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 musical and medical exchanges. Tourism and education exchanges are growing.
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 (rotated annually). Mr Couchpin took up office on 1 January 2008.
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.
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 four-party power-sharing arrangement 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 (CDP). The two SVP members elected to the Federal Council subsequently joined the new CDP and ended the “magic formula” power sharing arrangement. The SVP is no longer represented on 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 an increasingly close relationship with 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 the November 2006 Swiss referendum which approved a 630 million euros package of aid to the ten new EU member states. Switzerland is scheduled to become a full member of the Schengen agreement which includes cooperation in justice and home affairs and a passport-free zone with Europe.
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'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.
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$424 billion in 2007 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.
Switzerland is an important trading nation and a net exporter. In 2007, goods and services exports were estimated at US$238 billion, exceeding imports by US$39 billion. The strong growth over the year was due in part to services exports which increased by 21 per cent. Switzerland's export of goods and services amount to more than half of its GDP. Major merchandise exports are machinery, chemicals and jewellery and the main services exports are in the financial sector. Its major trading partner, Germany, accounts for a fifth of exports and a third of imports.
Switzerland has made efforts to liberalise its economy but agriculture is still 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 over the last few years led to a surge in Swiss exports and a rise in Swiss GDP growth of 3.2 per cent in 2006 and 3.1 per cent in 2007. Swiss GDP growth is expected to remain strong though easing to 2.0 per cent in 2008 and 1.3 per cent in 2009. Inflation is forecast to rise in 2008 to 2.6 per cent and ease to 1.5 per cent in 2009 (Consensus Economics, September 2008).
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. The Minister for Trade, Mr Crean, attended in January 2008. The former Prime Minister, John 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.
Swiss Foreign Minister Calmy-Rey visited Australia in August 2005 and met the then Foreign Minister, Mr Downer. The Minister for Home Affairs, Mr Pascal Couchepin, visited Australia in October 2006. He signed an MOU on Social Security.
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; an MOU on Exchange of Trainees; and a Social Security Agreement (signed October 2006). An air services agreement has been finalised and is due to be signed by the end of 2008.
Texts of bilateral agreements are available at the AUSTLII site.
Australia has sought to deepen and broaden the relationship including through senior officials’ dialogue on economic and security issues which were held in February and April 2004 and in April and June 2005. The Australian Ambassador regularly visits Berne for dialogue on current issues.
Bilateral Trade and Investment Relationship
Trade and Investment
In 2007, Switzerland increased its rank to Australia’s 23rd largest merchandise trading relationship, valued at A$3.6 billion, with the trade balance in Switzerland’s favour. The trade deficit fell to around A$313 million for the year but this was due a sharp upturn in Australia’s gold exports to A$1.5 billion. Total merchandise exports were around A$1.7 billion and total merchandise imports A$2.0 billion. The major Australian imports from Switzerland are medications and pharmaceuticals. Two-way services trade amounted to around A$1.8 billion in 2007 with Australia having a deficit of A$610 million. Australia’s services exports include transportation, recreational travel, business services, education (over 1,500 Swiss student enrolments in Australia) and biotechnology.
Investment
Switzerland is a significant investor in Australia. Switzerland was ranked as Australia’s sixth largest source of foreign direct investment in 2007 at A$16.4 billion.
Notable Swiss companies with a base in Australia include Xstrata (mining), Nestlé, Bernina and financial services companies Credit Suisse, Zurich and UBS. Swiss company Atradius (formerly Gerling NCM) acquired the Australian Government Export Finance and Insurance Corporation's short-term credit insurance business in 2003.
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.
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 firms Macquarie Bank, with offices in Zurich and Geneva, and Babcock and Brown, are active in the Swiss market. Babcock and Brown’s portfolio recently included real estate properties in Switzerland.
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
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 product 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 email the Department of Foreign Affairs and Trade.
Last reviewed date: 09/10/2008