By Ray Smith
ZUG - The powerful Swiss commodity sector is under fire in this Swiss town, as citizens fed up with government inaction on charges of corporate corruption, tax evasion and lack of transparency gear up for major protests.
Switzerland is anything but a country rich in raw materials but it is, nevertheless, a major hub for international commodity trade, hosting some of the worlds biggest commodities companies such as Glencore (which specializes in power generation, steel production, oil and food processing); Xstrata (copper, zinc, aluminum, nickel and coal-fired electricity), Vitol (which ships oil products like gasoline, diesel, jet fuel and metals, as well as ethanol and chemicals) and Mercuria (dealing in oil and energy products).
Swiss-based companies are estimated to have a share of 15 to 25% of the global commodities trade. Data provided by the industry reveals that 60% of the global metals and coffee trade is done in Switzerland. In sugar, the Swiss sector has a market share of 50% and in crude oil and grains it makes up 35% of global trade.
Against this backdrop, Swiss critics are preparing for a chance to voice their grievances with these commodities giants at the second annual Financial Times Global Commodities Summit to be held in the city of Lausanne, about 60 kilometers northeast of Geneva, on April 15.
Voluntary regulations Inadequate
Oliver Classen, media director of a protest group calling itself the Berne Declaration (BD), says these companies also put Switzerlands reputation at risk. The negative image of Glencore, Vitol or Mecuria affects Switzerland the same way that the misconduct of the Union Bank of Switzerland [UBS] and Credit Suisse have in the past.
UBS alone has paid US$1.5 billion in fines for its part in the fraudulent fixing of the Libor rate, the agreed international rate of exchange between banks.
The Swiss Federal Councils recently published background report dedicated to Switzerlands commodity sector has been criticized as inadequate for failing to suggest serious measures for solving or preventing fraudulent or criminal activity, though it does identify challenges such as human rights violations or fighting corruption.
The report proposes only voluntary corporate initiatives, which is politically naive, the Bern Declaration claims.
For example, the Federal Council highlights the importance of the international Extractive Industries Transparency Initiative (EITI), which promotes revenue transparency on a local level by asking companies to publish their transactions with governments of member states, who in turn are expected to disclose how much they receive. Calling the initiative necessary, but insufficient, Classen laments that the EITI is voluntary, with only 20 member states.
Many important mining countries - such as Angola or Colombia - where Swiss-based companies are very active, arent EITI-members, said Classen.
Furthermore, the transparency initiative only deals with commodities extraction, but not with trade.
Misconduct such as Glencores aggressive tax avoidance in Zambia is neither covered nor sanctioned by the EITI, according to the Berne Declaration. Organizers describe the official conference as an unparalleled opportunity for executives of the worlds biggest investment banks, trading houses and natural resource entities to come together and debate, network and strategize about the future of world trade Protestors say the summit is a symbol of exploitation and speculation.
While the companies profits increase, the local population in mining countries suffers from environmental damage, expulsion, tax avoidance and anti-trade union measures, Yvonne Zimmermann of MultiWatch, a broad coalition of NGOs, trade unions and anti-globalization organizations, tells IPS.
An alliance of two-dozen organizations is calling for a demonstration to coincide with the arrival of businessmen in Lausanne on April 15. Speaking on behalf of the protest organizers, Alwin Egger told IPS that the march, which is expected to draw hundreds, will move towards the Hotel Beau-Rivage Palace, where the summit takes place.
A member of the anti-globalization Association for the Taxation of financial Transactions and Aid to Citizens (ATTAC), Egger said, In our opinion, its the people who should have control over extraction and trade of raw materials, not profit-oriented companies.
The commodities business is known for its discreetness. As of late, that peace has been disturbed by NGOs such as the Berne Declaration (BD), which published a groundbreaking book in 2011 to shed light on some of the dubious practices the sector constantly engages in.
For more than a century, commodity companies have flocked to Switzerland to avail themselves of the countrys low tax rates and the privileged corporate taxation system. Holding companies, for example, are exempt from corporate income tax on cantonal and communal levels as long as they own shares in foreign companies only. Besides, Switzerland offers strong banks, political stability and a high standard of living.
That the country wasnt a member of the United Nations until 2002 was another factor behind its popularity, as it allowed Switzerland-based companies to avoid UN embargoes and sanctions.
The commodities business is known for its discreetness. As of late, that peace has been disturbed by NGOs such as the Berne Declaration (BD), which published a groundbreaking book in 2011 to shed light on some of the dubious practices the sector constantly engages in.
Accusations range from human rights abuses, ecological destruction, exploitation, to corruption and tax avoidance in developing countries. In 2012, for instance, NGOs accused Glencore of buying copper from intermediaries in the Democratic Republic of Congo that was extracted partly using child labor and under precarious conditions.
Entitled Commodities - Switzerlands Most Dangerous Business, the book found that trade in oil, gas, coal, metals and agricultural products - particularly via deals made in Geneva and Zug - has grown by an incredible 1,500% since 1998... he result: Seven of the 12 corporations with the highest turnover in Switzerland trade in... or mine commodities.
As more information becomes available, attentiveness to the issue grows - and so does criticism, said Zimmermann, adding that a media spotlight on these practices has dealt a harsh blow to the industrys public image.
But Economics Minister Johann Schneider-Amman opposes specific, national regulations for the commodities sector. We dont want to treat our companies any stricter than other, competing locations do, he said at a press conference, echoing the standard argument issued every time the corporate tax system is in the line of fire: that Switzerland cannot afford to have companies relocate elsewhere.
For critical experts like Classen, this excuse is not valid since there are no unregulated alternative business locations anywhere else in the world.
The Swiss Federal Council has proposed a consultation draft for a transparency regulation similar to the 2010 Dodd-Frank Act in the United States, section 1504 of which obliges companies to disclose their payments to governments for access to oil, gas and minerals. It is still unclear, though, whether payments of commodity trading companies will be included in the Swiss draft regulation.
Fearing new regulations, the Swiss commodities sector has ramped up its lobbying efforts. Associations representing the industry have popped up in the main commodity trading hubs of Geneva, Zug and Lugano.
Glencore recently invited Swiss parliamentarians to hear an explanation of its engagement for sustainable business, for the health and safety of its employees and for the environment. Media and NGOs were denied access to the closed-door meeting.
The sector is concerned that it has become the subject of attentiveness and debates, says Zimmermann, who protested against the recent lobby event. As a reaction to criticism, these companies have started to publish sustainability reports, she said, which whitewash their practices and portray themselves as charities. |
