With everything going on in the world today, you might find it perplexing that scrapping an anti-corruption law is at the top of the congressional to-do list in Washington.
But Congress will seek to do just that this week by voting to roll back rules to implement the landmark bipartisan Cardin-Lugar anti-corruption law known as section 1504 of the Dodd-Frank Act. Passed in 2010, it requires oil and mining companies listed on U.S. stock exchanges to publish the payments they make to the United States and governments around the world for access to natural resources.
{mosads}This rule is a hallmark of U.S. global leadership in fighting corruption in poor countries. It covers the vast majority of the world’s largest oil, gas and mining companies, including ExxonMobil, Chevron, BP and Shell, as well as leading state-owned companies from China and Brazil. All foreign companies listed on U.S. stock exchanges must comply with the Cardin-Lugar rule.
Since our law passed, more than 30 countries have followed the United States’ lead and passed similar laws. All 28 EU states, Canada and Norway are implementing laws modeled on ours, ensuring a level playing field. Even state-backed companies from China, Russia, India and Brazil must comply. So far, so good. Reports have been published by BP and Shell and even by Russia’s state-owned companies, Gazprom and Rosneft.
There is absolutely no benefit to nullifying this common sense rule. If your objective is to make it easier for corrupt elites to steal money, or if you like terrorism and unstable kleptocracies, however, overturning this rule is for you.
In the years since this law was passed, we estimate that oil company payments to governments of some of the world’s poorest countries surpassed $1.5 trillion. This money should have helped governments pay for schools, roads, hospitals and other critical measures to fight poverty without needing a dime of U.S. foreign aid.
But citizens eager to follow the money have had to wait until 2019 thanks to delays in implementing Cardin-Lugar caused by lawsuits from laggards in the oil industry. At a time when aid dollars are shrinking, transparency is essential to prevent the looting of much needed revenues by corrupt officials. And if the rule is rolled-back, these payments will remain a secret, possibly forever, fueling corruption, waste, and keeping poor countries dependent on U.S. foreign aid.
In a recent Wall Street Journal op-ed, House Republican leader Kevin McCarthy (R-Calif.) declared his intention to dismantle the bipartisan the Cardin-Lugar anti-corruption rule, incorrectly suggesting that it was imposed by “the federal bureaucracy.” The op-ed fails to mention that this rule was actually mandated Congress—not bureaucrats.
The idea for this law first emerged in a 2006 resolution introduced by Republican Rep. Chris Smith (R-N.J.), which promoted transparency of natural resource revenues in poor countries. In 2008, former Republican Sen. Richard Lugar (R-Ind.) took up the mantel in the Senate. As chairman of the Senate Foreign Relations Committee, Lugar led the panel to produce a seminal, 20-country study on the causes of corruption, conflict and instability in resource- rich countries, which recommended that the United States pass a payment transparency law. Lugar then worked across the aisle with Democratic Sen. Ben Cardin (D-Md.) to get it passed.
Some have falsely claimed such transparency puts American businesses at a competitive disadvantage vis a vis their foreign competitors. But that misreads the law, which was specifically designed to cover foreign companies that file annual reports with the U.S. Securities and Exchange Commission (SEC). In fact, a leading natural resource economist from Duke University wrote to the SEC to confirm that “no competitive disadvantages would result” for reporting companies.
Business professors from George Washington University and Catholic University also submitted the results of a study of more than 1,500 equity securities. It found that increased transparency resulting from disclosures required under section 1504 lowers the cost of capital for covered U.S.-listed firms by up to $12.6 billion. It is no surprise that investors with combined assets worth nearly $10 trillion, including ING, BNP Paribas, UBS and Calpers, the largest public pension fund in the United States, publicly support the rule.
The bottom line is that this resolution is trying to address a problem that doesn’t exist.
All major domestic and foreign companies are now covered by the same non-burdensome reporting rules. Companies already track these payments. The rule places no limits or restrictions on whom companies can pay money to, how much, or what for. It has absolutely no regulatory effect on any aspect of their business operations. BP, Shell, BHP Billiton, Rio Tinto, Glencore, Kosmos Energy, Gazprom, Rosneft and others have already been reporting under the same rules with no negative impact whatsoever.
So if there is no problem for the resolution to solve, what’s the point?
This effort comes just as the Senate moves to confirm former ExxonMobil CEO Rex Tillerson to be the next U.S. secretary of state. Tillerson and ExxonMobil lobbied aggressively to oppose this anti-corruption rule with the American Petroleum Institute, and tried to block it and overturn it in the courts. But Exxon’s peers, like BP and Shell, have moved on and publicly support the rule, along with most of the mining industry.
On the heels of the abandoned attempts to weaken Congressional ethics oversight, the fact that some in Congress have put rolling back anti-corruption rules so high on their list of priorities raises serious questions about whose interests these members are serving. Members of Congress should take note that a vote to roll section 1504 back is a vote for corruption.
Isabel Munilla is senior policy advisor for extractive industries at Oxfam America, where she manages oil, gas and mining transparency work.
The views of contributors are their own and are not the views of The Hill.