Swiss foreign policy: the end of privileges

Swiss Federal Councilor Ignazio Cassis, left, talks with Bogdan Aurescu, Minister of Foreign Affairs of Romania, during an official visit to Switzerland in September 2021. Keystone / Peter Schneider

Neutrality and special solutions allowed Switzerland, for many years, to discreetly increase its prosperity. But today, the international tide has turned.

This content was published on December 01, 2022 – 09:36

While the United States, Japan and the European Community (EC) tried in 1986 to bring the apartheid regime to its knees through economic sanctions, neutral Switzerland continued to negotiate with South Africa. Since 2007, when the UN and the United States tried to prevent the regime of the Iranian mullahs from making a nuclear weapon, imposing sanctions and an arms embargo, Bern has developed its commercial relations with this country. And while Switzerland committed itself to more democracy and the rule of law in the countries of the South through development cooperation, the despots continued to deposit their funds in Swiss bank accounts.

With its good offices, its humanitarian tradition, its neutrality and international Geneva, the country has profiled itself for decades as an invested player, while discreetly cultivating its own interests, sometimes economic, in the background. At least that is the opinion of its detractors.

International Red Cross workers tend to wounded evacuated to Geneva during World War I. Keystone / Str

Neutrality, understood as “we do business with everyone without worrying about sanctions”, has been, along with the financial center and tax laws, one of the reasons why Switzerland has managed to become the dominant global hub. Commodity trading, says Andreas Missbach, director of Alliance Sudexternal linka working community of Swiss non-governmental organizations (NGOs).

More difficult international context

According to Elisabeth Schneider-Schneiter, a member of the political party Le Center, Switzerland was able to enjoy many privileges in the past because of its neutrality. But “those privileges are being eroded”.

Under international pressure – coming from the United States, among others – Bern reformed its financial center, partially abolished bank secrecy and introduced automatic exchange of information on tax matters.

The Swiss financial center specializes in international wealth management. Keystone / Alessandro Della Bella

Difficult relations with the European Union (EU) also reflect this change in mindset. In Brussels, it is increasingly said that Switzerland “chooses”. “With bilateral agreements, Switzerland has long been able to make the most of the European internal market without having to submit to its obligations”, explains Elisabeth Schneider-Schneiter. It’s over now, she says.

Politician Christine Badertscher, from the Green Party, also confirms that the international context has changed: “The EU no longer wants to grant exceptions to Switzerland”. She even believes that strained relations with the EU are currently the greatest danger to the country’s prosperity.

The Swiss economy suffers not only from complicated bilateral relations with Europe, but also from developments within it. That’s why Switzerland is trying, for example, to reduce, through lobbyingexternal link, a reform of the EU financial market. This reform follows Brexit, but it could also significantly affect the activity of Swiss banks in wealth management, especially the German ones.

Russia’s invasion of Ukraine also helped to change the mood towards Switzerland. Thus, some European countries are irritated that they cannot transfer weapons and ammunition purchased from Switzerland to Ukraine. And although German politicians threatenedexternal link in order not to acquire more military equipment in Switzerland, Bern firmly adheres to this prohibition, invoking neutrality and a national law.

It is no longer possible to escape the radars

China, Russia, Iran – autocratic states stand together, even in Russia’s war against Ukraine. Some analysts speak of a new bloc formation and a new cold war.

According to Patrick Dümmler, from the think tank Avenir Suisse, close to economic circles, Switzerland cannot fail to position itself – “more than before and more than what it wants”.

In its idea of ​​itself and in the world’s perception of it, Switzerland is part of the western alliance. According to Patrick Dümmler, it can hardly fly under the radar and do business like it used to. “Its foreign economic policy is watched by both the US and the EU and is expected to follow suit.” Previously, this requirement did not exist. Bern could get away with remaining neutral.

Sooner or later, sanctions affect prosperity

In the case of the war in Ukraine, Switzerland, according to its official statement, put high ideals ahead of its own prosperity and participated in the sanctions against Russia – after some hesitation.

She found herself under pressure, however, believes Patrick Dümmler. “She will likely continue to support sanctions, otherwise she risks being confronted with economic countermeasures.”

The center’s head, Gerhard Pfister, told the mediaexternal link that the country had to prepare for a loss of prosperity. Sanctions and counter-reactions, disruption of trade relations… all of this will have economic repercussions.

Undoubtedly, it is this fear that has caused disagreements in the federal government on the issue of sanctions. If the Department of Foreign Affairs wants to maintain good relations with its main trading partners, Switzerland must, from time to time, make concessions towards the EU and the United States. Even for measures like sanctions that don’t go in the direction of the economy.

The Department of Foreign Affairs’ Prosperity and Sustainability Division acted as an internal facilitator. According to division head Alexandra Baumann, Swiss prosperity is not directly threatened by sanctions. She said in an interviewexternal link to “We are committed to a stable financial system and the best possible relations with foreign countries”. Because prosperity mainly depends on stable structural conditions.

While the pandemic, energy crisis and inflation have rocked other European countries economically and caused major political upheavals, Switzerland remains surprisingly stable economically and politically. Instead of counting on privileges such as its neutrality and its somewhat special status in the center of Europe, Bern can count on another asset: stability.

Revised and verified by Balz Rigendinger, translated from German by Lucie Donzé

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