Battling International Corruption: 3rd Annual Report on the Implementation of the OECD Anti-Bribery Convention

12:05 P.M. EDT

     MODERATOR: Good afternoon, and welcome to the Washington Foreign Press Center. We're very pleased today to have with us Anthony Wayne, the assistant secretary of State for economic and business affairs, and Stephen Jacobs, the deputy assistant secretary of Commerce for agreement compliance. And they will jointly roll out the third annual report on the implementation of the OECD anti-bribery convention.

     This is a report that is mandated by the U.S. Senate and carried out jointly by several federal agencies and departments, with State and Commerce in the lead. Copies of the report are out front, and the gentlemen will offer some opening thoughts and then take your questions. Thank you.

     MR. WAYNE: Thank you very much. It's a pleasure to be with you here today. Deputy Secretary Stephen Jacobs of the Commerce

     Department and I will each brief you on our respective reports, which are mandated by Congress, on the implementation of the OECD anti- bribery convention. I'm going to talk a little bit about the importance of the OECD convention in the context of the administration's global anti-corruption strategy and the status of the ratification of the convention by the signatories.

     Steve is then going to go into some more detail on the relationship of the corruption issue to our international trade interests and to other issues covered in the Commerce Department report. You should have -- if you haven't gotten yet, you'll be able to find outside, as was mentioned, copies of the two reports. Also you'll find out there a longer version of what I have happily, from your perspective, I'm sure, cut back here to tell you orally.

     International bribery costs tens of billions of dollars in lost exports to American companies and others that play by the rules and seek to win contracts through fair competition. But we're also concerned about more than just commercial loss as we looked at the problem of bribery. Bribery of government officials and other forms of corruption undermine good governance, the responsibility of public officials to perform their duties responsibly, efficiently, honestly and transparently for the public good.

     Corruption not only impedes government's efforts to deliver basic services to their citizens, it weakens the confidence of people in democracy. It's often linked with international criminal activity, including drug trafficking, organized crime and money laundering. The OECD convention is our principal international weapon for combating the bribery of foreign government officials. It is a milestone in the battle against corruption in international business transactions, a battle which the United States has helped to lead for more than two decades now.

     So far, 33 of the 34 signatories of the convention have deposited their instruments of ratification and 30 of the 34 signatories have legislation in place to implement the convention. As is the case with every international agreement, the real test of the OECD anti-bribery convention will be in its implementation and enforcement. We're encouraged by the progress to date in implementing it.

     However, we are concerned that some countries' legislation may be inadequate to meet all of the commitments under the convention. We will continue to express our concerns in our contacts with those governments. We're also disturbed by continuing allegations of bribery by firms based in countries in which the convention is in force. The OECD enforcement review, which is scheduled to begin later this year, should provide further opportunities to evaluate the seriousness with which the participating countries are taking their obligations.

     Another element in our strategy to fight corruption is to address the demand side of the problem. The United States hosted the first of a series of global forums on fighting corruption in Washington in February of 1999. The second global forum was held in the Netherlands in May of this year, and a third is scheduled for Korea in 2003.

     By promoting transparency, accountability and integrity in public institutions, these forums address the demand side of corruption; in other words, those who are demanding bribes for international contracts, as distinct from those who offer them, which the OECD convention addresses.

     Another important element of our strategy is to reach out to American companies and business associations to make them better aware of the international anti-corruption environment. In May of this year, the Department of State, working with the Departments of Commerce and Justice, published a new edition of our brochure, which is titled "Fighting Global Corruption: Business Risk Management." It contains information about the benefits of strong corporate anti- bribery policies and gives guidance to businesses on the requirements of U.S. law and the OECD convention. Copies are available outside if you haven't already received one.

     Let me now ask Steve Jacobs to make some comments about the Commerce Department report, and then we'll be happy to take your questions.

     MR. JACOBS: Good afternoon. It's a pleasure to be here, along with Assistant Secretary Wayne, to release the third annual report of the Commerce Department concerning the implementation of the OECD convention. This issue may not be the sexiest, but it certainly does matter. It doesn't matter just to American businesses, but it should matter to all American citizens.

