IV. POLITICAL ENVIRONMENT - Nature of Bilateral Relationship with the United States U.S. relations with Switzerland are excellent. There are no serious bilateral political disputes. The U.S. Government welcomes the Swiss government's greater international engagement. In recent years, Switzerland has been increasingly active in multilateral fora dealing with finance, export controls/nonproliferation, refugees, law enforcement, human rights, and trade, to name only a few. The U.S. has negotiated several bilateral agreements in agriculture with Switzerland, mostly in the context of multilateral trade negotiations. For example, the U.S. acquired a special import quota for high-quality beef in 1967, and the quota amount has been increase in each subsequent trade negotiation. In the recent Uruguay Round agreement, the U.S. and Switzerland engaged in an extensive request/offer negotiation with respect to tariffs on a wide variety of agricultural products. The outcome will significantly increase market opportunities for a number of commodities (see Section II and Appendix B). For example, U.S. access to the Swiss high-quality beef market will increase to 1,400 metric tons per year. - Major Political Issues Affecting Business Climate In the wake of the Swiss voters' rejection of the European Economic Area (EEA) Agreement in December 1992, the Swiss federal government is attempting to negotiate bilateral sectoral agreements with the European Union. To what extent the government will succeed -- and on what terms -- is a major political issue that will affect the business climate. The Swiss federal government is committed to achieve EU membership as a long term goal, although this course is opposed by a significant number of Swiss. U.S. companies already doing business in and with Switzerland have not to date indicated any direct problems associated with the EEA rejection on their business; any negative repercussions to trade are more likely to impact domestic companies' relations with the EU. U.S. companies already acclimated to EU business practices and regulations should experience no difficulties in Switzerland, as the underlying Swiss goal is not to reject EU trade, but rather to make its trading environment as compatible as possible with that of the EU while still maintaining Swiss political and economic integrity. - Brief Synopsis of Political System, Schedule for Elections, and Orientation of Major Political Parties Switzerland has a relatively weak federal government and no recent tradition of executive leadership wielded by one individual. Many executive and administrative powers are vested in the 26 cantonal governments rather than in the federal government in Bern. Federal executive decision-making is undertaken by the seven-member Federal Council (cabinet). Its members head the various federal government ministries: Treasury, Foreign Affairs, Justice, Economics, Interior, Transportation and Energy, and Defense. The entirely ceremonial position of President of the Federal Council (i.e., head of government) is rotated annually among the councilors according to seniority. The current President is Treasury Minister Otto Stich; Justice Minister Arnold Koller will assume the presidency in 1995. Some councilors may also exchange ministerial portfolios as new members are added. The Federal Council strives to present a collegial image and to govern by consensus. The Federal Council's deliberations are private. Contentious issues that cannot be decided by consensus are determined by majority vote, the results of which are not released. The composition of the Federal Council reflects the so-called "magic formula" coalition that has governed Switzerland since 1959. Under this informal arrangement, the four largest political parties, which generally receive 70-75 percent of the popular vote in federal parliamentary elections held every four years, fill the seven positions on the Federal Council. The three bourgeois parties in the coalition (Free Democrats, Christian Peoples' Party and Swiss Peoples' Party) reflect center-right constituencies. The left-of-center Social Democrats are the fourth coalition party. The three largest parties in terms of popular vote (Free Democrats, Christian Peoples', and Social Democrats) each receive two Federal Council seats; the Peoples' Party receives one. In addition, there is an understanding that there will always be at least two members from French-speaking cantons on the Federal Council. According to the Constitution, no canton may have more than one representative on the Federal Council. Federal Councilors are elected by Parliament for life terms, but political tradition dictates that they retire in their 60s. The presence of left and right-wing elements in the governing coalition has allowed it to coopt more extreme parties in the spectrum. The coalition's ideological diversity has brought prolonged political and social peace but has lately come under strain during Switzerland's worst economic downturn since World War II. The next parliamentary election will occur in October 1995. All governing parties will be under some pressure to dissolve the coalition to achieve greater political coherence and decision-making efficiency, but party leaders will be reluctant to end a system that guarantees them control of federal ministries and jobs. Treaties, agreements, and legislation approved by the Parliament are subject to challenge by popular vote in Switzerland's unique system of initiative and referendum procedures. These votes allow unusually intense popular involvement in the legislative process and keep the federal government under pressure and scrutiny. Most of the interesting moments in Swiss politics occur during these initiative and referendum campaigns.