The Obama administration will face on Monday what many may regard as a first test for the new “partnership” it is seeking to promote in foreign policy. When Eveline Widmer-Schlumpf, the Swiss federal councillor in charge of police and justice, meets Eric Holder, US attorney-general, the final item for discussion – according to her ministry’s press release – will be US demands for data on American holders of accounts at UBS, the Swiss bank.
This issue, a tiny coda to stories about troubled banks in the US, has been the lead story in Swiss newspapers and on Swiss television for days – with no sign of cessation. Both UBS’s leadership and Finma, the Swiss bank and insurance regulator that sanctioned a release of some customer data to the US justice department, have been pilloried – from across the Swiss political spectrum – for compromising banking secrecy and sovereignty.
The most intense anger has, however, been directed at the US government, which – via the justice department and the Internal Revenue Service – rode roughshod over two bilateral agreements to which it is a signatory. That is, the US ignored formal, negotiated understandings with a long-time friend, a constitutional federal republic where rule of law is enshrined, and a nation that was prepared to work with US authorities to repatriate Guantánamo inmates, in line with its role as a high contracting party and depositary of the human rights convention.
It has been a harsh wake-up call for the Swiss who, like many Europeans, were swept up in the excitement of Barack Obama’s victory and hopeful that the new administration’s words about multilateral co-operation were more than campaign bromides.
The Swiss Confederation’s first experience with the new administration is of a superpower exerting raw Goliath power, ignoring its own diplomatic undertakings and taking advantage of Switzerland’s size and the stereotypical misunderstanding of Swiss bank secrecy laws. US authorities are seen in this instance as being once again arrogant and bullying. The apparent hope of UBS and Finma was that a settlement of a criminal complaint about abetting tax fraud would mollify US authorities. UBS agreed to a $780m (€615m, £546m) settlement and to supply information on approximately 250 customers suspected of tax fraud.
UBS and Swiss officials were stunned when the IRS, within days, filed a civil complaint that included a demand for information on 52,000 American UBS customers. A Swiss financial oversight court has ordered UBS not to fulfil this demand. Thus the bank is in the awkward position that its officers would have to violate Swiss banking law to fulfil the US demand.
Switzerland is a stable, responsible republic and a reliable partner in combating drug trafficking, terrorism and other threats. Although small in population, Switzerland plays a significant role in the financial world. Its investment in the US also provides approximately 500,000 jobs for Americans. As a result of this action, Swiss confidence in the US might well diminish, with new jobs going to other countries, possibly in eastern Europe or Asia.
Characteristically (and consistently), the Swiss honour their agreements. Switzerland negotiated a legal assistance treaty with the US that provides mechanisms for sharing information about bank accounts when there is reasonable suspicion of criminal activity or tax fraud. Swiss officials are adroit in responding to inquiries that fall within the letter and spirit of this agreement. Fishing expeditions that appear to be driven by the exigencies of the financial crisis and rely on a public perception of Switzerland as a haven for dirty money will inflame Swiss opinion.
One of the largest Swiss political parties is agitating for retaliation that would include discontinuing Swiss representation of US interests in countries such as Cuba and Iran, where the US does not have embassies. Perhaps 1m jobs in Switzerland depend on the financial sector. Harsh unilateral US policy could lead to additional hardship among the Swiss during a worldwide crisis that is widely perceived as largely the US’s fault. This could result in more virulent anti-Americanism.
We must hope when the attorney-general and the minister sit down together, the Obama administration will have resolved to treat an old, reliable friend with the care and thoughtfulness it is showing to regimes that have not been as friendly and reliable.
The writer, US ambassador to Switzerland 1981-83 and 1985-88, is chair-man emeritus of the American Swiss Foundation
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