By Stephen Fidler 

Switzerland is sometimes held out by British euroskeptics as an ideal role model for the U.K. outside the European Union. The Alpine country has a free-trade agreement with the 28-nation bloc and more than 100 other accords covering their relationship.

Trouble is that many in the EU don't want even Switzerland to have a Swiss-style relationship with the bloc. The idea that they would willingly negotiate Swiss-style arrangements with an economy four times larger seems far-fetched.

Both the U.K. and Switzerland are awkward customers for the EU from their different vantage points inside and outside the bloc. The U.K. has been long criticized by other EU governments as seeking to cherry-pick the benefits and minimize the responsibilities of membership. The Swiss are viewed as cherry-pickers too but they have an alibi--a system of government that depends heavily on referendums.

It was a 1992 referendum that decided that Switzerland wouldn't join the EU's internal market with the other members of the European Free Trade Association: Norway, Iceland and Liechtenstein. That left the economic relationship to be negotiated on a piecemeal basis.

Alexis Lautenberg, a former Swiss diplomat who is now chairman of the Swiss Finance Council, representing the interests of the country's two big banks, said the current "relationship between the EU and Switzerland isn't the product of determined intention" and would be impossible to replicate.

Neither is it an ideal or reliable way to gain easy access to the roughly 500 million people in the EU market.

The Swiss government has to keep constant watch on EU regulation to make sure its own standards are in alignment. In some sectors, including services, which encompasses large parts of finance, the Swiss are outside the EU market, meaning they can't sell their services to EU customers.

One common factor is that there is no body set up to settling disputes, which many inside the EU see as a failing that needs correcting before further agreements are made.

Pressure was therefore already growing on Brussels to establish institutions to manage the relationship, and resistance mounting to prolonging the current ad hoc arrangements. Then, two years ago in another referendum, the Swiss voted to restrict immigration.

That decision, which must be implemented by early 2017, upsets perhaps the most important agreement between the EU and Switzerland: one guaranteeing free movement of people.

EU leaders responded by declaring that "free movement of persons is a fundamental pillar of EU policy" that couldn't be separated from the internal market. It said that if this agreement was abrogated, six other agreements negotiated at the same time--covering issues such as air transport, road traffic and agriculture would be undermined.

Relations are now in the deep-freeze, although the official position, from European Commission spokesman Margaritis Schinas, is that "Talks are ongoing with the Swiss."

Two bilateral accords have been put on hold: one close to final agreement on electricity and another in its early stages, on financial services that would give Swiss banks access to EU markets.

On free movement, the EU wants to do nothing that could influence the British debate over whether to leave the EU or stay. EU and British negotiators hope to have the U.K. referendum out of the way in June, meaning discussions with the Swiss won't start in earnest before then.

Among those following Switzerland is U.K. Prime Minister David Cameron, who said last month he was "watching closely the Swiss attempts to renegotiate its position."

He added "there is no guarantee of Swiss access to any part of the single market without agreement in this area [of free movement.] That is worth thinking about carefully in terms of the relationship between a country--particularly a small country outside the EU--and the rest of the EU."

Mr. Cameron seems to accept the view, widely held in Brussels, that free movement of people is a price of access to the single market. If the U.K. wants to regain powers over migration from other European countries, it will have to leave not only the EU but also the internal market.

For Switzerland, its situation appears to be becoming more difficult. On the one hand, the EU is demanding institutional arrangements that would need to be put to a Swiss referendum; on the other, the EU's deteriorating image among Swiss voters--as among many inside the bloc--would likely lead to a rejection.

The arrangement is precarious. So among those who don't see Switzerland as a template for the U.K. are some prominent Swiss. "I don't think that what we have set up by trial and error can be considered as a precedent or a model to be followed by others," Mr. Lautenberg said.

Write to Stephen Fidler at stephen.fidler@wsj.com

(END) Dow Jones Newswires

February 11, 2016 15:43 ET (20:43 GMT)