Commodities trading now 3.5% GDP, says Bern


Geneva, popular with tourists but also with the rapidly growing commodities trading industry

GENEVA, SWITZERLAND – The commodities trading business will be watched more closely, but will not come under the thumb of regulators, the Swiss government said Wednesday 27 March.

The Federal Council says it has accepted 17 recommendations that are part of a report issued jointly by three federal government departments, set deadlines for implementing them, and assigned a number of government departments the work.

The commodities industry, which has grown rapidly in the past decade, particularly in Geneva, now accounts for 3.5 percent of Swiss GDP (gross domestic product). The council’s statement Wednesday says that an estimated 500 companies and 10,000 employees “are active in the commodities sector, which, in addition to trading, also comprises shipping, transaction financing, inspections services and product testing. In 2011 the commodities industry made net receipts from merchanting of CHF20 billion.”

Bern points out that Switzerland has already taken a number of steps to “safeguard its competitiveness and its integrity as a business location” and that many of these cover the commodities business. But the report, says Bern, presents the case for a set of targeted recommendations that “should further improve conditions and reduce various risks including those to reputation.”

Geneva on Monday learned that it has moved up two slots in the Global Financial Centres Index 2013, to seventh place in the world, and it is now considered the top French language financial centre. The city made it into the top  10 last year, in ninth place.

Calls for cleaner trading companies have drawn public attention to industry

There have been calls, notably from non-governmental organizations, for the government to tighten rules governing the multinationals that are heavily involved in industries such as gold, where reports of human rights abuses in mines surface regularly. The Federal Council noted this “growing interest in and importance of the commodities industry”.

The Berne Declaration group in particular has waged a campaign to clean up the commodities business, producing books and reports that highlight abuses, and underscoring Switzerland’s role.

The new regulations cover a range of areas, the Federal Council says, from “measures which serve to safeguard Switzerland’s attractiveness as a business location. On the other, possibilities should also be explored of providing greater transparency in terms of finance and production flows. Other recommendations address ways of continuing the commitment to responsible corporate governance at multilateral and bilateral levels, supporting states in good governance, ensuring early recognition of reputational risks and strengthening dialogue between all stakeholders – commodity companies, cantons, civil society, federal administration. Switzerland, in cooperation with these stakeholders, intends to draw up voluntary standards for commodity trading in the area of corporate responsibility and submit them to the relevant international bodies.”

Geneva’s housing problems and cost may be setting commodities growth limits

The Financial Times, which ran a lengthy story on what it called the “long-awaited report” the night before it was released, points out that “Switzerland is the world’s leading commodities trading hub, accounting for about 35 percent of global physical oil trade and a 60 percent of metals and minerals. Commodities traders are attracted to Switzerland by a low-tax regime, a large pool of staff and specialised banks, lawyers and consultants. But executives believe that the capacity of the country to absorb more commodities businesses is at its maximum due to limitations on housing in cities like Geneva, and high costs.”