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REMARKS BY PETER EIGEN
Rather than reiterate the fine points of his paper, Mr. Eigen emphasized its central message: the WTO, like other international institutions, should recognize the fight against cross-border corruption as one of its major objectives.
Mr. Eigen noted that corruption is an impediment both to free trade and to effective governance, especially the ability of governments to intervene to address market failures. Moreover, he maintained that civil society organizations have the opportunity to become effective partners with international institutions and the private sector in creating a more equitable trading system, including by collaborating to fight corruption.
Transparency International (TI): History and Principles
To provide a context for his paper, Mr. Eigen discussed the origins and philosophy of Transparency International, which was officially launched in May of 1993. He explained that as a World Bank official, he had observed exporters from industrialized nations systematically engaging in bribery and corruption in the global South, practices that he believed were undermining development. He therefore left the Bank in 1991 and turned to co-found Transparency International (TI).
Mr. Eigen described Transparency International as a global coalition, which has an International Secretariat based in Berlin but is driven by National Chapters - now ninety such chapters internationally. He identified the principles of Transparency International to include: (1) building broad-based coalitions to fight corruption; (2) supporting diverse initiatives undertaken by National Chapters; and (3) striving for a holistic approach. On this last point, Mr. Eigen observed that society needs a variety of institutions and tools to fight corruption, and referred the audience to the TI Source Book 2000 and the organization's "Corruption Fighters' Tool Kit," a loose-leaf collection of civil society experiences and strategies available on the TI website at: www.transparency.org.
More Leadership is Needed from the WTO
Since the founding of Transparency International, Mr. Eigen noted that changes in laws and attitudes have contributed to the emergence of an anticorruption consensus among international actors and agencies. For example, 34 countries have ratified the landmark 1997 OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions. Mr. Eigen also emphasized the World Bank's shift to recognize corruption as an economic issue, and subsequently to take a leadership role in its eradication.
Peter Eigen voiced his disappointment, however, with the World Trade Organization (WTO). While he recognized that his paper is intended to be provocative, and therefore may overstate his case to some extent, he maintained that the WTO is currently not doing enough to fight corruption. According to his argument, anticorruption efforts should be inherent in the WTO's mandate, for corruption is a barrier to trade. One key opportunity in this regard is the potential WTO agreement on transparency in government procurement. But still missing, claims Eigen, is a central and dramatic message from the WTO that "to fight systematic corruption is the key to development-oriented trade."
COMMENTS BY VERON HUNG
Carnegie China Program Associate Veron Hung offered a concrete example of how systemic corruption in China possibly could be curtailed by a new WTO agreement on transparency in government procurement, as described in Peter Eigen's paper.
Dr. Hung pointed out that over the past decade, corruption cost China approximately 15 percent of its GDP annually in lost taxes, tariffs, and public funds; moreover, a leading expert estimates that 90 percent of officials at the lowest level of government in China are corrupt. In view of the serious corruption evident in China, Dr. Hung asserted that an external and clean body - such as the WTO - is needed to hold China accountable to transparent government procurement requirements.
Drawing upon the Report of the Working Party on the Accession of China (Working Party Report) and on China's new Government Procurement law, Dr. Hung explained why a new agreement on transparency in government procurement would indeed be more appealing to China than the existing Government Procurement Agreement (GPA), which China is not yet a party to but has expressed its intention to join. First, the GPA is burdened by market-access clauses, under which countries cannot offer preferences to infant industries or domestic bidders. Like many developing countries, China is concerned by such clauses. Yet, China has also demonstrated its interest in adopting transparent procurement practices to combat government corruption. Therefore, Dr. Hung concluded that if the WTO can adopt a new government procurement agreement that does not have market access clauses, China will be quite ready to be a party to it.
Regardless of which WTO procurement agreement China accedes to, Dr. Veron Hung noted several limitations to China's GP law, including exceptions to its scope and the lack of an independent Chinese judiciary. She then ended her comments on an optimistic note, by hoping that the substantial amount of money saved by Chinese provinces that have adopted transparent government procurement practices will provide the Chinese government with a strong incentive to ensure the continued implementation of such policies.
COMMENTS BY R. MICHAEL GADBAW
R. Michael Gadbaw, Vice President & Senior Counsel for International Law and Policy at General Electric, observed that though he shares Peter Eigen's focus on eliminating corruption in the global arena, he disagrees with Mr. Eigen's contention that the WTO has not been engaged in fighting corruption. He noted that the WTO Ministers officially put anticorruption efforts on the organization's agenda at the 1996 Singapore Ministerial.
