Trade and the Commonwealth: developing countries inquiry SUBMISSION FROM TRANSPARENCY INTERNATIONAL UK INTRODUCTION Markets affected by corruption cannot ultimately be sustainable, prosperous, and secure. There is wide consensus on the corrosive impacts of corruption on income equality, human development, and economic growth1 for countries at all stages of development2. The overwhelming majority of research shows that corruption is detrimental to international trade and business3. For the Commonwealth, the likely series of new post-Brexit UK trade agreements is a once in a generation opportunity. Signing trade deals that embed anti-corruption provisions and reinforce good practice would help to level the playing field for law-abiding businesses and reduce hidden costs. As we near the 2018 Commonwealth Summit, the UK should take this opportunity to promote public accountability, transparency, and anti-corruption measures in new trade initiatives.
SHOULD THE UK MAKE PARTICULAR ARRANGEMENTS FOR TRADE WITH DEVELOPING COUNTRIES THAT ARE MEMBERS OF THE COMMONWEALTH? The expansion of Commonwealth trade and investment would create new opportunities for the UK to leverage anti-corruption practices in the global market. In order to generate global impact the UK must seek to enshrine transparency and anti-corruption provisions into all post-Brexit trade deals, not only those it negotiates with other with Commonwealth states. However, as the United States has previously been effective at securing anti-corruption provisions in its trade with countries in the Americas and East Asia4, the UK can secure similar provisions in agreements it makes with less-developed states, and should seek to encourage other states to do the same. At a minimum, these provisions should include:
1. Provisions requiring state parties to ratify international anti-corruption conventions In order to level the playing field for business all Commonwealth states should ensure their trade partners are also held to the same international anti-corruption standards. Stronger Commonwealth economies can hold their partners to these standards by requiring them to ratify international anti-corruption conventions in order to secure trade deals.
1
https://www.transparency.org/whatwedo/answer/the_impact_of_corruption_on_growth_and_inequality [Accessed 6/11/2017] https://blogs.imf.org/2015/11/05/corruption-a-hidden-tax-on-growth/ [Accessed 3/11/2017] 3 https://www.transparency.org/files/content/corruptionqas/Literature_review_of_the_impact_of_corruption_on_firms_export_dec isions_and_foreign_direct_investment.pdf [Accessed 6/11/2017] 4 Ibid. [Accessed 6/11/2017] 2
For example, provisions could require state parties to ratify the United Nations Convention against Corruption (UNCaC) and the Organisation for Economic Co-operation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention).
2. Provisions to require state parties to address corruption In addition to ratifying international anti-corruption conventions, Commonwealth states should ensure that their trade partners address corruption in their own jurisdictions and in international fora. State partners should be required to adopt or maintain legislation that criminalises corruption, ensures appropriate penalties, and encourages whistleblower protection. We recommend that more economically developed Commonwealth countries adopt and implement open contracting principles5 and leverage their influence to secure open contracting initiatives that level the playing the field for law-abiding businesses to win contracts. This will result in the businesses performing services as intended, for example in public infrastructure projects, and could decrease the estimated 20-25% fraud- and corruption-related procurement budget losses6.
3. Provisions to require compliance with anti-corruption regulations Commonwealth states will then want to ensure compliance with anti-corruption regulations so they are more than words on paper. Stronger Commonwealth economies can incentivise compliance with anti-corruption regulations by including in their trade agreements provisions against non-compliance.
IN WHAT OTHER WAYS MIGHT THE UK SEEK TO SUPPORT DEVELOPMENT THROUGH TRADE? To maximise sustainable growth and reduce poverty, the UK’s trade and development policies should be designed with the aim of levelling the playing field for legitimate businesses and raising global anti-corruption standards. These should be thought of not as add-ons, but as essential conditions for a healthy market. Existing best-practice transparency and anti-corruption provisions include but are not limited to:7
Provisions aimed at state parties to obligate them to take anti-corruption measures at the national level, e.g. the ratification of anti-corruption provisions. Provisions to mandate the criminalisation of corruption (e.g. defining active and passive bribery as a criminal offence), the introduction of enforcement mechanisms (e.g. fines or debarment for engaging in corrupt activity), and the protection of whistleblowers.
5
https://www.open-contracting.org/get-started/global-principles/ [Accessed 9/11/2017]
6
https://bis.lexisnexis.co.uk/blog/posts/anti-bribery-and-corruption/latest-g20-action-plan-aims-for-transparency-to-mitigatecorruption-risk [Accessed 9/11/2017] 7 https://www.transparency.org/whatwedo/answer/anti_corruption_and_transparency_provisions_in_trade_agreements [Accessed 6/11/2017]
Agreements in which states agree to mutually open government procurement markets, as with e.g. the Government Procurement Agreement laid out by the World Trade Organisation. