No Progress on Bribery Prevention, According to OECD

There has been little or no progress on implementing transparency and anti-corruption measures, according to a report issued Tuesday by Transparency International, a non-governmental anti-corruption body. The 2011 Anti-Bribery Convention Progress Report , released at the OECD Summit in Paris, gives a comprehensive review of the efforts made by signatories to the convention on investigating, prosecuting, and preventing corruption (Read the full report here).

The prevention of global corruption is of great importance for property rights, economic development, and trade, for a number of reasons. Weak anti-corruption laws cost investors because bribery, unpredictable regulation, and expropriation by fiat all increase risk. Furthermore, investments in government transparency have been shown to reduce government costs and increase investment, making them sound fiscal ideas as well.  Globally, government corruption is estimated to cost as much as $1 Trillion annually.

Overall, the problems outlined in the report are detrimental to investors, economies, and property rights and should have the effect of increasing pressure on governments to fully enforce the convention, both in the United States and in its trading partners.

The findings of the report, however, can be best described as “mixed.”

Seven signatories to the treaty (of 38), representing 30% of global exports and 46% of global foreign investment outflows, were ranked as “Active” enforcers, the best possible rating. The United States was among them. Of the major American trading partners, Germany and the United Kingdom were also considered to be actively enforcing the Treaty, Japan was rated as having “moderate” enforcement, while Canada and Mexico were considered to have “little or no enforcement.” China and India, not being OECD members, are not yet signatories to the convention. South Korea, a pending U.S. free-trade partner, was rated as having moderate enforcement, similar to Japan.

While there have been changes in the performance of individual states, the aggregate performance of signatories to the convention is unchanged.

While it is certainly encouraging that the United States placed in the top category for corruption prevention, more needs to be done to prevent the abuse of government power, whether through the misuse of powers such as eminent domain, or the granting of health care “waivers” to politically-favored businesses. Predictability and equitable application of laws are both core American values and key elements to a stable business climate. Furthermore, pressure should be put on major American trading partners and investment destinations (notably China, Canada, and Mexico) to take their anti-corruption obligations seriously. In summation, a strong rating for the United States should not be a source of complacency.