Swiss regulation of commodity trade long overdue

Several global commodity traders that call Switzerland home have been repeatedly accused of violating human rights and environmental standards. Andreas Missbach of the NGO Public Eye believes the Responsible Business InitiativeExternal link is necessary for reining them in.

Five years after releasing its background report on commodities, the Swiss government published a reassessment of the situation at the end of November – “The Swiss commodities sector: current situation and outlook”External link. Despite numerous scandals involving commodity firms in Geneva and Zug, the Federal Council has once again missed the opportunity to adopt effective measures against corruption and ward off other risks. Yet again, it seems to be content with asking the Swiss multinational commodity trading and mining company Glencore and its pals “to act with integrity and responsibility”.

Andreas Missbach is the head of commodities at Public Eye. Marion Nitsch/zvg

In 2013, at least the Federal Council’s message was clear. It talked about “serious challenges regarding human rights and environmental conditions in commodity-exporting countries, anti-corruption regulations as well as the ‘resource curse’ phenomenon in developing countries”. In the end, however, it did not seem to take these challenges seriously enough to come up with effective regulatory measures. It has also ignored concerns coming from parliament.

Since 2015, the Federal Council has only supported one of eight proposals (motions and postulates) put forward by parliament. In this respect, the 2018 reassessment is consistent, it focuses on strengthening Switzerland’s competitiveness as an international business hub. Five measures are now dedicated to this cause, up from two. One of them is the introduction of a tonnage tax under which the taxable profits of shipping companies would be calculated as a lump sum based on the net tonnage of their ships, rather than on their profits. For commodity giants owning significant fleets such as Vitol, Glencore or Tragifure this would open a tax loophole as big as a barn door.

There is an urgent need to fight corruption but the search for a concrete solution seems to be in vain. Instead, the State Secretariat for Economic Affairs (SECO) simply wants to continue to “raise awareness”. In its quest to do so, it surprisingly updated one of its brochures last year, even though the scandals in the industry are by no means fading. On the contrary, it happens far too often that globally dominating Swiss commodity firms are partially to blame for the “resource curse”. No matter whether it’s deals with oligarchs from Congo or Kazakhstan, the revelations of the Paradise PapersExternal link or the epochal corruption case surrounding the Brazilian state oil company Petrobas, dangerous practices of “our” commodity firms whereby they use dubious door openers or enter partnerships with politically exposed people just to gain access to lucrative markets keep on coming to the surface.

Switzerland’s political inertia has not gone unnoticed though. In its evaluation of the Swiss anti-corruption mechanism last March, the OECD called on our government to impose “appropriate and obligatory regulations” on commodity trade. Judicial authorities in the US and Brazil have also started investigating the business practices of Glencore, Trafigura, Vitol and other commodity firms.

Even the obligation for commodity firms to disclose payments to governments, the only legal measure that has been tackled since 2013, is in danger of becoming a farce. The Federal Council only wants to introduce transparency rules for commodity extraction, even though an overwhelming majority of Swiss companies are involved in the trade of commodities. This “alibi bill” would only affect four out of 544 companies in the industry. The billions of francs from commodity trade, especially from crude oil ending up with government agencies of countries where corruption is endemic will remain in the dark. This opens countless opportunities for potentates and their entourage to simply help themselves. It is now up to the Senate to rectify this scandalous omission.

When it comes to human rights, the Federal Council prides itself with the “Guidance on Implementing the UN Guiding Principles on Business and Human RightsExternal link” which was developed by a working group of representatives from trading companies, their lobby organisations, non-governmental organisations and administration. The Swiss NGO Public Eye participated in the multi-stakeholder consultation process. After years of procrastination and endless discussions with an industry that is more interested in burnishing its image rather than tackling the problems, the guidelines were published at the very last minute. 

However, the Federal Council also relies on voluntary action even when it comes to human rights. It is up to the commodity firms if and how the UN’s guiding principles on human rights are implemented. Only initiatives such as the ‘Responsible Business’ InitiativeExternal link could force this high-risk sector to adopt them, and the established guidelines are there to tell them how to do it.

The times of completely trusting in voluntary action should be over. Five years ago, the Federal Council identified a “reputational risk” in the behaviour of Swiss-based companies, and even though it is against all evidence, it no longer sees it today. If the government in Bern continues to sleep “the sleep of the unjust”, it is only a question of time until – just like in the financial sector – pressure from abroad forces it to act.

The views expressed in this article are solely those of the author, and do not necessarily reflect the views of swissinfo.ch.

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