Israeli diplomats have expressed concern that Switzerland may impose trade sanctions to protest Israel's military role in the Occupied Territories.
"Switzerland is trying to put pressure on Israel through economic means, but this isn't adequate in view of the close friendship which exists between our two countries," said Daniel Halevy-Goetschel, spokesman for the Israeli embassy.
Israel has not yet assessed the impact of possible Swiss and European Union sanctions, said Yossi Ackerman, economic attaché at the Israeli embassy in Bern. According to Ackerman, Israel is still waiting for additional information from Bern and Brussels to calculate the impact such measures could have.
Import restrictions into Switzerland would apply only to products made in the Jewish settlements. Ackerman says such a decision would be difficult to apply, because there are no means to control whether products "made in Israel" effectively come from the settlements.
Despite Israeli concerns, the Swiss cabinet denies any plans to limit imports of Israeli goods.
"We never mentioned the word sanction," said the foreign minister, Joseph Deiss, in an interview published on Friday by the Swiss Jewish newspaper, "Tachles". This term was "wrongfully attributed to the cabinet," Deiss added.
This view is shared by a specialist at the State Secretariat for Economic Affairs (Seco), who says that despite Israel's concerns, it is "highly unlikely" that Switzerland will sanction imports.
Robert Equey, president of the Swiss-Israeli Chamber of Commerce in the French-speaking part of Switzerland, shares the same opinion. He says sanctions would have negative effects for Switzerland.
"The commercial balance between the two countries is largely favourable for Switzerland," said Equey. "In case of a boycott, Switzerland would lose that market, and would rapidly be replaced by other economic partners."
Exports to Israel amounted to SFr1.2 billion ($720 million) last year, while imports of Israeli products stood at SFr448 million ($269 million).
While imports to Switzerland from Israel have increased by 17.5 per cent this year, retail exports have suffered a 60 per cent drop since the start of this year.
The result is essentially due to a severe drop in the precious metal section, says Rudolf Kummer, responsible for the Africa-Middle East region at Seco. Trading in precious metals dropped from SFr143 million to less than SFr5 million during the two first months of this year.
Precious stones, which are sent to Israel for refinement, account for almost half of Swiss exports to the country.
Sanctions against Israel could affect a free-trade agreement it has with members of the European Free Trade Association (Efta) - which includes Norway, Liechtenstein, Iceland and Switzerland.
Meanwhile, pro-Palestinian organisations could launch a far more devastating boycott, by calling on Swiss consumers to reject Israeli products.
The organisations, which brought together at least 10,000 people in a mass demonstration in Bern last weekend, are expected to decide next week on whether to carry out a boycott.
by Frédéric Burnand and Jeff Nottage with agencies