ZURICH (Reuters) – Switzerland will pay the price for lost exports, rising costs and diminishing attractiveness as a business center after deciding this week to halt a project to treaty linking it more closely to the European Union, its biggest trading partner.

Popular fears of ceding too much sovereignty shattered the 2018 pact that would have forced non-member Switzerland to systematically adopt rules governing the EU’s giant single market, including the free movement of people.

As the Eurosceptic far right celebrated the demise of a treaty it saw as a “colonial” treaty and the left applauded the defense of measures to support Swiss high wages, businesses and economists have warned that it there would be significant economic spinoffs.

No cliff-edge effect is looming, but there will be a gradual impact, as more than 100 bilateral agreements guaranteeing flawless cross-border trade become obsolete and Brussels is keeping its vow not to grant Switzerland new market access without a treaty.

The medical tech industry is already feeling the pinch after a mutual agreement of industrial standards (MRA) agreement expired this week, meaning Swiss medical tech makers will be treated like those in any other country not. member of the EU.

Industry body Swiss Medtech said the new administrative requirements would cost the industry around 114 million Swiss francs ($ 127 million) initially, then 75 million per year.

While this represents only a fraction of the 5.2 billion francs per year the sector exports to the EU, the greatest danger lies in the fact that non-European companies and start-ups avoid Switzerland as a location. from their European headquarters.

“Anyone who simply claims that the administrative costs are bearable completely ignores the harshness of international competition,” said Swiss MedTech President Beat Vonlanthen.

IN CROSSHAIRS

The Swiss mechanical engineering sector (MEM) could be next to face the pain – in two or three years – of an expiring MRA, as the prospects for an electricity union and cooperation in the health sector have dried up.

The Swissmem sector lobby considers barrier-free access to the single market to be essential. It exports 80% of its products, of which around 55% are destined for the 27 countries of the EU.

“Thousands of high-quality jobs in Switzerland depend on the bilateral route,” said Swissmem, also sounding the alarm on the power supplies of the bloc, which surrounds landlocked Switzerland.

“For the security of electricity supply and the growing demand for electricity due to climate change, an agreement on electricity in particular would be necessary and urgent – not just for industry,” he said.

A study this month by think-tank BAK Economics found that trade setbacks resulting from technical barriers could reduce merchandise exports from directly affected sectors by about 12% cumulatively by 2040.

“The export-oriented Swiss economy depends on stable trade relations and therefore on corresponding agreements with the EU. This is no longer the case without a framework agreement or a clear alternative, ”he said.

Researchers at Swiss universities are worried about their ability to join the European Horizon program, which provides billions of dollars in funding to scientists.

“If Switzerland were no longer part of the Horizon funding program, it would be like being knocked out of the Football Champions League,” said Detlef Guenther, vice-president of the ETH Zurich last month.

Jan-Egbert Sturm, director of the KOF Swiss Economic Institute, said that without some sort of framework agreement with the EU, it would become increasingly difficult for the Swiss economy to remain competitive.

“Many sectors – for example the pharmaceutical industry, the energy sector or science – will come under increasing pressure without the framework agreement,” he said.

(1 USD = 0.8990 Swiss francs)