Switzerland and the Commodities Trade
Taking Stock and Looking Ahead
Switzerland has recently emerged as one of the world’s most important hubs in the global trade of commodities. But its rise has been accompanied by concerns about transparency, appropriate regulation, and risks to resource-exporting developing countries. A growing body of evidence points not only to beneficial, but also to harmful effects of commodities trading and extraction on resource-exporting poor countries. These include risks of undiversified economic development, political corruption, environmental damage, and human rights violations.
However, there is a profound lack of scientific research on the role of major commodity hubs like Switzerland, where vital commodities such as oil, metals, and grains are traded and extractive companies are headquartered. Could policy changes in Switzerland make the commodity sector more sustainable and its impact more mutually beneficial? This factsheet outlines key challenges, knowledge gaps, and research questions centring on Switzerland’s role and potential responsibility as a leading commodity hub.
- Switzerland now accounts for as much as one-third of the global transit trade in vital commodities such as oil, metals, and agricultural goods
- One-third of globally traded oil is bought and sold in Geneva
- Two-thirds of the international trade in base metals (e.g. zinc, copper, aluminium) is handled in Switzerland, with companies headquartered in Zug and Geneva also heavily involved in extraction
- Soft commodities show a similar trend: two-thirds of the international cereals trade, over half the coffee trade, half the sugar trade, and the bulk of the cotton trade are handled by Swiss-based firms
- The total sales revenues of transit trading in Switzerland generated abroad were CHF 763 billion in 2011 alone – more than the entire Swiss GDP
- The trade of commodities is also associated with risks including illicit financial flows, environmental damage, human rights violations, and lost opportunities for poor countries in which the (often finite) commodities are extracted
- The risks may negatively impact the country’s reputation in international business, foreign policy (particularly development cooperation policy and global environ-mental policy), and among segments of its own population
The review of the existing literature indicates a clear need for in-depth studies of the Swiss commodity hub. Some of the most critical issues and knowledge gaps are summarized below:
- Illicit financial flows linked to commodity trading
- Commodity-related practices of trade mispricing
- Tax evasion and avoidance
- Corruption, conflict, and money laundering
- Speculation and hedging
- Lack of transparency
The factsheet concludes with suggestions of possible avenues for future research and policy:
- A sector of this magnitude merits greater transparency. The Swiss government could facilitate the collection and release of much better disaggregated data on the commodities trade
- Reframing challenges and solutions based on an integrated perspective
- Emphasizing policy coherence for (sustainable) development
- Studying the impacts of binding regulations versus voluntary guidelines
- Organizing public discussions between science, policy, industry, and civil society
- Examining domestic impacts in Switzerland
- Highlighting agents of change
The factsheet was written in the context of the project “Global change and developing countries: why should we care?” managed by the KFPE and the Forum for Climate and Global Change (ProClim), two working groups of the SCNAT.
The factsheet has been published in English, German and French.
Source: Swiss Academy of Sciences. (2016). Switzerland and the Commodities. Trade Taking Stock and Looking Ahead. Swiss Academies Factsheets 11 (1).