You can’t blame immigrants for wanting to go to a country as successful as Switzerland. So does it make sense to keep them out?

Democracy is democracy and the politicians have to do what the voters want

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Switzerland, population 8 million, is heading into a punch-up with the European Union, population 508 million. If that sounds like an unequal match, note this: Switzerland is the richest country on Earth (although perhaps one should say “real” country since a few small states, including Monaco, Liechtenstein and Luxembourg, and some oil-rich places just pip it). The question is, does Switzerland do so well because it is a tax haven, getting the benefits of its location in the heart of Europe, or because it happens to be very good at what it does, namely top-end industry and top-end services?

The referendum at the weekend requiring the government in Bern to impose quotas on immigration reverses a deal to open its borders that Switzerland did with the EU 12 years ago. Since then, the population has risen by a million. Some 20 per cent of the people in the country are now foreigners, as are nearly half of the employees in its highly successful pharmaceutical and bio-tech industries. The largest groups of immigrants are Germans and Italians, and while doubtless some are there for tax reasons – racing drivers and the like – most are there for jobs. Though not a member of the EU, Switzerland is a member of the Schengen Agreement, as, indeed, is Norway.

In broad economic terms the open borders have been a great success and, as you might imagine, the business and financial communities are deeply disturbed by last weekend’s vote. It was indeed a narrow one, with, in general, the large cities voting against quotas, and the smaller communities in favour. But democracy is democracy and the politicians have to do what the voters want.

The reaction in the European high command has been predictably hostile. Relations are already strained because of Swiss tax rules governing multinationals, which are among the most attractive in Europe. The country is now accused of trying to get what it wants from the EU and reject what it does not want. Hence the remark from the German Foreign Minister yesterday: “Switzerland has to know that cherry-picking in relations with the EU can’t be a lasting strategy.”

Technically, Frank-Walter Steinmeier is right. There is a clause in Switzerland’s EU agreement that means that cancelling any one part of the deal renders the others void. Under the terms of the referendum, the Swiss government now has three years to figure out how to impose immigration quotas (actually, to re-impose them), so expect a long and disagreeable interchange.

At a practical level, it all looks doable. It will be a nuisance for Swiss companies to have to go back to the old system of getting permits before they employ people from abroad. But it would not be in the interests of the country to reject highly skilled workers, so the pressure will be on the authorities to run a liberal regime. We have that problem in the UK with non-EU workers. It may seem a bit nutty that a British university has to go through all sorts of hoops to give a post to a top US professor, whereas there are no restrictions on unskilled workers from the EU, but that is the deal.

So if one side is under democratic mandate to renegotiate a deal, then it has to do so. It would be easy to sketch the outlines of a new agreement between Switzerland and the EU that gave reasonably open access for  EU citizens to the Swiss labour market – even preferential access vis-à-vis  non-EU workers – yet gave Switzerland control over its borders. You could call this cherry-picking, but in the real world this happens all the time.

Switzerland is in Schengen; the UK is not in the euro. You can see the fear in Europe that if Switzerland is allowed to do this, other countries that are EU members, including the UK and the Netherlands, will demand similar special arrangements. The reality, however, is that it is very much in the self-interest of both sides to do a deal. By being a little different, Switzerland actually attracts business into Europe that might not otherwise come. The greater challenge for Bern is that if you run a successful economy, attracting inward investment and becoming the location of choice for multinationals seeking regional headquarters, then you attract people at the same time. This applies to any successful economy, and especially to one that is relatively densely populated. Britain is attracting immigration because it has jobs. Singapore faces the same problem, with a citizen population of 3.3 million out of a total of 5.3 million, and is now restricting immigration more sharply than before. At the other end of the scale, Canada is the fastest-growing of the G7 in terms of population – but it has space.

The Swiss decision therefore highlights two huge issues. There is the European one: how does Europe square its political and economic aspirations of greater co-operation when its citizens reject some of those aims? The second is a global conundrum: economic success attracts people who want to be economically successful. How do you cope with that without rejecting success?

Online or off, it’s still spending

Retail sales are booming. The British Retail Consortium (BRC) reported an annual increase of 3.9 per cent in January, which squares with the official figures from the ONS, which showed an increase of 2.8 per cent in December. This has led to the usual debate about the sustainability of the UK recovery, the dangers of a housing bubble, when will interest rates rise – all that stuff.

That is all fine, and we will hear more about the Bank of England’s views on the retail boom in the new Inflation Report out tomorrow. But looking at the BRC numbers something else struck me as much more interesting. It was that online sales of non-food items were 19.2 per cent up year-on-year, and – this really is stunning – online penetration is now up to 17.4 per cent. Britons make a higher proportion of their retail purchases online than anyone else in the world.

The most thorough study of all this was done by Cushman & Wakefield last year. They looked at all markets and the UK ranked overall at the top. In absolute spend per person, Norway and Finland were a little higher; and in terms of overall market, we were third to the US and China. But as a proportion of the total, we were No 1.

This would square with the observation that the supermarkets with a solid online strategy did best over Christmas; those that didn’t, lagged. What this does not explain is why we should be leading the charge. Are we more computer literate than, say, the Germans? Are we more avid spenders than the Americans? Are we more inventive consumers than the Japanese? Surely not. But in the long term it must surely be an advantage to have consumers who will grab a new technology – and in the short term to have people propping up the economy by hitting  the keyboard.

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