Switzerland is not a member state of the European Union (EU) or the European Economic Area (EEA), despite being a member of the European Free Trade Area (EFTA). It is associated with the Union through a series of bilateral treaties in which Switzerland has adopted various provisions of EU law in order to participate in the European Single Market, without joining the EU. Among Switzerland's neighbouring countries, all but one (Liechtenstein) are EU member states (though all including Liechtenstein are EEA members). Switzerland borders four EU member states: Austria, France, Germany and Italy.

Trade The European Union is Switzerland's largest trading partner, and Switzerland is the EU's fourth largest trading partner, after the United Kingdom, United States and China. Export of goods from Switzerland accounts for 5.2% of the EU's imports; mainly chemicals, medicinal products, machinery, instruments and time pieces. In terms of services, the EU's exports to Switzerland amounted to €67.0 billion in 2008 while imports from Switzerland stood at €47.2 billion.

Treaties

Switzerland signed a free-trade agreement with the then European Economic Community in 1972, which entered into force in 1973.

Switzerland is a member of the European Free Trade Association (EFTA), and took part in negotiating the European Economic Area (EEA) agreement with the European Union. It signed the agreement on 2 May 1992, and submitted an application for accession to the EU on 20 May 1992. However, after a Swiss referendum held on 6 December 1992 rejected EEA membership by 50.3% to 49.7%, the Swiss government decided to suspend negotiations for EU membership until further notice. These did not resume and in 2016, Switzerland formally withdrew its application for EU membership. Switzerland is also a member of Schengen Area and Single Euro Payments Area (SEPA).

In 1994, Switzerland and the EU started negotiations about a special relationship outside the EEA. Switzerland wanted to safeguard the economic integration with the EU that the EEA treaty would have permitted, while purging the relationship of the points of contention that had led to the people rejecting the referendum. Swiss politicians stressed the bilateral nature of these negotiations, where negotiations were conducted between two equal partners and not between 16, 26, 28 or 29, as is the case for EU treaty negotiations.

These negotiations resulted in a total of ten treaties, negotiated in two phases, the sum of which makes a large share of EU law applicable to Switzerland. The treaties are:

Bilateral I agreements (signed 1999, in effect 1 June 2002) Free movement of people Air traffic Road traffic Agricultural products Technical trade barriers Public procurement Science

Bilateral II agreements (signed 2004, in effect gradually between 2005 and 2009) Security and asylum and Schengen membership Cooperation in fraud pursuits Final stipulations in open questions about agriculture, environment, media, education, care of the elderly, statistics and services. This strand established the Common Veterinary Area.

The Bilateral I agreements are expressed to be mutually dependent. If any one of them is denounced or not renewed, they all cease to apply. According to the preamble of the EU decision ratifying the agreements:

This is referred to as the "guillotine clause". While the bilateral approach theoretically safeguards the right to refuse the application of new EU rules to Switzerland, in practice the scope to do so is limited by the clause. The agreement on the European Economic Area contains a similar clause.

Bilateral agreements are managed by joint Swiss-EU committees. They are responsible for ensuring that the agreements run smoothly, adapting them where possible, exchanging information and discussing any disputes. Twenty-one such committees existed in September 2021., Federal Department of Foreign Affairs, accessed June 15, 2023. This system is criticized by the European Union, which finds it too complex.Pierre Cormon, Swiss Politics for Complete Beginners, Editions Slatkine, 2014, , p. 86

Before 2014, the bilateral approach, as it is called in Switzerland, was consistently supported by the Swiss people in referendums. It allows the Swiss to keep a sense of sovereignty, due to arrangements when changes in EU law will only apply after the EU–Swiss Joint Committee decides so in consensus. It also limits the EU influence to the ten areas, where the EEA includes more areas, with more exceptions than the EEA has.

From the perspective of the EU, the treaties contain largely the same content as the EEA treaties, making Switzerland a virtual member of the EEA. Most EU law applies universally throughout the EU, the EEA and Switzerland, providing most of the conditions of the free movement of people, goods, services and capital that apply to the member states. Switzerland pays into the EU budget. Switzerland has extended the bilateral treaties to new EU member states; each extension required the approval of Swiss voters in a referendum.

In a referendum on 5 June 2005, Swiss voters agreed, by a 55% majority, to join the Schengen Area. This came into effect on 12 December 2008.

In 2009, the Swiss voted to extend the free movement of people to Bulgaria and Romania by 59.6% in favour to 40.4% against. While the EU Directive 2004/38/EC on the right to move and reside freely does not apply to Switzerland, the Swiss-EU bilateral agreement on the free movement of people contains the same rights both for Swiss and EU nationals, and their family members.

