Friday, 14 February 2014

Why a Swiss Yes could lead to a Scottish No

If I were a Scot, which I'm not, I'd be taking a very close look at the result of a referendum in Switzerland last weekend which, in effect, told the EU to go take a running jump.

Yes, I know, it's Switzerland. To quote Orson Welles in the film The Third Man: "In Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace—and what did that produce? The cuckoo clock."

But now, the Swiss have produced something a bit better than the cuckoo clock -- a slow-burning Euro-fuse that could end up causing a mighty big bang in Brussels. And what happens next could be a crucial consideration as Scots decide how to vote in their independence referendum in September.

Here's why: the Swiss decided in their referendum -- by a paper-thin 50.3% -- to introduce a cap on immigration from the EU. That blows a sizeable hole in its treaty with the EU, which gives it all sorts of trade privileges that it wouldn't normally have as a non-EU member -- but in return for accepting many of the obligations that come with EU membership. Like, for example, the free movement of people across borders.

And the relevance for the people of Scotland is simply this: what happens next in Berne and Brussels will depend on some very tough negotiations, accompanied by endless huffing and puffing, public posturing and dire threats. And that's exactly what will happen if Scotland votes Yes to independence on 18 September.

When one of the two parties in a relationship decides it's time to redefine that relationship -- whether it's Switzerland saying No to unrestricted immigration from the EU or Scotland saying Yes to independence from the UK -- the outcome of the haggling depends on the relative strengths of each of the two parties.

Who needs what from whom? And who needs what most? Does it matter more to Scotland that, for example, it signs up to a currency union that would enable it to carry on using the pound; does it matter more to Switzlerland that it continues to enjoy its existing trade relationship with members of the EU?

The party with the greatest needs sits down at the negotiating table with the weakest hand. As all experienced negotiators know, a successful deal is one that both sides can present as being in their own interests. Every negotiator wants to be able to stand in front of the cameras and say: "We got what we wanted."

And that's why Scottish voters should be closely watching the Berne-Brussels drama as it unfolds. Unfortunately, nothing is likely to be settled quickly, certainly not before the Scottish independence referendum. But the early skirmishes could provide a clue: when powerful players (Brussels, London) threaten to play hardball, how likely are they to follow through? Or when it comes to the crunch, will they value a "we can still be friends" divorce to a lawyers-at-dawn, take-no-prisoners legal battle?

I wouldn't automatically assume that in the event of a Scottish Yes, London would hold all the best cards. I don't imagine the international money markets would be all that thrilled if the pound found itself at the centre of a lengthy and acrimonious London-Edinburgh slugfest -- and there may well come a time when the view from Frankfurt, New York and Hong Kong is simply: "For God's sake, do a deal. Then we can get back to normal …"

Of course it's not just in Switzerland and Scotland that substantial numbers of European voters want to redefine their relationship with their neighbours. Right across the EU, anti-immigration parties are gaining strength; and in the UK, David Cameron insists that he too wants to "renegotiate" his relationship with Brussels.

Perhaps the anti-immigration parties will have been encouraged by the result of the referendum in Switzerland, on the grounds that it brings home to Brussels the depth of feeling among angry and disillusioned voters. (Mind you, 50.3% isn't exactly an overwhelming victory.) On the other hand, they know that the political elites, business leaders and bankers will now redouble their efforts to steady the ship. They have far too much invested in the status quo to see it smashed without putting up a fight, and yesterday's triple whammy from Messrs Osborne, Balls and Alexander was just a taster of what's to come …

My hunch is that, paradoxically, the Swiss Yes to immigration quotas makes a Scottish No to independence more likely. There'll be more warnings of the price to be paid for years of political uncertainty, potential instability and investor nervousness. Pro-independence campaigners will call it bullying; the anti-independence camp will call it setting out the facts.

As a Brit, not a Scot, I hope the Scots vote to stay in the UK, which I believe is a much better place with them than it would be without them. But that's just me being selfish -- and I have to accept that it's not a decision for me to take.

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