LIECHTENSTEIN: 'We're a low-maintenance country'
Karin Palmquist

Miro's sun

What do you do when your country is so small it makes little sense to build universities, hospitals and prisons? You outsource.

Tiny Liechtenstein, population 33,436, wedged between Switzerland and Austria on an area slightly smaller than Washington, DC, is a model for a truly global, interdependent world. The country has outsourcing agreements with its neighboring countries for all the services it doesn't make economic sense to provide in-country.

And when a state can buy services at best value and doesn't have to worry about public sector overhead, there is no need to overtax its citizens.

"We're a low-maintenance country," Liechtenstein's ambassador to the United States, Claudia Fritsche, explained in a recent interview with DiplomaticTraffic.com.

But there are things you can't outsource. Diplomatic relations is one of those things. This October it will be two years since Liechtenstein opened its first embassy in Washington, DC.

"There have been direct diplomatic relations between the United States and Liechtenstein for some time," Ambassador Fritsche said. In the early 90s, "The Unites States accredited its ambassador in Bern to Liechtenstein and it was understood that in due course, Liechtenstein would open an embassy in the United States."

It took a decade, but in December of 2000, Ambassador Fritsche was accredited as non-resident ambassador to the United States and in October 2002, Liechtenstein opened its Washington embassy.

Opening the embassy in Washington was an ambitious undertaking. For one, the pool of Foreign Service personnel at the Foreign Ministry in the capital Vaduz (population 5,200) is extremely small. For the first two years, Ambassador Fritsche served as both Liechtenstein's ambassador to Washington and its permanent representative to the UN, a post she had held since 1990.

"I told my government they were taking the word 'permanent' too literally," the ambassador joked about her long stint in New York.

Asked about the reasons for opening an embassy in Washington, the ambassador said that apart from the long-time understanding that Liechtenstein would one day open an embassy here, there was also the realization that "any small entity, even as small as Liechtenstein, could not afford not to have a presence in Washington."

"We went through a rather difficult period four or five years ago, with a lot of scrutiny and criticism of our financial services sector," the ambassador continued. "We had to accept that despite the fact that the accusations were somewhat exaggerated, there were shortcomings in our system and we had to make changes. We realized that it was to our distinct disadvantage that this major player [the United States] knew very little about Liechtenstein. If you are present in Washington not only can you follow [events] much more closely, but you also have the possibility to immediately get in touch with administration officials or members of Congress to react. The mere fact that in two years we have put Liechtenstein on the map, that every department, the State Department and so on, now has a file on Liechtenstein, shows that we are making progress. We have managed to bring several delegations of Members of Congress to Liechtenstein. We now have a group of congressmen who can give an informed, and I hope positive, comment on Liechtenstein."

Switzerland's attorney general said in June that his country was likely used as a base for financing and logistical support for the September 11 attacks by Al Qaeda. Similarly, Liechtenstein, traditionally as financially tight-lipped as Switzerland, has been accused of keeping in place secrecy laws that make it difficult to trace funds. Liechtenstein has since implemented new anti-money-laundering and due diligence legislation and recently concluded a Mutual Legal Assistance Treaty with the United States. The country is working closely with the United States in the war on terror, the ambassador said.

"With Liechtenstein being a financial center and the United States having an interest in cooperating with all financial centers to combat terrorist financing, it hasn't been too difficult to get access [to Washington leaders]," the ambassador said. "As sad as the reason for this might be, it has been fairly easy, because this is an issue that is of great importance to the United States. Our foreign minister comes here at least twice a year and meets with members of the executive branch, Members of Congress, with think tanks and with the media, and that has also helped my work."

"We have established a good relationship with the State Department, the Treasury Department and the Justice Department," the ambassador continued. "Washington is very happy with what we've done and the proactive way in which we handled these issues. High officials at the Treasury Department said before a congressional hearing that Liechtenstein has been 'extremely helpful' as a partner. This has been repeated by the Treasury Secretary [John W. Snow], and by Attorney General John Ashcroft."

"The last three years' work is starting to bear fruit," the ambassador said of her years in Washington. "It's a continuous task, but we have made great progress. Much of our work is public relations, to inform about Liechtenstein. Liechtenstein is not only a financial center and low-tax jurisdiction. Most of our revenues come from the industrial sector. We have a highly developed industry, with many companies that are the market leaders in their respective fields."

"The United States is our biggest trading partner. There are five companies from Liechtenstein represented in the United States, and between them they have created 4,500 jobs. Per capita, Liechtenstein is probably the largest foreign employer in the United States," Ambassador Fritsche laughed.

Among the companies is automotive supplier ThyssenKrupp Presta, an employer of 300 in Danville, IL.

"I visited the congressman from Illinois last week, and he was very well aware of this company. He said for a place like Danville, this is a very sizeable company and the jobs matter immensely," the ambassador said.

Along with Switzerland, Iceland and Norway, Liechtenstein is part of an ever-shrinking group of non-EU European states. Asked if her country had considered membership, the ambassador said:

"Like Iceland and Norway we are part of the EEA [European Economic Area] and I must say that for Liechtenstein this treaty is working perfectly. We would like to maintain this relationship for as long as possible. Liechtenstein has access to the EU and we continuously implement EU legislation, which helps to enable us to become 'Europe-fit' so to say.

"If we were a full member of the European Union, first of all, under the current constitution we would be the largest net payer per capita. Secondly, we couldn't come up with the necessary number of staff. Perhaps in the future, constitutional and structural changes will accommodate also the very small states of Europe. Right now we are too small for the EU, and the EU is too big for us.

"If Norway, Iceland and Switzerland join the EU, the situation might change. Then Liechtenstein will certainly re-examine the question of a full membership. We are not in a hurry, but we believe that at one point all countries in Europe will be members. Only then will the EU be completed."

The ambassador does think that there is a place for very small countries within large organizations, even if the European Union in its current shape isn't one of them.

"I think there is definitely a place for small countries in international organizations," she said. "A small country like Liechtenstein can occasionally raise a moral voice. It may be easier for a small country to speak out about, for example, human rights and not be accused of pushing an agenda of its own. Human rights are extremely important for Liechtenstein. We depend on the rest of the world respecting the rule of law and we therefore attach a great deal of importance to the development and codification of international law."