Five months on, businesses are still reeling from the blind-side punch of a Swiss referendum to limit immigration. That’s because the questions it raises about expat employees and trade with the European Union remain unanswered.
As we learned speaking with Michel Juvet, partner in the private bank Bordier & Cie, those questions are unlikely to be answered any time soon, leaving businesses in a strategic limbo.
The constitutional amendment is both vague and broad, seeking to control ‘mass immigration’ through quotas on all foreign nationals including ‘crossborder commuters,’ and requiring that preference be given to Swiss citizens in recruitment and hiring. It also famously states that the Confederation may not conclude (or remain party to) international treaties that contradict the new law. The Confederation must pass implementing legislation by 2017, so details are now in the hands of politicians and bureaucrats.
“At this point, companies do not have strategies to address the change because they don’t know what’s going to happen,” said Juvet, whose expertise is in political economy and asset management. The threat of quotas and uncertainty about how they will be administered is troubling, he said. If demand for permits exceeds the supply, how will the rationing be accomplished? Who will be at the front of the line and who will be at the back? Will big firms be allowed to fulfil all their needs before smaller ones get a shot? And what kind of lead time will it take to get an application through, especially for employers or sectors that are not priorities?
Juvet made the interesting point that the conflict will not just be between businesses, but will ensnare political entities as well. If a national quota system is adopted, cities and cantons that rely on immigration as a driver of economic activity, as Geneva, Zurich, Zug and Vaud do, will be pitted against one another in a competition for immigration permits. Geneva’s workforce includes 65,000 cross-border commuters. That group alone could deplete the region’s entire quota.
Another grave concern is over access to European markets. In some cases, negotiations that began before the vote have stalled. A Swiss law contravening the free movement of European citizens presents a major hurdle to those negotiations and gives the EU a stronger bargaining position, according to Juvet.
Ironically, there are parallels between the Swiss vote and the recent European Parliament election where anti-immigration parties gained seats from France to Austria and Greece to the Netherlands. Those European countries are smarting from lack of jobs. Switzerland’s employment figures haven’t been hurt as badly, but prices have, said Juvet. The Swiss who want immigration slowed down are fighting for lower rent and consumer good prices, he reasoned, on the theory that increased demand is driving them up. The bi-lateral agreement allowing Europeans to freely work in Switzerland took effect at the beginning of 2002. According to the Swiss Federal Statistical Office, apartment rents rose by 9.5% and other consumer prices rose by an average of 2.5% between 2005 and 2009. The Statistical Office of the European Union (Eurostat) calculates that Switzerland’s price level is still higher than that of most other European countries, although prices are trending toward convergence. “European and Swiss voters are reaching the same conclusion, but for different reasons,” he laughed.
This might all shake out in another referendum before the 2017 implementation deadline. As Juvet rather bluntly put it, that referendum might simply ask whether the Swiss want to continue doing business with the EU. In fact, both sides need the trade. And, he added, there are now fewer and fewer economic differences between the two, citing harmonisation of various industry practises for reasons of practicality. Such cooperation in practise achieves a type of de facto Swiss-EU unification.
“I think we will find a solution for Switzerland to remain outside of the EU but have economic integration,” he predicted. Of course, such an arrangement could fall apart due to circumstances beyond Swiss voters’ control if recent trends continue and EU members jump ship.
The banker suggests that businesses get comfortable with uncertainty for the next two years, remarking, “We are living in a fast-changing environment.”
Article by Peter Carson