The EU has an odd definition of the term "free trade." Apparently, low taxes, in the EU's world, are irreconcilable with free trade.
In a move that is both remarkable and disturbing, the European
Commission plans to file a complaint - and threaten protectionist trade
barriers - because attractive Swiss tax policies are supposedly a
violation of a free-trade accord. The bureaucrats in Brussels are not
arguing that Switzerland is imposing barriers against EU products.
Instead, the Commission actually is taking the position that low taxes
are attracting businesses that might otherwise operate in high-tax
nations. The implications of this radical assertion are
breathtaking. It certainly is true that a nation with more
laissez-faire policy will attract economic activity from neighbors with
more burdensome levels of government. But if this migration of jobs and
investment is a "distortion" or trade, then the only "solution" is
complete and total harmonization of all taxes (and regulations,
spending, etc). If the Euro-crats succeed with this argument at the
European level, it will be just a matter of time before similar cases
are filed at the World Trade Organization.