs. Company representatives say the expenses are also much higher than the EU forecast in so-called regulatory impact assessments.
Bureaucratization is part of the system
However, the complaints from business have now reached the Commission and the member states; the question now is whether a reversal of the trend is politically possible. For example, von der Leyen has given all commissioners the task of reducing the administrative burden on companies. Less bureaucracy and reporting, but more trust – that’s what the Commission President demands in “Europe’s Choice”, her political guidelines for 2024 to 2029.
Since 2022, the “one in – one out” principle has even applied in the EU. The EU understands this as follows: Any additional regulation should be compensated for with relief to a similar extent. And von der Leyen has also announced that reporting requirements will be reduced by 25 percent.
However, such actions have not appeased the companies and associations. “Basically nothing happened,” says Hundhausen from the Family Business Foundation.
Von der Leyen and the Commission are not solely to blame for this. The member states and parliamentarians are also responsible. Too often they cannot resist the temptation to inflate the laws, guidelines and regulations to suit their political ideas.
The member states like to pursue a shadow agenda. Governments act as if they care about the environment and use this to justify new regulations. In fact, their aim is to exclude competitors from the European market and put domestic companies in an advantageous position.
Things get really confusing when the EU Parliament comes into play. This has to do with the self-image of the MPs. For example, no social democrat can afford to work on a committee without bringing his or her own concerns to it. The same can be said of the Greens, the Christian Democrats and the other MPs.
The legislation is getting out of hand – as is also the case in Switzerland, where business also often complains about over-regulation. In the EU, however, the problem is probably more serious because many more actors are involved in legislation.
But even if Switzerland distances itself from the “bureaucratic monster” as Kompass wants, it will never be able to escape it. For example, the EU’s hotly debated supply chain law applies not only to companies headquartered in the confederation of states, but also to those from third countries, provided they have an annual turnover of more than 450 million euros in the EU.
This means that the law only affects large companies. They must carry out due diligence regarding human rights and environmental protection. But even small companies cannot avoid EU regulation in many areas if they want to export there. And many do this because the market is so large and the Swiss economy is linked to it in many ways.
Switzerland’s economic ties with the USA and China have increased in recent years, but the EU will be by far the country’s most important trading partner for a long time to come. Switzerland handles 59 percent of its goods exchange with Switzerland.
Switzerland will always follow the EU
Therefore, the Federal Council and Parliament will continue to have to base their legislation on the confederation of states, whether the so-called Bilateral III comes or whether the population rejects them in a vote. The industry associations have also always pushed for legal harmonization.
Gantner from Kompass says that with the Bilaterals III they don’t know what they are legally “buying” in the medium term. Where the EU is heading in terms of regulation is actually an open question. Perhaps the EU is deepening the internal market, which would also open up new opportunities for Swiss companies, but perhaps it is also becoming more protectionist, which would be a disastrous development for the EU’s trading partners.
But simply blindly, as Kompass claims, Switzerland does not have to adopt EU law. In the five existing bilateral agreements, for example on land transport or the free movement of people, the EU at least grants the country exceptions: Switzerland is allowed to grant the right of permanent residence only to employed people. And Switzerland can appeal to an arbitration tribunal if there is disagreement with the EU over the interpretation of the bilateral treaty.
Switzerland will have to live with the alleged bureaucratic monster for better or for worse – but European industry representatives are currently trying to at least tame it somewhat.
