Switzerland Country Brief
Overview
Australia and Switzerland enjoy friendly relations based on shared political and economic interests. A key element of the contemporary bilateral relationship is Switzerland's significant investment in Australia. Cultural ties have traditionally been close, and many Swiss have made significant contributions to Australia. There are numerous exchanges across various fields including research and development, education, musical and medical sectors.
The Australian Ambassador to Germany, based in Berlin, is also accredited to Switzerland. Australian representation in Switzerland, based in Geneva, comprises our Consulate-General and the Australian missions to the UN and WTO.
Political Overview
Switzerland's Government and Head of State, the Federal Council (Cabinet) is made up of seven Councillors (Ministers). A new Federal Council was elected by the Federal Assembly on 18 December 2007 following the October 2007 parliamentary elections. The Federal Council then elected Pascal Couchepin as the 2008 Federal President (the position of Federal President is rotated annually). In December 2008, the Federal Council elected Finance Minister Hans-Rudolf Merz as Switzerland's President for 2009. He took up office on 1 January 2009.
The Federal Assembly is Switzerland's national legislature. It has two chambers: the National Council and the Council of States. The National Council has 200 members elected on a (mostly) proportional representation basis. The Council of States has 46 members: two from each canton and one from each half-canton. The two chambers serve concurrent four-year terms. The next parliamentary elections will be held in 2011.
At the October 2007 parliamentary elections, the (right-wing) Swiss People's Party (SVP) won the largest share of the votes (29 per cent) followed by: (left) Social Democrat Party (SP) (19.5 per cent); (liberal) Radical Democrat Party (FDP) (15.6); (centrist) Christian Democrat Party (CVP) (14.6 per cent); and the Greens (9.6 per cent). The new Federal Council was then formed from the four major parties - two each from the SVP, FDP and SP and one from the CVP. This was in accordance with a power-sharing arrangement between the four largest parties on a pro rata basis established in 1959, known as the “magic formula”.
Swiss politics became more unsettled during 2008 following a splintering of the SVP party in June 2008 and the formation of the new Conservative Democratic Party (BDP). The two SVP members who were elected to the Federal Council in December 2007 against the will of the SVP leadership subsequently joined the new BDP, retaining their positions as members of the Federal Council. Since the SVP, the largest party, was no longer represented on the Federal Council, the “magic formula” power sharing arrangement no longer applied. Switzerland for the first time in many years had a major party, the SVP, in opposition. These developments also created a further political anomaly. The BDP, which had only a handful of parliamentary deputies, did not have enough to form a parliamentary faction. The party subsequently formed at the national level on 1 November 2008 and will contest local and cantonal elections before tackling the general election in 2011.
Switzerland's political landscape changed again in December 2008 Defence Minister Samuel Schmid (BDP) resigned. The Federal Assembly then voted SVP candidate and former SVP federal chairman Ueli Maurer to the Federal Council, marking a return of the SVP after self-imposed opposition. While the SVP's return marks a renewal of concordance politics, the SVP still does not have proportional representation in the Federal Council.
A unique aspect of Switzerland's political system is the frequent requirement of national referenda which adds to difficulties in getting legislation passed.
Foreign Policy
Switzerland has become increasingly integrated within the EU through ongoing bilateral issue-specific accords rather than full EU accession. Currently Switzerland is seeking to negotiate a Swiss-EU free trade agreement on unprocessed agricultural products and a framework agreement on European electricity sharing. Trade in processed agriculture products was liberalised as part of the 2004 package of bilateral accords. The relationship was enhanced by a 2006 Swiss referendum which approved a €630 million (A$1.2 billion) package of aid to the ten new EU member states. Switzerland became a member of the Schengen area on 12 December 2008, and full implementation to include airports took place on 29 March 2009.
The Swiss Government is also seeking closer relations with the United States, particularly in trade. Switzerland plays a role in the Asia-Pacific region, primarily through significant investment activity, but it is also promoting economic reform, for example, in North Korea by funding the privately-run Pyongyang Business School. Switzerland has also worked to develop a closer bilateral relationship with China.
Switzerland's policy of neutrality means it does not belong to NATO. Since 1953, it has participated in peacekeeping missions, including NATO's Partnership for Peace (PfP) in 1997. It is one of four members (with Sweden, Poland, and the Czech Republic) of the UN Neutral Nations Supervisory Commission monitoring the demilitarised zone between North and South Korea. Switzerland eventually joined the United Nations in 2002.
Switzerland is a member of the Council of Europe (CoE), the Europe-Atlantic Partnership Council (EAPC), the European Bank for Reconstruction and Development (EBRD), the European Free Trade Association (EFTA), the International Bank for Reconstruction and Development (IBRD), the International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD), the Organisation for the Security and Cooperation in Europe (OSCE), the United Nations (UN), the World Trade Organisation (WTO), and the Schengen area.
