Switzerland voted in favour of new limits to immigration on Sunday. While implementation of the new law will take as long as three years, critics of the move highlight the risk to the country's trade agreements with the EU and its impact on multinationals. Photo: Reuters
Switzerland voted in favour of new limits to immigration on Sunday. While implementation of the new law will take as long as three years, critics of the move highlight the risk to the country's trade agreements with the EU and its impact on multinationals. Photo: Reuters

Swiss vote to limit EU immigrants worries business

By Bloomberg Time of article published Feb 11, 2014

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Switzerland has voted in favour of new immigration curbs, leaving the government to grapple with a measure that may hurt the economy and thwart the country’s relationship with the EU.

Almost 12 years after opening borders to EU expatriates, Swiss citizens recoiled, backing an initiative to impose undefined quotas on immigration with a 50.3 percent majority in a national vote on Sunday. The government has three years to implement the new rules, which will primarily affect workers from the EU, many of them highly qualified. The surprise result led to tensions in Zurich late on Sunday, with some demonstrators throwing stones at buildings, the city’s police said.

Immigration has supported economic growth in Switzerland, home to Nestlé, the world’s biggest food company, and Basel-based drug makers Roche and Novartis. The decision, due to popular discontent about scarce housing, transport bottlenecks and falling blue-collar wages, could undermine the economy by making it difficult to take on foreigners and sour relations with the EU, the top destination for Swiss exports, the government warned before the vote.

The decision “has far-reaching consequences”, Justice Minister Simonetta Sommaruga said on Sunday. “There is no way of judging how negotiations with the EU will develop.”

About 20 percent of Swiss residents are foreigners and 45 percent of employees in the country’s chemical, pharmaceutical and biotech industry are not Swiss.

“What is crucial now is the way in which the quota system is implemented and the need to avoid subsequent damage to the bilateral agreements as far as possible,” Pascal Brenneisen, the head of Novartis’s Swiss unit, said on Sunday.

Companies fear a return to a decades-old system under which they had to file for permission with the government for each new foreign employee. A clause in Switzerland’s package of agreements with the EU means that the one on immigration cannot be cancelled without rendering the others null and void too. The pacts touch on topics such as energy and the environment.

The European Commission in Brussels would “examine the implications” of the vote on bilateral relations, it said in a statement on Sunday. It went “against the principle of free movement of persons,” the EU’s executive body said.

Italians and Germans were the biggest groups of foreigners living in Switzerland in 2012.

“In the interest of Europe, Germany, but also in its very own interest, Switzerland shouldn’t take the path of progressive self-isolation now,” said Andreas Schockenhoff, the deputy chairman of German Chancellor Angela Merkel’s Christian Democratic Union. Given that immigration had benefited the economy so much in recent years, “Switzerland would be ill-advised to restrict the influx too much”, he said.

The initiative, put forth by the euro-sceptic Swiss People’s Party (SVP), leaves it up to the government to decide how high to set the new quotas and gives legislators three years to change legislation.

“It’s clear that we will now steer things ourselves again,” SVP president Toni Brunner said. “We’ve not yet fully stipulated the level for quotas. On purpose!”

With its low taxes and high quality of living, the population grew by an annual average of 74 000 each year between 2007 and 2012, pushing Switzerland to 8 million inhabitants.

Infrastructure, especially trains and housing, has not been able to accommodate all the newcomers, the SVP says. They also attribute a rising crime rate to Switzerland’s open borders with neighbouring countries, such as France and Italy.

Companies, particularly in the pharmaceuticals sector, say they need top-notch workers from around the world to keep their competitive edge. About half of Roche’s research and development team are foreigners, according to chief executive Severin Schwan, himself an Austrian.

Sunday’s vote highlighted a split between Switzerland’s cities and the country’s rural parts. Voters in Zurich, Basel and Geneva opposed the initiative, while those in rural German-speaking cantons and the Italian-speaking region of Ticino backed it.

Even though immigration is a contentious topic in neighbouring Italy, Austria and France, Switzerland stands apart because the anti-immigration vote targets some of the biggest economic contributors. Among arrivals from the EU between 2010 and 2012, 69 percent were highly skilled. That compares with a rate of 35 percent within the 28-member union, data from the Organisation for Economic Co-operation and Development shows.

The Swiss decision drew satisfied reactions from Marine Le Pen, the head of France’s anti-EU National Front, and Heinz-Christian Strache, the leader of Austria’s anti-immigrant Freedom Party.

“Switzerland said no to mass immigration, bravo!,” Le Pen tweeted on Sunday.

Among Swiss companies, the mood is grimmer. Business lobby Economiesuisse and Swissmem, an association of 290 companies in the Swiss machinery, electronics and metal industries, called for a careful, non-bureaucratic implementation of the new rules, and asked the government to limit negative consequences on unrestricted EU access.

“Holcim respects the will of the people, even if we don’t rejoice in the outcome,” Peter Stopfer, a spokesman for cement maker Holcim, said on Sunday. Only after the legislative process had got under way “will we be able to form a conclusive opinion”, he said.

About 500 people protested in Zurich late on Sunday, following the vote. While they were “primarily peaceful”, some demonstrators lit fireworks, used spray cans and threw stones at buildings, leading to several thousand francs worth of damages, the city’s police said.

Even so, some investors say the government will find a workaround so as not to compromise economic prosperity.

“I don’t think the Swiss economy will suffer,” Karim Bertoni, a strategist at de Pury Pictet Turrettini in Geneva, said in a phone interview, declining to specify how he himself had voted. “Businesses will still be able to hire foreign top managers or very highly skilled employees, such as engineers. For less qualified workers, such as barkeepers or waiters at restaurants, it may be trickier.”

Past examples show the government and parliamentarians in Bern often translate into law a weaker version of what the initiators say they were aiming for.

The “Alps Initiative” of 1994 to stop road traffic has never been implemented in full, and the SVP accuses the government of dragging its heels on implementing the 2010 referendum to expel foreigners convicted of crimes.

The initiators of last year’s “fat cat” limits on chief executive compensation have also said the measure had been watered down, with less stringent sanctions and high levels of legal proof.

“The parliament has quite a bit of room to manoeuvre in translating it,” Marc Buehlmann, a lecturer in political science at the University of Bern, said.

Switzerland is already at odds with the EU over how it taxes multinational corporations. Relations with the governments of neighbouring countries such as Germany and Italy have been strained due to a dispute over their citizens who evaded taxes with secret bank accounts.

Potentially complicating matters still further, another initiative, called “Ecopop”, which would cap the immigration rate at 0.2 percent of the resident population, is in the pipeline. The government, which opposes that measure too, has not set a voting date yet. – Bloomberg

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