Explainer-What is at stake in the Swiss-EU trade talks

Switzerland's national flag flies beside the one of the European Union in Steinhausen, Switzerland February 11, 2020. Arnd Wiegmann/File Photo

ZURICH - Switzerland and the European Union have been in talks since March to update their trading relationship after a previous effort foundered in 2021, but Switzerland's concerns about its fast-growing population have complicated the process.

Swiss officials have been seeking to agree terms under which they can control immigration from the EU. EU officials worry that such a concession would encourage member states to seek their own opt-outs and weaken the bloc's single market.

WHAT ARE THEY UPDATING?

The talks aim to modernize economic agreements between the EU and Switzerland, the bloc's fourth biggest export market, in areas ranging from electricity to state aid, transport, freedom of movement and wage protections.

The two sides also hope to agree on Switzerland's future financial contribution towards the bloc.

The package of measures should include agreements on how to handle disputes and the application of the law.

It includes the concept of so-called "dynamic alignment" of laws governed by bilateral accords, under which Switzerland is obliged, pending its own constitutional safeguards, to adapt its legislation to relevant ongoing changes in EU law.

WHAT IS THE IMMIGRATION ISSUE?

Switzerland's population has risen rapidly this century, stirring concern that infrastructure is being stretched, rents are too high, and wages under pressure.

Capitalizing on those worries, the biggest group in the lower house of parliament, the right-wing Swiss People's Party (SVP), has launched a referendum campaign to stop the population reaching 10 million before 2050.

Switzerland's population only passed 7 million in the mid-1990s but this year reached 9 million, putting it on track to hit the SVP threshold well before mid-century.

Eager to quell calls for population curbs, Switzerland has sought a so-called "protection clause" in its EU agreement that would give Bern scope to contain migration. That would go against the single market's principle of free movement of people, and could encourage other countries to seek exceptions.

Much of the population increase in Switzerland has been due to growth in the workforce driven by its business-friendly, low-tax model and higher wages. Swiss companies reliant on access to the EU labour market say hiring curbs could make it harder to find staff and encourage firms to expand operations abroad.

WHO IN SWITZERLAND MUST APPROVE A DEAL?

If a deal can be struck, it will be sent to the Swiss parliament. Lawmakers expect approval to be challenging after the last talks failed.

If parliament approves a deal, which might take until 2026, it is almost certain to be put to a national referendum. That could pose an even bigger challenge for the government.

Lawmakers backing a deal are nervous it could become a focal point of federal elections due in 2027. Some therefore want to ensure that there is no referendum before 2028.

WHO OPPOSES A DEAL?

Opposition comes from both left and right. Arguments often mirror those used by critics of British membership of the EU in the 2016 Brexit referendum campaign.

They variously depict the EU as an over-regulated and bureaucratic threat to Switzerland's market economy or as a neo-liberal menace that risks undercutting wages.

As with Brexit, opposition centres on the argument that national sovereignty is being compromised and that Switzerland has shown that its constitutional arrangements have achieved greater prosperity and stability than elsewhere.

Switzerland should not be subject to the dictates of EU courts that infringe its ability to set policy, critics say.

(Reporting by Dave Graham; Editing by Catherine Evans)