June 27, 2018 / 2:38 PM / 3 months ago

FACTBOX-Main issues in Swiss-EU treaty negotiations

ZURICH, June 27 (Reuters) - The Swiss government is due to discuss this week the status of negotiations with the European Union on a new treaty that would cement ties with its most important trading partner.

The cabinet will decide if negotiators have made enough progress on technical matters to put a political deal between non-EU member Switzerland and the surrounding bloc within reach.

The treaty would formalise ties now governed by around 100 separate accords. Brussels has said Switzerland must agree a treaty before it gets greater access to EU markets.

Any deal would be put to a binding referendum in Switzerland so winning public support is important.

Voters would chose whether to back a treaty strengthening business links with the EU but embracing the free movement of people, which many in Switzerland oppose.

A rejection of the treaty would boost Swiss sovereignty but would also risk diplomatic isolation and economic damage for both Switzerland and the EU.

Switzerland and the EU were aiming for a deal this year as both face elections in 2019 so the window is closing.

Here are the main technical issues:

CONFLICT RESOLUTION

The EU wanted its European Court of Justice to act as the main referee in settling legal disputes.

But the use of “foreign judges” was a no-go area for the far-right Swiss People’s Party (SVP). The three other parties in the Swiss coalition did not want to hand the SVP a political club with which to beat them in 2019 elections.

A proposal by European Commission President Jean-Claude Juncker last year to allow arbitration panels to settle legal disputes may have defused Swiss concerns.

STATE AID

The EU wants Switzerland in principle to ban state aid that can skew competition for the single market with some exceptions.

This has raised Swiss concerns about losing public subsidies for some sectors and state guarantees for regional banks.

LABOUR RULES

The Swiss system of “flanking measures” – steps adopted in 2004 that aim to ensure foreign workers on temporary assignments in Switzerland do not undercut Swiss pay and working conditions — is shaping up as the main battle front.

The Swiss government has in the past defined them as a non-negotiable “red line” in talks, and the centre-left Social Democrats, one of the four coalition parties, plus labour unions have taken a hard stance. There are some signs of flexibility by Foreign Minister Ignazio Cassis, who is from the pro-business FDP party.

“I do not think a deal between Switzerland and the EU is possible soon. It would be a mistake if the government would give up its red line on the flanking measures,” said Gerhard Pfister, head of the centre-right Christian People’s Party. (Reporting by Michael Shields; editing by Anna Willard)

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