Mr. Gadbaw reflected on an article he co-authored in 1997 with Timothy Richards, "Corruption as an International Policy Issue: its Origins and Practice," published by the Council on Foreign Relations in the edited collection, Trade Strategies for a New Era. In this article, Richards and Gadbaw argued that anticorruption efforts should remain focused on the 1997 OECD Convention, according to three recommendations.
- "Level up, not down," a goal that Mr. Gadbaw feels the OECD has accomplished by setting an international standard that criminalizes the bribery of officials.
- Stop subsidizing bribery and institute incentives for ethical practices, for example by requiring businesses that benefit from government largesse to take "no bribery pledges."
- "Get the bureaucrats out of business," for Mr. Gadbaw argues the greatest opportunities for corruption often arise when governments are running State Owned Enterprises or over-regulating the private sector.
Finally, Mr. Gadbaw agreed that the WTO has not yet done enough to fight corruption. Like Peter Eigen, he welcomed as a litmus test the potential WTO agreement on transparency in government procurement, which he argued should set a standard of transparency and accountability in government procurement separate from any market access commitments. Further, he made five suggestions for an expanded anticorruption agenda within the WTO.
- The WTO should adopt a transparency and rule of law commitment, a model of which can be found in the APEC transparency agreement.
- The WTO should provide that acceptance of bribes by any government officials in the conduct of their duties under any WTO obligation should constitute a per se nullification of that WTO obligation. This would create an enforceable anticorruption obligation; to avoid enforcement through trade retaliation, fines might be used.
- The 1997 OECD Convention on bribery should be incorporated into the WTO in the same way that the agreement on Trade-Related aspects of Intellectual Property rights (TRIPS) has been incorporated.
- The WTO should analyze and publish a report on the "corruption gap" - or the difference between what a government actually collects in revenues from tariffs and what it would collect if actual tariff rates were applied.
- Tax reductions and other subsidies allowed for bribes should be considered prohibited subsidies.
COMMENTS BY DORTHY DWOSKIN
Dorothy Dwoskin, Assistant United States Trade Representative for WTO and Multilateral Affairs, opened her remarks with a strong assertion that the World Trade Organization is working to fight corruption. While the language of "corruption" is not often used within the WTO, this is because negotiating tactics make it necessary to come at the issue from other angles - especially that of "good governance."
Ms. Dwoskin observed that though anticorruption and transparency are win-win issues for all WTO Member countries, they are often seen as a U.S. agenda. Unfortunately, according to Ms. Dwoskin this contributes to a damaging attitude whereby some countries expect the United States to "pay" them for tackling systemic corruption issues. She suggested that Transparency International could support developing countries in realizing that anticorruption efforts are in their own best interest, and thus help to expand the call for such efforts.
Another stumbling block to be overcome within the WTO context is the inclusion of transparency and procurement into the so-called "Singapore Issues," which include investment and competition, very difficult agendas for developing countries to pursue. Ms. Dwoskin noted that the United States hopes to negotiate these issues separately, each on its own merit.
Despite such complications, Ms. Dwoskin emphasized that transparency is a very important issue to the WTO, including in the areas of transparency in government procurement, transparency in customs and trade facilitation, and transparency in the Dispute Settlement Resolution process. Like other panelists, she praised efforts since the Singapore Ministerial to de-link transparency in government procurement from market access commitments, as well as the progress made to improve customs procedures. She noted that though anticorruption is a focus of WTO work, it can fall under a variety of guises, including the TRIPS Agreement and trade-related capacity building.
DISCUSSION
Peter Eigen thanked his co-panelists for their insights, and promised to consider their suggestions carefully in his future work. He repeated his contention that the World Trade Organization must strengthen its commitment to fighting cross-border corruption, as must many OECD countries. Additionally, he declared that anticorruption coalition partners must help developing countries understand that the goal is not to expand the WTO's role to that of a global policeman, but rather to increase its capacity to fight detrimental practices of corruption and bribery.
A question and answer period with the audience followed. Among other points, the panelists debated the WTO's latitude to make an institutional statement against corruption, as well as recognized the need to tackle "grand corruption," "petty corruption," and broader political and social systems in order to promote transparency and accountability.
Summary prepared by Vanessa Ulmer, Junior Fellow, Carnegie Endowment for International Peace