Switzerland–EU: SMEs face a new phase in the bilateral process

For a Swiss SME, relations with the European Union are not a distant foreign policy issue. They are reflected in delivery times, product certifications, the recruitment of specialists, access to tenders and the ability to plan investments. Switzerland is not a member of the EU, but its economy has for decades operated within a network of bilateral agreements that governs a significant proportion of its trade with its main trading partner.

This framework comes at a sensitive time. The Federal Council supports the bilateral approach and has proposed a new package of agreements, often referred to as Bilateral Agreements III, to stabilise and develop relations with the EU. For businesses, the stakes are not merely institutional: they relate to the predictability of regulations, access to the European market, the availability of labour and the administrative costs of cross-border activities.

A European market that plays a key role in the day-to-day operations of Swiss businesses

The EU remains Switzerland’s main trading partner. According to data highlighted by the Fédération des entreprises romandes Genève, more than half of Switzerland’s foreign trade was with the European Union in 2022, amounting to around one billion francs’ worth of goods exchanged every day. For many SMEs in the industrial, technology, commercial and craft sectors, these figures translate into a very tangible reality: suppliers in a neighbouring country, end customers within the European market, imported components, specialist subcontractors, and sales teams who regularly cross borders.

The economic relationship between Switzerland and the EU is based on several layers of agreements. The 1972 Free Trade Agreement established a free trade area for industrial products. The First Bilateral Agreements, concluded in 1999, cover, in particular, the free movement of persons, technical barriers to trade, public procurement, agriculture, air transport, land transport and research. The Bilateral Agreements II, concluded in 2004, added areas such as judicial cooperation, the environment, statistics, the fight against fraud, education, vocational training and participation in the Schengen Area.

For a business, these agreements are not abstract texts. They reduce friction: fewer redundant checks, better recognition of certain rules, opportunities for staff to move freely, and clearer access to certain markets. When a Swiss manufacturer sells a machine, a technical device or a component to a European customer, it needs to know which standards apply and whether its certificates will be recognised. When a service company recruits someone with a rare skill set, it must anticipate the recruitment conditions, authorisations and administrative obligations. The economic value of the bilateral approach therefore lies as much in market access as in the stability of the regulatory framework.

The Bilateral Agreements III seek to prevent the gradual erosion of the existing framework

The Federal Council regards the bilateral approach as the best option for organising relations between Switzerland and the EU. The new package of agreements presented by the Confederation aims to stabilise and develop this framework. The economic objective is clear: to prevent existing agreements from becoming less effective over time, particularly as European rules evolve and Switzerland has to adapt, clarify or renegotiate certain forms of access.

This concept of erosion is central to businesses. An agreement may remain formally in force whilst becoming less useful if procedures become more complex, if recognitions no longer keep pace with technical developments, or if economic operators lose legal certainty. For an SME, uncertainty does not always manifest itself as a major immediate shock. It sometimes creeps in gradually: a certificate that is harder to get accepted, a longer validation period, a partner requesting additional guarantees, or a distributor favouring a supplier based in the EU because the process seems simpler to them.

The Conference of Cantonal Governments has supported the package of bilateral agreements between Switzerland and the European Union, emphasising the importance of stable relations for the economy and the labour market. Business organisations, including FER Geneva, are also calling for the bilateral agreements to be maintained and developed, as they consider them important for the economy, the scientific community and the general public. These positions reflect a shared concern within business circles: Switzerland benefits from its autonomy, but it needs solid links with the market around it.

Exports, standards, staff: three areas where SMEs quickly feel the difference

The first challenge is market access. For an exporting SME, selling in the EU means meeting not only the customer’s requirements but also the rules applicable to the product or service. When standards are compatible and procedures predictable, the company can focus on quality, price, logistics and the commercial relationship. When rules diverge or become uncertain, administrative costs rise. More documentation is required, along with more checks, and sometimes external advice or adjustments to production.

The second challenge concerns technical barriers to trade. This term refers to differences in requirements, standards, testing procedures or approvals that can complicate the sale of a product from one country to another. In practice, an SME does not always have a dedicated regulatory team. The quality manager, senior management or the sales department often have to take on these responsibilities. Simplifying or recognising certain processes can therefore represent a competitive advantage, particularly for companies that are not as large as major corporate groups.

The third challenge is the labour market. The free movement of people, as provided for in the First Bilateral Agreements, facilitates the recruitment of skilled talent within the EU. For Swiss SMEs, this can be a decisive factor in technical trades, healthcare, engineering, IT, the hospitality and catering sector, construction or other sectors where specialist skills are not always available locally. The issue is not merely being able to recruit, but being able to do so within a clear framework, with timeframes that are compatible with the needs of the business.

The economic figures cited in the report underscore the importance of the bilateral framework, although they should be interpreted with caution: since the Bilateral Agreements I came into force in 1999, real GDP per capita in Switzerland has risen by 25 per cent; between 2002 and 2022, the average real wage rose by 0.5 per cent per year, compared with 0.2 per cent per year during the ten years preceding the Bilateral Agreements I; in 2022, Switzerland’s unemployment rate stood at 2.2 per cent, the lowest level in over 20 years according to the FER Geneva. These indicators do not in themselves prove a direct cause-and-effect relationship, as the economy depends on many factors. They do, however, show that the period of the Bilateral Agreements coincided with robust economic performance.

Sovereignty remains the most sensitive political issue

The debate is not limited to trade interests. Some of the criticism centres on national sovereignty: to what extent must Switzerland adopt or adapt European rules in order to retain privileged access to certain parts of the single market? How can Swiss democratic mechanisms, cantonal powers and Parliament’s room for manoeuvre be preserved? These are political questions, but they are of direct interest to businesses, as they will determine the stability of the future regulatory framework.

SMEs often take a pragmatic approach: they want clear, enforceable and predictable rules. Excessive uncertainty can hold back investment, delay recruitment or force a company to restructure its operations. Conversely, a stable framework can encourage a business to develop a European distribution network, expand a production line or invest in regulatory compliance, knowing that the effort will bear fruit over several years.

Another area to monitor is the evolution of European policies, particularly in the environmental and digital sectors. Even without EU membership, Swiss companies operating in the European market may be affected by new requirements imposed by their customers, partners or supply chains. These may relate to traceability, sustainability, cybersecurity, data protection, technical documentation or reporting. For an SME, the challenge is to ensure it does not only discover these requirements when signing a contract or crossing a border.

Preparing the business without speculating on the political outcome

Whilst awaiting more specific decisions, businesses can already strengthen their ability to anticipate developments. The first step is to map their exposure to the EU: the proportion of turnover linked to European customers, dependence on EU suppliers, products subject to specific standards, cross-border workers or planned recruitment, and contracts containing European compliance clauses. This work does not necessarily require a major project, but it helps to identify where vulnerabilities lie.

An SME can also review its documentation processes. Certificates, proofs of origin, technical data sheets, distribution contracts, general terms and conditions, HR procedures and compliance files must be easy to locate and update. For exporting companies, the quality of this documentation becomes a commercial advantage: it reassures customers and reduces delays during inspections or audits.

It is also prudent to keep abreast of communications from the federal government, the cantons and trade associations. Policy announcements set out the general framework, but industry bodies often translate the practical implications for the relevant sectors more quickly. An accountancy firm, a legal adviser, a trade association or a customs specialist can help interpret the changes according to the sector, canton and business model. However, decisions regarding corporate structure, taxation, employment contracts or business location must be examined on a case-by-case basis.

The bilateral approach has long enabled Switzerland to combine economic proximity to the EU with institutional autonomy. The next chapter will reveal whether this balance can be consolidated. For SMEs, the key is not to wait until the debate is settled before assessing their dependencies, securing their processes and integrating Europe into their strategic planning. In an open economy, a border is not just a line on a map: it is often a factor in day-to-day management.