By 2010, Switzerland had amassed around 210 trade treaties with the EU. Following the institutional changes in the EU–particularly regarding foreign policy and the increased role of the European Parliament–European Council President Herman Van Rompuy and Swiss President Doris Leuthard expressed a desire to "reset" EU-Swiss relations with an easier and cleaner way of applying EU law in Switzerland.Pop, Valentina (19 July 2010) EU looking to reset relations with Switzerland, EU Observer In December 2012, the Council of the European Union declared that there will be no further treaties on single market issues unless Switzerland and EU agree on a new legal framework similar to the EEA that, among others, would bind Switzerland more closely to the evolving EU legislation.Council of the European Union, 8 Jan 2013: Council conclusions on EU relations with EFTA countries José Manuel Barroso, the President of the European Commission, later affirmed this position. However, a second referendum on Swiss EEA membership wasn't expected at that time, and the Swiss public remained opposed to joining.

Schengen Agreement

In 2009, Switzerland became a participant in the Schengen Area with the acceptance of an association agreement by popular referendum in 2005.Allen M. (March 2009). Switzerland's Schengen entry finally complete. swissinfo.ch; retrieved 14 June 2013. This means that there are no passport controls on Switzerland's borders with its neighbours though customs controls continue to apply.

2014 referendum

In a referendum in February 2014, the Swiss voters narrowly approved a proposal to limit the freedom of movement of foreign citizens to Switzerland. The European Commission said it would have to examine the implications of the result on EU–Swiss relations since literal implementation would invoke the guillotine clause.

On 22 December 2016, Switzerland and the EU concluded an agreement whereby a new Swiss law (in response to the referendum) would require Swiss employers to prioritise Swiss-based job seekers (whether Swiss nationals or non-Swiss citizens registered in Swiss job agencies) whilst continuing to observe the free movement of EU citizens into Switzerland thus allowing them to work there.EU and Switzerland agree on free movementeuobserver, 22 Dec 2016.

Swiss financial contributions Since 2008, Switzerland has contributed CHF 1.3 billion towards various projects designed to reduce the economic and social disparities in an enlarged EU. One example of how this money is used is Legionowo railway station, Poland, which was redeveloped with CHF 9.6 million from the Swiss budget.

Proposed framework accord Negotiations between Switzerland and the European Commission on an institutional framework accord began in 2014 and concluded in November 2018. On 7 December 2018, the Swiss Federal Council decided to neither accept nor decline the negotiated accord, instead opting for a public consultation.Swissinfo 7 December 2018. The negotiated accordSwiss Confederation Accord Facilitant Les Relations Bilatérales... 23.11.2018 would cover five areas of existing agreements between the EU and Switzerland made in 1999:

free movement of persons air transport carriage of goods and passengers by rail and road trade in agricultural products mutual recognition of standards

Notably, the accord would facilitate EU law in these fields to be readily transposed into Swiss law, and the European Court of Justice would be the final and binding arbiter on disputes in these fields. If the accord were accepted by Switzerland, the country would be in a similar position with regard to imposition of EU law (albeit only in the above five fields) as that in the other EFTA countries which are members of the EEA. Further to matters of sovereignty, specific concerns raised in Switzerland include possible effect on state aid law on the cantonal banks, the potential for transposition of them into Swiss law (and any resulting effect on social welfare, for example) and the possible effect on wages enjoyed in the country. Accepting the accord is considered by the commission to be necessary to allow Swiss access to new fields of the European single market, including the electricity market and stock exchange equivalence.

By June 2019, the Swiss Federal Council found no meaningful compromise neither with the internal consulting partners, such as Swiss labour unions and business representatives, nor with the outgoing EU-commission president Jean-Claude Juncker. EU-member countries also expressed that no further compromise on the text of the proposed framework accord with Switzerland would be possible. As a result, Brussels did not extend its stock market equivalence to the Swiss stock exchange because of this breakdown of Swiss-EU negotiations, and for a counter-measure, the Swiss Federal Council ordinance from November 2018 was implemented, limiting the future exchange of most EU-traded Swiss stocks to the SIX Swiss Exchange in Zürich."EU equivalence assessment of Swiss stock exchanges". ILO.com. Retrieved 19 August 2019.Brüssel soll warten – die Schweiz schiebt den Rahmenvertrag auf die lange Bank . Neue Zürcher Zeitung. Retrieved 19 August 2019.