     Corruption interferes with capital markets, it undermines democracy, it contributes to poverty, and it causes economic inefficiency. As the president and Secretary Evans have said, if international free trade is a moral imperative, then so is the fight against corruption.

     The convention is a key element in our strategy to fight corruption in international business, and I'm happy to note that fully three-quarters of countries -- countries accounting for three-quarters of world trade have agreed to criminalize bribery. The reports from the Commerce Department note that we have seen meaningful progress in implementing the agreement over the past year. As Tony noted, we still have considerable work to do in front of us. Four countries have yet to adopt implementing legislation.

     We are committed to monitoring compliance at the Commerce Department and will be looking for concrete results in the coming year, as well as in the next phase of the OECD's work, which will look at enforcement mechanisms. There are still too many instances of bribery occurring. We have last year allegations of about 61 contracts affecting what may have been $37 billion, and U.S. firms may have lost at least nine of those contracts worth $4 billion.

     Over the past seven years, we have information or reports, rather, that we may have lost 100 contracts valued at $30 billion. Now, it's not just a matter of losing a commercial opportunity. These are contracts that have affected some of America's most competitive industries, contracts that U.S. firms should expect to win on their merits and price alone, in defense procurement, telecom, energy and construction.

     We'll be looking for some more prosecutions over the coming year. I'm still sad to say that 70 percent of alleged bribes are still paid by firms from countries that are signatory to the convention. We'll be looking to add additional elements to the convention as well; bribery (acts?) in relation to foreign political parties as well as candidates for political office. These are omissions that the convention should address. We're happy that OECD ministers, in their communique this past May, have agreed to continue that work.

     We need to assure American business and Congress that as we move forward on trade-liberalizing measures, like the World Trade Organization negotiations or the Free Trade Area of the Americas, or even in bilateral agreements, that we will not allow the opportunities that we negotiate to be undercut by acts of corruption. I note that the president included an element on this issue in his trade agenda for the coming year, which an objective of trade promotion authority is to promote due process and to combat corruption affecting international trade.

     Assistant Secretary Wayne noted the publication which the State Department and Commerce worked on this past year. I really do want to draw your attention to it, because there is some very helpful information; it has some very helpful information in it about what everyone can do to help fight corruption. Companies need to implement corporate compliance programs, and we have some suggestions in here what constitutes a good corporate compliance program.

     We would like to see more foreign awareness campaigns take place overseas by signatories to the convention. We'd like to see them as extensive as our own. Some countries, I would note, that have done particularly well include our NAFTA partners, Canada and Mexico. But Korea and Sweden have done some interesting things as well. Others can do much more.

     We're also enlisting the help of the private sector as well as non-governmental organizations in identifying cases or instances of bribery that we will be able to pass along to national authorities. The Commerce Department has instituted a bribery hotline which offers the opportunity for the private sector or NGOs to report acts of bribery. We then would pass those along to the appropriate authorities. We think it would be helpful if foreign governments did the same.

     In sum, we're making progress in implementing the convention. We will continue to work to strengthen it and we will continue our efforts to build public awareness of this important issue.

     With that, Assistant Secretary Wayne and I are happy to take your questions.

     MODERATOR: Thank you. Please wait for the microphone and give your name and news organization before asking your question. First question here in the middle.

     Q (Inaudible.) What is the Turkish position on this issue?

     MR. WAYNE: Well, Turkey is a member of the OECD. They have signed on to the convention and have ratified the convention. And I believe they've also -- they are waiting to have -- there are four countries that still don't have implementing legislation in place: Turkey, Ireland, Chile and Brazil. And so we're very much looking forward to all four of them moving forward and having their implementing legislation in place.

     MODERATOR: In the back.

     Q Jim Berger from Washington Trade Daily. You said the next phase of the OECD would be enforcement review. Is something scheduled? I mean, will there be a meeting devoted to that?