Economic Overview
Analysis of the Economy
Switzerland is an open economy with one of the highest standards of living in the world. Switzerland's GDP was estimated at US$493 billion in 2008 with one of the highest per capita incomes in the world.
Switzerland's prosperity is based on labour skills and technological expertise in manufacturing, as well as earnings from services such as tourism and banking. In the 2006 World Economic Forum Competitiveness Index Switzerland ranked number one for the first time.
Switzerland is an important trading nation and a net exporter. In 2008, goods and services exports were US$318 billion, exceeding imports by US$40 billion. The strong growth over the year was due in part to services exports which increased by 20 per cent. Switzerland's export of goods and services amount to more than half of its GDP. Major merchandise exports are machinery, chemicals and pharmaceuticals, watches, jewellery and telecommunications; and the main services exports are in the banking and insurance sectors. Its major trading partner, Germany, accounts for a fifth of merchandise exports and a third of imports.
In response to the global financial crisis, the Federal Assembly approved a financial rescue plan including a loan of SFr59 million (approximately A$72.2 million) and SFr6 billion (approximately A$7.3 billion) cash injection for the leading Swiss bank, UBS. The Federal Banking Commission has imposed a higher capital adequacy ratio both on UBS and Credit Suisse (the second-largest Swiss bank), but they have until 2013 to comply. Credit Suisse, which survived the financial crisis better, has nonetheless undertaken job cuts and cost cutting following financial losses. In August 2009, the Swiss Government announced that it would sell its stake in UBS.
The Swiss Government's key economic priority is to address the expected recession in 2009. The Swiss National Bank (Central Bank) cut interest rates three times between December 2008 and March 2009 in response to company retrenchments, faltering export demand, slumping consumer confidence, and tight credit conditions. Other measures to boost GDP growth include improving competition policy, social security reform and reducing high price levels by liberalising sectors such as electricity, energy, telecommunications and postal services.
Switzerland's agriculture sector remains highly protected. Farm subsidies are the highest in the world, with some Swiss farmers receiving supports equivalent to three-quarters of the value of production.
Key Economic Indicators
Germany's sustained strong GDP growth and the rise in global demand prior to 2008 led to a surge in Swiss exports and a rise in Swiss GDP growth of 3.4 per cent in 2006 and 3.3 per cent in 2007. However, the global financial crisis in 2008 led to a downgrading of Switzerland's economic growth forecasts in 2009.
Switzerland's significant financial sector exposes the Swiss economy to a higher risk in the event of a systemic banking crisis. Swiss GDP growth eased to 1.6 per cent in 2008 and is forecast to contract around 2.6 per cent in 2009 due to lower investment and weaker export demand (Economist Intelligence Unit, November 2009). Inflation is forecast to fall to negative 0.6 per cent in 2009 from 2.4 per cent in 2008. Unemployment is forecast to rise to 5 per cent in 2009. The budget balance is forecast to fall into deficit by 1.3 per cent in 2009 due to fiscal stimulus measures. The Swiss National Bank cut official interest rates to 1 per cent in December 2008, to 0.5 per cent in January 2009 and to 0.25 per cent in March 2009.
Bilateral Relations
High Level Visits
Australian ministers regularly visit Switzerland for meetings in Geneva or to attend the annual World Economic Forum (WEF) in Davos. Deputy Prime Minister, Ms Gillard and the Minister for Trade, Mr Crean, attended in January 2009. Mr Crean, attended in January 2008. The former Prime Minister, Mr Howard, attended the WEF in January 2005, the former Minister for Foreign Affairs, Mr Downer last attended in 2003 and the former Minister for Trade, Mr Truss in 2007. An Australian parliamentary delegation, lead by the Speaker of the House of Representatives, Mr Harry Jenkins MP, visited Bern and Zurich in April 2009.
Swiss Foreign Minister Ms Calmy-Rey visited Australia in August 2005 and met the then Foreign Minister, Mr Downer. The Minister for Home Affairs, Mr Couchepin, visited Australia in October 2006.
Bilateral Agreements and Official Dialogue
Australia and Switzerland have a number of bilateral agreements including on: Double Taxation; Defence and Supply; Nuclear Safeguards (covering the import of Australian uranium for peaceful purposes); Extradition; Mutual Assistance on cooperation on law enforcement agencies; a Memorandum of Understanding (MOU) on exchanges on health regulations; and an MOU on Exchange of Trainees.
In 2006, Australia and Switzerland signed a bilateral social security agreement to give improved social security protection to people who have lived and/or worked in both countries. The social security agreement also exempts Australian employers from the need to provide Swiss social security support for Australian employees sent temporarily to work in Switzerland, provided the employee remains covered in Australia by compulsory superannuation arrangements. Further information is available on the Australian Taxation Office website. In 2008, Australia and Switzerland signed an air services agreement.
