Switzerland at the heart of agricultural commodity trade
Commodity trading in Switzerland has a long history as demonstrated extensively in Public Eye’s book Commodities: Switzerland's Most Dangerous Business. In 1851, the Volkart Brothers founded a trading company in Winterthur which primarily traded cotton from India. At the turn of the century, Volkart was one of the largest merchants of Indian cotton and one of the world's major coffee traders. In the French speaking part of Switzerland, André & Cie, a company founded in 1877 and headquartered in Lausanne, quickly became one of the world's leading grain traders. The third historically significant commercial enterprise was the Basel Missionary Society, with its United Trading Company specialised in trading cocoa and which soon became one of the leading cocoa traders globally.
But these traditional Swiss trading houses did not make the country the trading hub it is today. In fact, most of the traditional companies did not survive the competition. Only Volkart still exists to some extent: It was taken over by the Reinhart family at the beginning of the 20th century. Paul Reinhart AG (Reinhart) is active in the cotton trade and sold its coffee branch in 1989. Today, the former coffee trading branch of Volkart – Volcafe – is still headquartered in Switzerland but is owned by the British trading house ED&F Man Holdings.
In the 1950s, international companies started to settle along the shores of Lake Geneva and in central Switzerland. Tailor-made tax breaks facilitated Cargill's decision to locate its European office in Geneva in 1956. The tax authorities agreed to a lump sum payment of 50’000 francs per year, with the possibility of renegotiating the agreement if the activities were to evolve. And evolve, they did: Today, Cargill is the world’s largest agricultural commodity trader. Also in 1956, Philipp Brothers, who at the time were the most important trading company for ores and metals, settled in Zug.
Low taxes and limited regulation
The Swiss tax regime has always been extremely attractive to trading companies. But it was not the only reason for companies to relocate here: After the Second World War, Switzerland was one of the few countries in which the import and export of capital was not subject to any restrictions or government controls. The presence of important service providers was another decisive factor for many companies to establish their offices in the country. Banks, specialised insurance companies, inspection firms, as well as logistics and cargo transport companies were at their disposal. Numerous companies also supplied the fast-growing manufacturing industry, most importantly the food company Nestlé, based in Vevey, along with various other chocolate producers.
Furthermore, the fact that Switzerland was not a member of the United Nations (UN) until 2002 provided, prior to this date, lucrative business opportunities for traders based in Switzerland. For example, André & Cie. were able to circumvent the UN trade embargo against the former Rhodesia (today Zimbabwe) and the US government grain boycott of the Soviet Union. Marc Rich, a trader with Philipp Brothers and founder of the Swiss trading company Marc Rich + Co. (later rebranded Glencore) admitted to his biographer that he did his “most important and most profitable” work by breaking international embargoes such as in doing business with apartheid South Africa. He also traded with Cuba, Angola and Nicaragua when these countries too faced an embargo. Rich was later indicted by a Federal grand jury in the United States for tax evasion and for making oil deals with Iran during the Iran hostage crisis.
Traders are still greeted with open arms today. For example, in May 2017 the Canton of Geneva signed a Memorandum of Understanding with COFCO International, the international trading arm of the Chinese public conglomerate China National Cereals, Oils and Foodstuffs Corporation (COFCO Group). Signed by State Council Pierre Maudet in the presence of then Federal Council President Doris Leuthard, COFCO International was granted the full support of the canton for its business expansion. The canton also committed itself to providing a friendly business environment for the company.