Voters are due to decide on September 25 whether to open up the Swiss labour market to citizens of the ten new European Union member states.
It is the second time this year that the electorate has had the final say on plans for closer ties with the EU.
Switzerland opened its labour market to the 15 old EU member states under a bilateral agreement with Brussels concluded six years ago. It also guarantees access for Swiss citizens to a market with 380 million people.
In December parliament approved a gradual extension of the accord to the ten new EU members, despite opposition from parties mainly to the right and far right of the political spectrum.
But opponents succeeded in collecting the necessary signatures to challenge parliament's decision in a nationwide vote.
The September 25 ballot is the second poll this year on improved ties with Brussels. In June voters came out in favour of closer security and asylum cooperation with the EU.
Some experts see the forthcoming referendum as a vote of confidence in the government's policy of bilateral treaties between the EU and Switzerland, which was launched 12 years ago.
Besides parliament and the cabinet, both the business community and trade unions have come out in favour of extending the labour accord.
Economics Minister Joseph Deiss has warned that a "no" vote could threaten the bilateral track and dent Switzerland's image as a reliable partner.
"Our relations with the EU would undoubtedly be in a crisis. It could also have a negative impact on Switzerland's export-oriented-businesses," Deiss told swissinfo.
He said fears of a rise in unemployment and mass immigration were unfounded, since the authorities had taken preventive steps, including introducing quotas and controls.
"People don't want to come to Switzerland at all cost. They live in countries with fast growing economies and most likely prefer jobs at home," he added.
Business and unions
The Swiss Business Federation, economiesuisse, also fears the worst should the vote be rejected.
"Relations with our most important trading partner could be thrown back to 1972 levels. Thousands of jobs would be threatened. Switzerland's image would suffer a serious setback in the new EU countries," said economiesuisse.
The launch of campaigning ahead of the vote was marked by a controversial statement from Brussels, warning of possible negative consequences for Switzerland in the event of a "no" vote.
Most trade unions are backing the labour accord after parliament approved a series of measures to protect Swiss salaries.
"The unions forced through stringent measures against wage dumping. A 'no' would undermine them and put pressure on salaries," said the Federation of Trade Unions.
Three of the four main governing parties have also been campaigning for approval of the accord.
Leading the campaign against opening up the labour market are the Swiss Democrats, a small far-right splinter party.
Among its supporters is the rightwing Swiss People's Party. However, the People's Party contains a number of prominent dissenting voices with close ties to the business community.
"It is a vote on immigration, not on opening up the labour market," said People's Party parliamentarian Luzi Stamm, one of those toeing the party line.
Together with his allies, Stamm has been raising the spectre of an influx of cheap labour coming to threaten Swiss jobs and plunder the social-security system.
"If you have a rich country on one side and rather poor countries on the other, it is never to the advantage of the rich country to open the border for free immigration," he said.
Opponents, mainly to be found in rural areas and among voters with modest professional skills, have also criticised the inefficiency and bureaucracy of existing safeguards.
They are still trailing in the opinion polls. The latest survey by the GfS institute found 49 per cent would vote "yes", against 36 per cent saying "no". With six weeks to go before the ballot, 15 per cent were still undecided.
Observers say a big feature of campaigning ahead of September 25 has been the unusually large number of lobby groups seeking to persuade voters of the merits or otherwise of extending the labour accord.
"It appears to be the strategy of opponents, particularly the People's Party, to show that many organisations, such as the farmers, small and medium-sized businesses, are not united in their approval of the labour accord," said political scientist Hans Hirter of Bern University.
swissinfo, Urs Geiser
Non- EU member Switzerland and Brussels signed two sets of bilateral accords in 2000 and 2004, covering 16 different areas.
Switzerland's official unemployment rate (July 2005): 3.5%.
The EU is Switzerland's most important trading partner.
An accord between 15 EU countries and Switzerland granting mutual access to labour markets came into force in 2002.
This accord will be extended gradually to the ten new EU members, mostly from eastern Europe, if it is approved by the Swiss electorate.
Parliament has given the green light, but the far-right Swiss Democrats – supported by the rightwing People's Party – forced a nationwide vote on the issue.