Department of State support of an antibribery rule adopted last August by the Securities and Exchange Commission makes the US government appear incoherent on the important issue of transparency. A DOS spokesperson on Jan. 10 issued a statement backing SEC's requirement that companies in extractive industries disclose payments to non-US governments property by property. The American Petroleum Institute, Independent Petroleum Association of America, US Chamber of Commerce, and National Foreign Trade Council are challenging the rule in the US Court of Appeals for the DC Circuit.
The statement noted that Sec. of State Hillary Clinton considers corruption to be a national security issue and said SEC's rule ensures that "a sufficiently detailed level of information concerning payments from the extractive industry" reaches civil society and investors. The importance of fighting corruption and of transparency in that effort will receive no challenge here. Corruption impedes economic progress, sustains poverty, and generates instability. It is, indeed, a national security malaise for which transparency is an indispensable antidote.
An international fight
But the corruption fight must be waged internationally. The SEC rule pushes disclosure standards beyond global norms of the moment. And DOS's expression of support for it conflicts with support for a multilateral program elsewhere in the government.
For the oil and gas industry, the problem with SEC's rule, a product of the Dodd-Frank financial reform law of 2010, is not the requirement for disclosure of payments to foreign governments. The problem is the need for specific firms to be identified with specific payments related to specific properties. Reporting at that level of detail contravenes contracts and publishes competitively sensitive information. Those problems are aggravated by the increasingly aggressive investment in international projects by firms not covered by SEC's rule, especially those owned by governments.
DOS's phrase about "a sufficiently detailed level of information" acknowledges insistence by civil-society activists that nothing broader than property-level disclosure will do. But activists always demand more than they need. They lose nothing when oil companies are forced into breaching international contracts and disclosing secrets helpful to competitors. Oil companies, of course, do.
The main goal of international transparency is to ensure money governments receive from expatriate companies flows to legitimate uses. Disclosure at the country level, notwithstanding activist protests to the contrary, serves that purpose. While property-level disclosure would of course achieve greater transparency, it's unnecessary. And it hurts companies making the disclosures and payments. Activists think that shouldn't matter. They're wrong.
For most countries participating in an important international effort known as the Extractive Industries Transparency Initiative (EITI), country-level reporting of payments to host-country governments is sufficient. Companies and associations opposing the SEC rule therefore see the EITI as a superior alternative. Another reason to prefer EITI is the multilateral support it has garnered since the UK government introduced it in 2002. If the property-level disclosure standard imposed by the SEC and blessed by DOS were promoted internationally, that support would dissipate, and transparency overall would suffer.
Strange lurch
That DOS has seen fit to sanction a unilateral lurch seems particularly strange in an administration that makes implementation of the EITI part a program it calls the Open Government Partnership. There, however, the administration has aimed the EITI inward to focus on payments to the US government by oil and gas firms. That program is administered by the Department of the Interior.
The US thus has internalized an international transparency program as it elevates disclosure standards elsewhere to levels quite likely to be rejected in most other countries. Corruption, entrenched as it is in so many places, is difficult enough to combat without muddling the effort with bureaucratic confusion. By siding with never-enough activism, the SEC and DOS are undermining global progress toward transparency in extractive-industry dealings with host-country governments. Maybe the court will deal more reasonably with this crucial issue.