Switzerland and the European Union -
                                                
    One of the most important economic and political developments of the last one
hundred years is occuring on Switzerlands doorstep and strangely enough there is
an almost tangible fear of becoming involved in this momentous development - namely,
the integration of all the European countries into a European Union and eventually, the establishment of a United States of Europe.

                                 


     A small white region in a sea of green and in an ocean of pink which in a few years will also be green

   As I have reported here on other pages, the Swiss view of the neighboring countries
has been influenced by the turbulent history of Europe during the past 150 years. Under
the mantle of neutrality there has developed a national identity which has succeded in
holding together this very inhomogeneous country. Now this identity is being called into
question by the only successful peaceful integration movement in Europe since the
empire of Charles Quint (1556).

   Beginning in 1947, an effort was made to unify the basic industries (coal and steel)
of France and Germany with the goal to finally integrate the economies and eliminating
once and forever, the  wars which had occurred three times in the last 150 years. This
initiative grew to include Italy and the Benelux countries (total of 6) in the Treaty of Rome
in 1957. This core was joined by England, Ireland,Spain, Portugal, Austria, the Scand-
inavian countries and Greece in enlargements between 1973 and 1995.
  The unifying of the finally 15 countries in the treaties of Maastrich and Nice has
essentially removed all barriers to trade and has established a single market where
goods, services, people and capital can move freely across borders. In 2002 the national
currencies of 12 of the 15 member states were replaced by the common currency -
the Euro - managed by the European Central Bank. And, in May 2004 the community was expanded to 25 with the entry of the 10 formally communist eastern countries.

    If you look at the map of the EU Europe above, you will note that there is a small blank
space just in the middle. That is the position of a small country of some 7.1 million
citizens which is surrounded by 25 other nations comprising some 455 million inhabitants.
Switzerland began to wake up to the profound changes which were taking place all around
at the end of the 1980`s. In fact, a proforma application to begin membership talks was
sent to Brussels in 1992. This coincided with an election to join the European Economics
Union which was considered to be the economic stepping stone to EU integration.

   This important step was rejected by a narrow margin - and this has been the source of
many difficulties ever since. It has resulted in an estrangment from the EU countries and
even commercial differences with countries such as Norway, Liechtenstein and Iceland
which are in the IEEE (but not yet not in the EU). Since that time all integration efforts by
the various Swiss political parties have been put on hold. All agreements must be
reached by the old laborious method of negotiation - country to country and subject by
subject.
   Beginning some ten years ago, a complicated round of negotiations were begun with the
EU concerning air and land transport, agriculture, public procurement contracts, free
movement of persons, technical trade barriers, etc. etc. The changes necessary in Swiss
laws and regulations to rinder them EU compatable were finally accepted in a national referendum in 2000. As could be expected in our fast moving world, this Bilateral I was immediately followed by a new series of talks called Bilateral II. Agreement was reached
in June 2004 and now each of the 9 subjects must be discussed in Parliament and
approved in a referendum a year later by the electorate and cantons.

   The subjects include -
-  reporting and taxing of bank accounts of EU citizens.
-  exchange of information concerning cross border fraud.
-  cross border environmental programs and protection.
-  elimination of subventions and customs on agricultural products.
-  integration into common statistical collection programs.
-  elimination of double taxation of pensions.
-  integration of audiovisual programs.
-  promotion of cross border educational programs.
-  participation in the EU Schengen police and judiciary controls (open borders for
   persons in exchange for national security and crime information) and participation in
   the Dublin program for control of immigration (immigrants once in the EU cannot
   apply for asylum in any country other than the one where they entered)

   I list all of these to give an example of the complexity faced by voters in a system which operates by direct democracy. To expand some on the subject,  I will show how "the devil
resides in the details" using the subject above about reporting and taxing EU citizens..On
the Economics,  page I told about how the practice of failing to report income is a
misdemeaner and not a crime and how this has attracted fabulous amounts of money
into Switzerland.
    In the coming referendum, the voters will be asked to approve taxation (35%) of interest
of these accounts. Of the nonreclaimed (nondeclared) money, 3/4 will go to the home
country and 1/4 will stay in Switzerland - a present of about 1 billion dollars for the Swiss
budget at last report. This first breach in the banking secrecy laws could penalize the
banking industry and the large private banking industry, in particular. Some 15000 jobs
and 14% of national income could be in jeopardy.
   However, few of the voters will be aware of the fine print of what they are voting on.

   For example, the tax will start at 15% and be increased in steps over 4 years to 35%.
The account holders can have the witholding returned if they file it on their home country
tax return. EU citizens with residence permits are exempted. Foreign companies are
exempted. Large fortunes such as trusts and holdings are exempt. Money placed in
bonds which were put into circulation before 2001 are exempt. Capital gains for stocks
and stock fonds are exempt, etc. Banks will, of course, arrange for the large accounts to
be shifted into one of these categories, if not already done.
   All of which essentially means that, as usual, only the "little fish" with money in a savings account will be affected by the new laws. And it means that the Swiss banks have won
again in the negotiations. And, to top things off, the EU has also agreed that no changes
would be demanded in these treaty conditions - fifteen years(!). The final result will be that
only a minimal amount of the bonanza expected by the EU will be transferred back.
   Another complex point for the voter to decide concerns the Schengen agreement. This
is the system of police and judicial information ( EU Interpol) which also concerns fraud
and illegal business practices, some of which are not criminal acts in Switzerland.
More on this subject on the page Economy.

    Conditions for Joining the European Union -

   The argument for joining the EU is a very difficult one, even if one is convinced of the
need for the country to be integrated into a new and unified Europe and having a part
in shaping the political future.
    There are a number of areas where, at least for the foreseeable future, sacrifices would
be demanded. Some of the subjects are -
-  EU unemployment is chronically around 8-10%. It is 4% or less in Swizerland.
-  EU sales tax is minimum 15% and averages 20%. It is 7.6% in Switzerland.
-  loss of monetary policy. Interest rates 4.5% in EU and 1% in Switzerland.
-  requirement to contibute to the EU development fund (aid to poorer EU countries) some
    2-3 billion dollars per year.
-  requirement that the whole body of laws and regulations developed by the EU members
     must be accepted without negotiation. Which will also mean submitting to foreign court
     decisions.
-  retail prices are 30 to 40% higher that in the EU with a record subvention of agriculture. 
    Adjustment to EU prices and wages will cause a large economic depression for several
     years until the law of supply and demand stabilizes within the the EU market.

         But the point which will probably forever hinder Swiss membership concerns the
     subject of direct democracy. Here many changes would be required on the national,
     cantonal and local levels. Many initatives and referendums would be impossible and
    many (but not all) regulations and laws passed by the EU parliament must be accepted
     without modification. Theoretically, it would be possible to have a voice in the enactment
     of the laws but practically, Switzerland would have a very small influence.
        More on the advantages and the disadvantages in the page Democracy .