Texts of bilateral agreements are available at the AUSTLII site.
Australia continues to look for opportunities to broaden and deepen the relationship, including through an ongoing senior officials' dialogue on economic and security issues. The most recent of these dialogues was held in Canberra in May 2009. The (Berlin-based) Australian Ambassador regularly visits Berne and other Swiss cities for dialogue on current issues.
Bilateral Trade and Investment Relationship
Trade and Investment
In 2008-09, Switzerland was ranked as Australia's 24th largest merchandise trading relationship, worth A$3.1 billion, with the trade balance heavily in Switzerland's favour. The trade deficit reached A$1.8 billion due mainly to the almost halving of gold exports over the year. Total merchandise exports were around A$0.66 billion and total merchandise imports A$2.5 billion. The major Australian export to Switzerland was gold. Major Australian imports were medications and watches and clocks.
Two-way services trade amounted to around A$2.1 billion in 2008. Australia's services exports amounted to A$644 million and imports from Switzerland to A$1.5 billion. Australia had a deficit of A$856 million. Australia's services exports include transportation, recreational travel, business services, education (1,500 Swiss student enrolments in Australia) and biotechnology.
Investment
Switzerland is a significant investor in Australia. Switzerland was ranked as Australia's fifth largest source of foreign direct investment in 2008 at A$19.5 billion. Australian foreign direct investment in Switzerland amounted to A$4.5 billion in 2008, our ninth largest destination. Notable Swiss companies with a base in Australia include Xstrata (mining), Novartis Pharmaceuticals, Roche, Nestlé, Bernina, and financial services companies Credit Suisse, Zurich and UBS.
Switzerland welcomes foreign direct investment (FDI) in manufacturing, services, and research and development. The State Secretariat for Economic Affairs and its Business Location Switzerland are the government bodies charged with facilitating such investment. Strict limits on the entry of foreign workers rule out the entry of firms in labour-intensive industries. Switzerland offers a high level of protection for all forms of intellectual property. Patents, industrial designs and models, trademarks and copyrights are legally recognised in Switzerland.
Export Opportunities
Information and Communication Technology
Switzerland's advanced economy and highly skilled labour force make it a good location for licensing sophisticated products and processes. The country itself depends on exports of product and process licenses. It is one of the few nations with a positive balance in licensing transactions. Sectors that are particularly important include pharmaceuticals, watch-making and precision machining, food and drink.
Biotechnology
Switzerland has a large pharmaceuticals industry. The market has well established international networks and offers Australian companies opportunities for forming alliances and export markets to the rest of Europe - European investors are optimistic about the longer-term prospects of the industry. Because of the size and scope of the European biotech industry, there are many large and small opportunities in many different sectors, including human health, environmental remediation and agricultural biotech.
Business and Financial Services
Switzerland's importance as a leading financial centre reflects a number of factors, including its central geographic location in Europe, high political stability, a strong currency, low inflation, strict laws protecting bank secrecy, and a well regulated and highly developed financial services industry.
Two large banks - the United Bank of Switzerland (UBS) and Credit Suisse Group - control around two-thirds of the banking sector. The best opportunities for Australian offshore private banking are in niche markets in the banking sector. Opportunities for Australian providers of insurance services are also in niche markets in superannuation and life insurance. The Swiss population is among the most heavily insured in the world, reflecting the high reliance on obligatory and voluntary private life insurance contracts for old-age retirement savings.
The large Australian investment firm Macquarie Bank, with offices in Zurich and Geneva, is active in the Swiss market.
Education
More than 40 Australian education providers achieved Austrade-assisted export success in Switzerland in 2006-07, with a combined total value of A$12 million. Leading providers include the University of Melbourne and Macquarie University.
Health and Medical
Australian biopharmaceutical group CSL has a major plasma manufacturing facility in Switzerland, under the name of CSL Behring. Invetech (health and medical products) completed a deal in Switzerland after participating in the 2007 Medica trade show in Düsseldorf, Germany.
Manufacturing
Disc Brakes Australia (designer, manufacturer of disc brake rotors and brake drums) registered a sale in Switzerland after participating in the 2006 Automechanika trade show in Frankfurt, Germany. Tasmanian Wet Blue (leather) has sold products in Switzerland as a result of Austrade assistance to connect with potential customers.
Austrade
The Australian Trade Commission (Austrade) is the Federal Government agency that helps Australian companies win overseas business for their products and services by reducing the time, cost and risk involved in selecting, entering and developing international markets.
Austrade's Opportunities Online website is a valuable resource for information on export opportunities to many countries, including Switzerland.
Tradeinfo Contacts
If you would like more information on the trade and economic conditions in Switzerland, please e-mail the Department of Foreign Affairs and Trade.
Updated 10 November 2009