US election unlikely to ease strained relations

Swiss parliamentarians agree that the US election result is unlikely to have a major impact on US-Swiss relations Keystone

Regardless of the outcome of the United States presidential election, Swiss politicians are not expecting an immediate improvement in bilateral relations, which have been strained by on-going banking and tax disputes.

“Some argue that [Republican candidate Mitt] Romney may have a different attitude to Obama, but I don’t think things will change as the IRS [Internal Revenue Service] and Department of Justice have a clear policy,” said centre-right Radical Party senator Felix Gutzwiller, who is vice president of the Senate foreign affairs commission.

The US authorities are currently investigating 11 Swiss banks for allegedly aiding tax evasion. The Swiss government is trying to get the investigations dropped in exchange for the payment of fines and the transfer of client names. It is seeking a comprehensive deal to “draw a line under the past” to protect the remainder of its 300 or so banks from US prosecution.

Relations between the two countries have been overshadowed since 2009 by disputes over Switzerland’s bank secrecy laws and US citizens’ use of Swiss accounts to shield untaxed income.

“Sick legal system”

Gutzwiller’s party colleague Christa Markwalder, who is president of the Swiss Parliamentary Association Switzerland-USA, said she had some understanding for the American position. “The world has changed quite a lot over the past four years, especially the US.”

Obama’s promises of hope, peace and prosperity were quickly eclipsed by tremendous economic challenges, she said.

“The state needed money, some citizens didn’t pay taxes correctly and some Swiss banks and bankers made mistakes … in such difficult situations our relations have suffered.”

Luzi Stamm, a parliamentarian from the rightwing Swiss People’s Party and member of the House of Representative’s foreign affairs committee, was more categorical.

“I think relations have clearly got worse,” he said. “The US has a sick legal system that keeps taking pot shots at Switzerland. Putting a friendly state under pressure to push through your own views is unacceptable.”

Carlo Sommaruga of the centre-left Social Democrats is concerned about possible long-term damage: “In the US collective imagination, what is being generated is a rejection of Switzerland.”

Low priority

According to the Swiss ambassador to the US, Manuel Sager, it is understandable that finding a solution to the banking and tax issues has not been a priority for Washington in a presidential election year.

If anything, Switzerland was put in an even darker light during the presidential campaign with revelations that Romney once had $3 million in a Swiss bank and a “Romney Girl” Democrat campaign video portraying the country as a tax haven.

“We’ll have to see whether [a deal] will work in December or early next year,” Sager told the Sonntag newspaper on October 21, while admitting that the problem was that each side had different expectations.

“We want to protect the integrity of our legal system, while the US wants to get back as much as possible from American tax evaders.”

Gutzwiller is confident that an overall deal is not far off, which may signal a new era in relations.

“I think we are entering the final stages of discussions which have a clear end … I have confidence in Swiss diplomacy and people like Swiss ambassador Michael Ambühl who are appreciated by both sides. I have the feeling we can regain the Americans’ trust,” he said.

Booming business

Martin Naville, chief executive of the Swiss-American Chamber of Commerce, is also upbeat about relations despite the rows.

“Underlying business relations are going very well. If you look at 2012 trade figures, exports to the US are up 12 per cent on the previous year and imports to Switzerland are up 20 per cent. In 2011, Switzerland was the second-biggest direct investor in the US … and the US is the biggest foreign direct investor in Switzerland with firms like Google and Kraft,” he said.

“Back in 2008, at the beginning of the economic crisis, lots of things were up in the air. We are now in a much better position than we were four years ago. There is still a ‘hanging rock’ [with the US still wanting data on possible tax evasion prior to the 2009 accord signed between both countries], but potential risks are still more or less under control.”

He felt Switzerland had shown it was “ready for compromise and solutions”.

“Hopefully this message has been sent loud and clear – it’s a legacy problem that needs to be solved,” he added.

“Constructive path”

One outward sign of progress was an agreement by Switzerland in June to cooperate with the US Treasury to implement a light version of the US Foreign Account Tax Compliance Act (Fatca), a 2010 anti-tax evasion law.

And in September the Swiss government approved two security accords with the US relating to sharing fingerprint, DNA and terrorist-related data, which in return will allow Swiss nationals to continue to benefit from visa-free entry to the United States for stays of up to 90 days.

Regardless of the obvious “asymmetrical relationship” between the US and Switzerland, Markwalder said it was important to look after the historically close relations.

“I now think we need to come back onto a more constructive path and look for solutions as blaming each other in this difficult situation will not lead to results,” she said.

Bilateral relations

The strategic goal of Swiss foreign policy in the recent past has been to optimise the defence of Swiss interests through deepening and structuring bilateral relations and strengthening cooperation with the US in areas of mutual interest. Both countries signed a memorandum of understanding on intensifying relations in May 2006.

Switzerland represents American interests in Iran and Cuba, as well as Cuban interests in Washington.

In addition to the common search for solutions to global problems, Switzerland’s interests are primarily economic. The US is the second-largest export market for Switzerland (2010: SFr20.6 billion) and by far the main destination for Swiss direct investments abroad (2009: SFr165.9 billion). 

More than 550 Swiss companies have subsidiaries in the US, employing about 400,000 people.

Since 2001, both countries have maintained active contacts at parliamentary level through two friendship associations of parliamentarians: in Switzerland, the “Swiss Parliamentary Association Switzerland-US”; in the US, “Friends of Switzerland Caucus”.

(Source: Swiss foreign ministry)

US-Switzerland

Between 1700 and 2009, about 460,000 Swiss citizens emigrated to the US. The number of Americans with Swiss origin is estimated to be around one million. Currently, 75,000 Swiss citizens are living in the US, i.e. about 10% of all Swiss abroad.

In the 19th century, a relationship of friendship developed between the two “sister republics” – Switzerland and the US – on the basis of shared values such as democracy, the rule of law and respect for human rights.

In 1822, Switzerland opened its first consulates in the US, in Washington and in New York. Sixty years later, the opening of the Swiss embassy in Washington marked Switzerland’s first embassy outside Europe.