I thank the Chairman and his colleagues for giving us this opportunity to explain our relations with the European Union which is Switzerland's most important political, cultural and economic partner. Both are founded on such fundamental values as democracy, human rights and the rule of law.
As a small state in the centre of Europe, Switzerland's fortunes are closely interwoven with those of its neighbours. I will cite two examples. First, in 2004 some 80% of our imports, amounting to €73 billion, came from the European Union, while almost 60% of our exports, worth €60 billion, went to the Union. Second, some 800,000 EU citizens live in Switzerland, while 300,000 Swiss nationals live in the European Union. Some 700,000 people cross the borders of Switzerland every day.
Switzerland's relations with the European Union are based on bilateral agreements, the main purpose of which is, generally, to secure market access. There are agreements, however, which have different objectives. They reinforce co-operation in new policy areas such as internal security, legal assistance, asylum, culture and the environment. Since 1972 we have had a free trade agreement essentially covering the free circulation of industrial goods. The so-called bilateral agreement between Switzerland and the European Union covers seven specific areas. These areas comprise free movement of people, the elimination of technical barriers to trade, public procurement markets, civil aviation, ground transport, agriculture and research. The agreements were signed on 21 June 1999, approved by 67% of Swiss voters in an optional referendum on 21 May 2000 and entered force on 1 June 2002. In a referendum on 25 December, 56% of the population voted for the extension of the agreements to the ten new member states.
The agreements enable Swiss companies to operate in the internal EU market subject to practically the same conditions as their EU competitors in the seven sectors concerned. They ensure a reciprocal opening of markets in a progressive and controlled manner. The so-called bilateral agreement two was signed on 26 October 2004 and covers co-operation in the fields of justice, policing, asylum and migration, the Schengen and Dublin agreements, taxation of savings, the fight against fraud, agricultural products, the environment, statistics, media, education, occupational training, youth and pensions. In a referendum on 5 June, the Swiss people accepted the Schengen and Dublin agreements with a 55% majority and these should enter force in 2008. The agreements on agricultural products and pensions are already in force, while the agreement on taxation and savings will enter force on 1 July 2006. The other agreements will enter force at a later stage.
The Swiss Government's long-term objective was accession to the EU. Before the end of 2007, it will present a report that will outline the consequences this step would have on Swiss political institutions in main policy areas and describe the necessary reforms. At present, the focus is on bilateral relations and accession is now one option among others. Questions also arise in terms of associations, agreements and continuing bilateral arrangements. For many people, major obstacles to membership include direct democracy, effects on the rights to hold referenda and initiatives, federalism and potential challenges to cantonal competencies. The Swiss franc, which is a solid currency, would be replaced by the euro. Value added tax would more than double, from the current 7.6% to 15% and our direct income tax will have to be reduced. There may also be problems with regard to the Union's agricultural policy. Finally, there is the question of neutrality, which is important to the Swiss.
Not being a member means that our country will, in some ways, become a satellite because we will have to adopt European legislation, without having a role in its negotiation. A formal referendum on accession has never been held but a popular initiative calling for the immediate commencement of negotiations was rejected in 2002 by 78% of voters. That has become a problem for us. In 1992, the Swiss people rejected, by a small margin, a European economic area agreement between EU and EFTA countries. However, most of the issues involved are now covered by Swiss bilateral agreements. My colleagues will outline their positions, as we are not all of the same thinking.