Switzerland could do better

People demand clear rules
for Swiss corporations.
(Photo: Philipp Rohrer/Alliance Sud)

In some areas of its foreign policy, Switzerland does not earn the best marks for its contribution to the Millennium Development Goals. Its finance and trade policy is driven by self-interest and contributes to restricting the policy space of poor countries. Although Switzerland has substantially increased its development budget and pursues good pro-poor development cooperation by international comparison.

As a donor country Switzerland is bound primarily by the eighth Millennium Development Goal (MDG). This means that it should support the poorest countries in realising development goals 1 to 7 and adapt its trade policy and that of its financial centre to the needs of the poorest countries. Its endeavours towards a coherent, pro-development policy have also remained rather modest.

Switzerland has made some headway regarding the import of goods from the poorest countries, which is no longer subject to customs duties and quotas and in refunding “stolen assets.”

There was also little or no movement on policy coherence for development. In concert with other western countries, Switzerland continues to defend its own economic interests first and foremost, with little regard for the needs of the majority of the world's population in developing countries.

At the start of the millennium the Government was extremely unwilling to increase its Official Development Assistance (ODA) to 0.7% of Gross National Income (GNI) in keeping with UN guidelines.

In 2007 this alliance of over 70 aid agencies, environmental and youth associations, trade unions, human rights and women's organisations launched a petition for ODA to be increased from the then 0.37% to 0.7 per cent of GNI by 2015. With over 200,000 signatures, the petition was submitted after just 10 months. That made an impression – including on the Parliament. A coalition of parliamentarians from almost all parties reached agreement that an increase to 0.5% by 2015 was politically feasible. After much bouncing back and forth between the Parliament and Government, the decision to make the increase finally came in February 2011. In 2012 it was confirmed in the debate on the global credit lines for 2013-16 by a substantial two-thirds majority in both chambers.

The development budget will now grow by about 9% annually until 2015. Switzerland is thus bucking the trend towards reduction amongst OECD donor countries. However, it financed its 2011 and 2012 contributions to the fast-start financing package that had been agreed at the Copenhagen Climate Conference from the increased ODA budget. The Government will probably also try to use ODA to finance the much higher climate obligations arising from a new climate treaty. It argues that this is all additional money, as it had increased the ODA budget.

Switzerland's free trade policy is highly prejudicial to developing countries. Once it became clear that Switzerland would not be able to push through its maximum demands (full liberalisation of investments, free access to government procurement and the services sector, etc.) against the majority of developing countries in the WTO, it opted for bilateral free trade agreements. Whilst the Swiss export sector benefits from the removal of trade barriers and access to the markets of partner countries, developing countries are losing considerable policy space to strengthen their domestic economies.

Thanks to parliamentary initiatives and NGO lobbying, Switzerland is slowly accepting the consideration of labour rights and environmental standards when negotiating new bilateral free trade agreements. It has thus begun offering its negotiating partners the possibility to include the European Free Trade Association (EFTA) voluntary provisions on environmental and labour rights. There has been less progress however on investment protection agreements. Under pressure from Parliament, Switzerland now includes principles of sustainable development in the preamble of agreements, but still lags far behind the European Union in the anchoring of human rights.

In patent protection, the Government firmly represents the interests of the chemical and pharmaceuticals industry. Apart from very few humanitarian supplies of medicines, Switzerland's patent protection policy continues to prevent access to medicines and to limit small farmers' use of seeds. Empowered by Swiss policy, Swiss pharmaceutical enterprises in India are taking legal action against the production of generic medicines, thereby preventing access for poor people to affordable drugs.

Because of advantageous investment conditions, Switzerland became a major centre for commodity companies over the past 10 years and is today home to the largest number of multinational enterprises per capita. Firms headquartered in Switzerland such as Nestle, Glencore, Xstrata or Trafigura frequently make headlines for human rights violations and environmental pollution, thereby jeopardising

At the 2010 MDG Summit, Switzerland joined various countries in opposing all initiatives in the realm of transparency and international cooperation on tax matters. Whilst Switzerland seems willing to cooperate with industrialised countries, it has not concluded any agreements with poor countries providing for any effective exchange of information about possible tax dodgers. Yet such information exchange is indispensable to developing countries if they are to stop the outflow of undeclared funds and generate more funds of their own for poverty reduction. Conservative estimates put the amount of untaxed funds from developing countries in Swiss banks at USD 400 billion. The real amount is more likely to be around 1,000 billion. If only the interest on these sums were taxed, the countries concerned would stand to have roughly an additional USD 6 billion at their disposal each year for poverty reduction. That is more than twice Switzerland's development aid.

Responding to civil society and political pressure, however, the Swiss Government in April 2012 declared its readiness to offer Tax Information Exchange Agreements (TIEAs) to poor developing countries. In so doing, it gave up its demand for information exchange to be built into very complex Double Taxation Agreements (DTAs). However, countries with which Switzerland already has such DTAs are not covered by this decision. These countries will benefit from tax information sharing only by renegotiating existing DTAs. In return for introducing information exchange, Switzerland wants to further reduce current withholding taxes on the revenues of Swiss investors.

National Report from Switzerland (Social Watch Report 2013)