     MR. WAYNE: Yes. Phase one was having an examination by experts of the implementing legislation. And that's nearly complete now. They've gone through 28 countries, including the United States. They've looked at the legislation. Where they felt there are shortcomings, they pointed those out. A number of countries have indicated a willingness to go back and correct some of the weaknesses that have been pointed out.

     The next phase is to review everybody's enforcement structures and practices, and this will involve on-site visits to each country that's signed up. And this phase is going to start later this year with a visit to Finland. Finland has volunteered to receive the first visit. And we think this will be very important, because, as we all know, actually carrying out the commitments and enforcing it are a vital part of making the convention valuable.

     MODERATOR: In the back.

     Q (Inaudible.) Do you think there will be more financial assistance to developing countries like Albania, for example, if they're determined to fight to end corruption?

     MR. WAYNE: Certainly in Southeast Europe we have made it a continuing theme that good governance -- and elsewhere, too, but I am just speaking to Southeast Asia -- a continuing theme that good governance is vital to attract investment and to achieve the integration with the rest of the trans-Atlantic community that is sought by so many of the governments and citizens of that area.

     And corruption is one of the key sort of problems that needs to be overcome if you're going to attract investment, if you're going to have the economic growth that you want. And so this has been an important part of what we've done in Southeast Europe. It's an important part of the stability pact for Southeast Europe. There is a whole anti-corruption special mechanism that's been established within that context to help countries deal with this scourge.

     MODERATOR: Next question. Up front.

     Q (Inaudible) -- South Korean News Agency. How do you evaluate the situation of South Korea now? And Assistant Secretary Jacobs mentioned something interesting was done by Korea. What is that?

     MR. JACOBS: Well, with respect to Korea, what I was referring to was public awareness campaigns that are taking place in several of our important trading partners, and Korea is one of those. I'll refer you to some specifics in the report. It's certainly an important feature of the fight against corruption that there is general public awareness that, one, it's illegal, and two, there are means in which companies can undertake to help ensure compliance with the convention in their own firms. Korea has done, we think, an interesting job in terms of getting that kind of public word out.

     MODERATOR: Yes.

     Q Hi. Peggy Chang (ph) from Voice of America China branch. And right now there will be more and more U.S. companies going to China to do business, since it's the largest market in the world. And how does the U.S. government see the entire corruption or bribery situation in China? Because it is kind of a very prevalent problem in China.

     MR. WAYNE: Well, we see the need to tackle the problem of corruption anywhere where American companies are going. As you know, since 1977, American companies have had to abide by a very strict set of rules passed in our law, in our legislation. And indeed, part of the impetus that led us -- part of the impetus that led us to push so strongly for the OECD convention was indeed to raise the standards around the world, certainly on the side of the OECD countries, which tend to be the wealthier countries.

     But at the same time, we believe everywhere that it's in the interest of all countries, and indeed very important for the whole principle of good governance and to deal with the corruption problem.

     That, as you say, is a problem in China. It's a problem which the authorities in China recognize and act on, and it's one where we certainly pay attention.

     MR. JACOBS: I think I would just note, from a trade perspective, that China's entry into the World Trade Organization, which is a rules-based organization that has quite a number of transparency- related elements in it, I think, should help, as well as address that issue.

     And it's not just a matter of undertaking our obligations and signing treaties and complying with them. It's the whole operation under the rule of law, as well as corporate compliance/public awareness campaigns.

     And I note that certainly within the State Department and the Commerce Department, we've spent some considerable time, effort and money in China offering assistance on the issue of the rule of law and developing commercial law.

     MODERATOR: Another question in the back.

     Q Thomas Gorguissian, Al Wafd, Egypt. Mr. Jacobs, you said it may be not sexy enough, this report. But let's make it sexier a little bit. (Laughter.) Putting the American side in it, when you say 70 percent of the bribes are done by the OECD convention -- (inaudible) -- how much it's -- I mean, if there is an American share in this 70 percent, or how many percent of these bribes are coming from America? Do you have any idea about that?

     MR. JACOBS: I don't think our statistics (brought that down?) yet. No, we don't know.

