ZURICH — Switzerland is scrambling to keep a lid on immigration from its top trade partner, the European Union, as a jobs boom powered by the country’s low-tax business model turns population growth into a political hot potato.

The issue helped derail talks in 2021 to overhaul rules governing some $338 billion of annual trade, and threatens to do so again after Brussels and Bern relaunched negotiations in March, aiming for a deal by year-end.

With runaway population growth fueling calls by Swiss nationalists to reject closer ties with the bloc, Switzerland is seeking to introduce a “protection clause” into the EU deal that would let it control immigration, diplomats and lawmakers say.

Since Switzerland secured unfettered access to the EU’s single market in 1999, its economy has expanded faster than those of Germany, Austria, France and Italy, neighbors whose growth it had lagged during the decade before. Jobs growth has been faster, while average wages have risen more.

And its population – just 7 million in 1995, according to World Bank data – is now above 9 million.

“This is a result of the success story of needing lots of workers in Switzerland,” said Peter Fischer, board chairman of metal processing company Fischer Reinach. He wants to see the deal updated so that Swiss firms can continue to recruit freely from the 27-nation EU.

The Swiss foreign ministry said the government understands how important free movement is for the economy and wants to establish specifics on a protection mechanism.

“It is crucial for (the government) that free movement of people and immigration from the EU takes place into the labor market and not into the welfare system,” it said.

Tax draw

Underpinning government concerns is a drive by the biggest group in the lower house of parliament, the right-wing Swiss People’s Party, to enshrine population curbs in law.

The party says infrastructure will be overwhelmed and rents will skyrocket if the population is not stopped from reaching 10 million by 2050 – a figure it is on track to hit far sooner.

The Swiss population grew at its fastest clip in six decades last year and the rate of increase since the mid-1990s has been more than quadruple that of the EU.

Freedom of movement is a pillar of the single market and diplomats do not expect a formal curb to be granted. But they express confidence a deal can be done.

After Britain voted in 2016 to leave the EU, Brussels is keen to persuade one of the world’s wealthiest countries to embrace it.

That would not be the end of it, however. The Swiss parliament would have to approve any deal, as would Swiss voters, if – as is likely – it is later put to a referendum.

Switzerland is highly dependent on immigrants.

Some 27% of the population is foreign – over four times the EU average, official data show.

Many companies have moved to Switzerland to take advantage of low taxes, something that has cost its EU neighbors, said Jacqueline Badran, a businesswoman and federal lawmaker for the center-left Social Democrats.

“We’ve taken away their tax base,” she said. “If we want less immigration, we have to stop luring capital.”
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