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Factba.se: Australia DFAT Country Briefs - Switzerland
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COUNTRY BRIEFS


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 valuable contributions to Australia. There are numerous exchanges across various fields including research and development, education and music, and the medical sector.

The Australian Ambassador to Germany, based in Berlin, is also accredited to Switzerland. Australian representation in Switzerland, based in Geneva, consists of a Consulate-General and the Australian missions to the United Nations (UN) and World Trade Organization (WTO).

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POLITICAL OVERVIEW

Switzerland has a federal structure with three levels of politics: the Confederation (federal government equivalent), the cantons (state/territory government) and the communes (local government). The Swiss Confederation consists of a seven member Federal Council (Cabinet equivalent) which is elected by the United Federal Assembly for a four-year term. A new Federal Council was elected on 18 December 2007 following the October 2007 parliamentary election. Ministerial portfolios were redistributed recently following the election of two new Councillors in September 2010. The position of President of the Swiss Confederation is rotated annually among Councillors. In December 2009 the Federal Council elected Ms Doris Leuthard as Switzerland's President for 2010. She took up office on 1 January 2010.

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 (territorial/administrative sub-division) and one from each half-canton. The two chambers serve concurrent four-year terms. The next parliamentary elections will be in 2011.

At the October 2007 parliamentary elections the (right-wing) Swiss People's Party (SVP) won the largest share of 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 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 when 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.

Foreign policy

Though not a European Union (EU) member state, Switzerland has become increasingly integrated with the EU by concluding bilateral issue-specific accords. Switzerland acceded to the European Free Trade Association (EFTA) in 1960 and signed a Free Trade Agreement with the European Economic Community (EEC) in 1972. Currently Switzerland is seeking to negotiate a Swiss-EU free trade agreement (FTA) 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 with the EU. The Swiss-EU 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 had exploratory talks with the United States on a bilateral FTA in 2005-06 but this lead to a Trade and Investment Cooperation Forum rather than the official launch of FTA negotiations. 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 became a member of the United Nations in September 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.

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ECONOMIC OVERVIEW

Analysis of the economy

Switzerland is an open economy with one of the highest standards of living and one of the highest per capita incomes in the world. Switzerland's GDP was estimated at US$492 billion (A$499 billion) in 2009. 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 2010-11 World Economic Forum Competitiveness Index Switzerland ranked number one for the third time.

Switzerland is an important trading nation and a net exporter. In 2009 goods and services exports amounted to more than half of its GDP. Major Swiss merchandise exports to Australia are medicaments (including veterinary), watches and clocks, orthopaedic appliances, and pharmaceutical products. The main services exports to Australia are in the transportation and royalties / license fee 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 (A$72.2 million) and SFr6 billion (A$7.3 billion) cash injection for the leading Swiss bank, UBS. The Federal Banking Commission has imposed a higher capital adequacy ratio on both UBS and Credit Suisse (the second-largest Swiss bank), which 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 sold its 9 per cent stake in UBS.

The Swiss Government's key economic priority was to address the 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 over the longer term 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. Some Swiss farmers receive support 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 3.6 per cent in both 2006 and 2007. However, the global financial crisis in 2008 and 2009 led to a contraction in Switzerland's economic growth by 1.5 per cent in 2009. Swiss GDP is forecast to rise to 2.9 per cent in 2010 and inflation is forecast at 0.7 per cent.

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BILATERAL RELATIONS

Cultural relations

People to people links are significant, with 43,174 Swiss visitors to Australia in 2009 with an above average length of stay. Australian artists have a presence in Switzerland through performing tours and visual arts shows, and feature in private and public collections, including Indigenous Australian arts. Upcoming tours to Switzerland over 2010-11 include the Sydney Symphony Orchestra. Australian film was a special focus of the 6th Zurich International Film Festival from September – October 2010.

High level visits

Australian ministers regularly visit Switzerland for meetings in Geneva or to attend the annual World Economic Forum (WEF) in Davos. The former Minister for Trade, Mr Crean, attended the WEF in January 2010 and in 2008. In January 2009 the then Deputy Prime Minister, Ms Gillard took part in the WEF. As Minister for Sport, the Hon Kate Ellis, visited Switzerland from 13 to 14 May 2010. An Australian parliamentary delegation, led 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 from the AUSTLII website (http://www.austlii.edu.au/au/other/dfat/countries/) .

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 Bern and other Swiss cities.

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BILATERAL TRADE AND INVESTMENT RELATIONSHIP

Trade and investment

In 2009-10, Switzerland was ranked as Australia's 25th-largest merchandise trading relationship, worth A$2.5 billion, with the trade balance heavily in Switzerland's favour. Total merchandise exports were around A$271 million and total merchandise imports A$2.23 billion. The major Australian export to Switzerland was gold, followed by meat (excluding beef), pharmaceutical products and pearls and gems. Major Australian imports were medications, watches and clocks, orthopaedic appliances and pharmaceutical products.

Two-way services trade amounted to around A$2 billion in 2009. Australia's services exports amounted to A$782 million and imports from Switzerland to A$1.25 billion. Australia's services exports include transportation, tourism, business and professional services. In 2009, 43,300 Swiss visited Australia and Swiss enrolments in Australian educational institutions rose to 1,557.

Investment

Switzerland is a significant investor in Australia. Switzerland was ranked as Australia's fifth-largest source of foreign direct investment (FDI) in 2009 (A$17.5 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 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, 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, 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. 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 and opened an office in Switzerland in 2009.

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.

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AUSTRADE

The Australian Trade Commission (Austrade (http://www.austrade.gov.au/)) 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.

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Last Updated: November 2010

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