     MR. WAYNE: Well, if there were reports of bribery by American officials, they would be referred to the Justice Department and they would be investigated; not by American officials -- by American companies to foreign officials. They would be subject to prosecution under U.S. law. And that's what happens. If any of us ever come across reports like this, we do refer them to the Justice Department.

     Q Another question. This week is the week of the transparency international bribe and money laundering on all these reports coming from all over the world. How do you see it, as a part of foreign policy? It's a part of fair trade? It's a part of American rules of game?

     MR. WAYNE: Well, I think as we -- let me take the first crack and Steve add afterwards. I think we see it as part of all of those things. It certainly is -- as I tried to make clear, it's very important from a commercial perspective, from a trade perspective. But it's equally important from a good governance perspective, from the perspective of the country where the bribery offer and receipt is going on. It undermines democracy to have a pattern of corruption; anywhere, that is -- if it were here, if it were in Europe, if it were in Egypt or in East Asia. Anywhere that that goes on, it undermines democracy and good governance.

     Now, it also has important commercial effects. It unlevels the playing field for those who are trying to offer a fair price and play the game well. It, thus, in that case, also has economic costs for the country that might sign a large arrangement for a price that was much higher than they would have had to pay otherwise. So the people of that country are getting a bad deal twice over.

     Steve.

     MR. JACOBS: I think Tony put it perfectly well. If it's a cancer on commerce, it's a cancer on democracy and freedom.

     MODERATOR: Are there any other questions? Okay, one more here.

     Q There are big economic problems and big corruption in Turkey. So my question is, what kind of efforts could U.S. government help Turkey to (battle ?) international corruptions and this matter?

     MR. WAYNE: Turkey is an important friend and ally of the United States. We have been and will continue to be fully supportive of Turkey in all of its efforts. We have been in recent months, as it's worked through a number of economic problems, and we will continue to be.

     Q (Inaudible.)

     MR. WAYNE: In this general context of being supportive, I don't have a specific comment on that. Sorry.

     MODERATOR: (Inaudible.)

     Q (Inaudible.) How can you describe the situation in Russia -- (inaudible) -- and the efforts of the government to fight the corruption? And what do you think about the perspectives of cooperation between American and Russian companies?

     MR. WAYNE: Well, I think, once again, within Russia there is recognition that this is a major problem that needs to be tackled. What I'm looking for here is that there is something that I think Russia has expressed interest in the convention. But let me just -- give me a second -- I circulated other countries, yes.

     Russia has expressed interest in this convention and in working with the OECD. The OECD secretariat held an information session for all interested countries in June of last year, and 14 countries came in, including Russia. I know that they have also continued to dialogue with the OECD on a whole cluster of investment questions, in creating a good investment environment, of course, which is related. This is one of the important aspects of that.

     And I know that we continue a dialogue with Russia about the range of economic issues, that we have a very vigorous American-origin business community in Russia and that we are very interested in promoting that commercial relationship between the United States and Russia. And so I'm sure, as part of a broad dialogue, that there are many things that go on, and some of them touch on the importance of good governance and other issues related to this.

     MR. JACOBS: And again, this is another country in which the Commerce Department and the State Department have spent some considerable time working with the authorities to create commercial law and develop law, which, again, helps promote good governance and rule of law.

     MODERATOR: We have time for a final question. We'll go back to Thomas.

     Q Yes, please. This is the question for the official of the State Department. When it's the case of (usury ?), in recent years there was a lot of cases where bribing was in the context of USAID. How, as an official, you handle this issue?

     MR. WAYNE: Well, I think, again, if -- I mean, we would --

     Q (Inaudible) -- American money. There is the other countries, and there is American companies are involved in bribing officials overseas.

     MR. WAYNE: If there was allegations like that, we would refer it to our Justice Department.

     Q Justice Department would be. You don't have any role in this?

     MR. WAYNE: If it comes to our attention, our role is to turn it over to our law enforcement authorities.

     MODERATOR: Any closing thoughts?

     MR. WAYNE: Thank you. Enjoy reading the reports, or at least the executive summaries. (Laughter.)

END.

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