Financial haven Switzerland risks a fresh hit to its reputation from the proposed mega-merger between opaque commodities giants Glencore and Xstrata, left wing groups warned.

The Alpine nation is struggling to restore its tarnished image as the United States cracks down on hidden offshore accounts held by wealthy Americans in secretive Swiss banks.

Many of the world's leading mining firms are headquartered in Switzerland and about a third of the world's oil is handled via its trading houses.

Low taxes, specialised banks and light regulation have helped the sector mushroom over the last decade and it now makes up some 3 percent of Swiss economic output.

The merger shows that Switzerland is becoming an ever more important global commodity hub and this industry carries political risks for this country, said Oliver Classen of Swiss non-governmental organisation (NGO) Berne Declaration.

Glencore and Xstrata, both headquartered in the low-tax canton of Zug but listed in London, announced a merger on Tuesday in a bid to reap the reward of growing demand for commodities from China and other emerging economies.

Some Swiss politicians have qualms about the lack of transparency in the sector and have called on the cabinet to pay more attention to an industry, whose activities they say could drag Switzerland's reputation into the mire.

It is imperative that politics address in detail the risks in connection with commodities trading, the environmental and social consequences and the political implications, the Swiss centre-left Social Democrats said in a statement.

Social Democrat politician Hildegard Faessler has called on the cabinet to investigate the sector and its risks to the country's reputation.

GLENSTRATA OR XCORE?

Switzerland has worked hard in recent years to clean up its image as a haven for ill-gotten gains, seizing the assets of numerous deposed dictators and agreeing in 2009 to soften strict banking secrecy laws to help other countries catch tax cheats.

After Switzerland already got a very bad image because of the banks, it is threatened with a new fiasco because of commodity trading, Green party lawmaker Geri Mueller was quoted as saying in the TagesAnzeiger newspaper on Wednesday.

Since it listed on the London stock exchange, Glencore has come under increased scrutiny from environmental and corruption campaigners for its involvement in mining operations in countries from Zambia to Colombia.

CEO Ivan Glasenberg has defended Glencore's conduct in developing countries, saying the company helped finance health, education, environmental and other social projects.

But Berne Declaration said the merger represented a clash of corporate cultures between the two companies. While Xstrata has taken steps to improve sustainability, Glencore is engaged in some of the most risky and conflict-ridden countries in the world, Classen said.

Is it Glenstrata or Xcore? That's a question that shareholders need to be asked, Classen said.

If they follow Glencore then that's bad news for us, the Xstrata shareholders and the affected communities. But if Glencore is willing to learn from Xstrata's sustainability policies it is good news for everybody.

(Editing by David Cowell)