Commodities Report of the Swiss Federal Council names problems but fails to provide solutions
27 March 2013
The 50-page “Background Report: Commodities" is a detailed description of the key issues which regularly result in Swiss-based commodity trading and extractive companies making negative headlines. However, it is disappointing and at the same time symptomatic that, despite months of research, the three government departments involved cannot provide any new or enlightening data. While the report stresses the sector’s “huge economic importance” for Switzerland, it acknowledges that there are, at present, no figures available on tax revenues deriving from the commodities industry.” Equally unmet are the expectations for effective proposals as to how politics can get a grip on the risks, identified in the report, which the commodity sector represents for resource-rich developing countries and also for its host state.
Human rights and environmental damages: For these important areas, the report proposes only voluntary corporate initiatives which, to put it mildly, is politically naive. Switzerland as hot spot of global commodity traders must be able to ensure ethical Swiss standards particularly in their worldwide operations. This can be achieved only through a “smart mix” of regulatory and voluntary measures.
Corruption and money laundering: Regarding the wider topic of corruption, the report’s clarity is limited to the analysis: “Although the amounts at stake are quite considerable, there is little transparency in the commodities market; the complex structure of certain holding companies and companies that are not listed on the stock exchange also contribute to this.” The report lacks any proposal for more transparency and control regarding complex company structures and their owners. It recommends using the revision of the defensive measures in place for combating money laundering in order to minimize similar risks within the commodities industry. However, the existing consultation draft for revision of the Anti-Money Laundering Act (AMLA) simply states that commodity trading does not fit into this act. New legal instruments are therefore urgently needed.
Transparency: The Swiss Federal Council proposes the preparation of a consultation draft for a Swiss regulation on the transparency of payments to governments based on the example of the EU and the USA (Dodd-Frank section 1504 and the EU transparency directive). It remains unclear though whether payments of commodity trading companies will be included, as the use of the general term “Swiss commodity sector” suggests. Anything else would be completely useless as the extractive activities of virtually all Swiss commodities companies will already be covered by the forthcoming EU regulation. As the world’s most important commodity hub, Switzerland has the responsibility and the opportunity to make a significant contribution to a more transparent commodity sector by introducing effective disclosure requirements.
Instead of drawing the necessary legal conclusions from the report’s analysis and of taking appropriate legislative action, the Swiss government wants to develop voluntary corporate social responsibility standards. Any such initiative can only become credible if the world's leading commodity trading hub meets its political duties. Federal Councillor Johann Schneider-Ammann, head of the Federal Department of Economic Affairs, a department instrumental in preparing the report, announced last autumn that he wants to “put the stable in order”. The commodities report is the equivalent of officially measuring up this stable. Now the time has come for parliament and government to take up the muckrake.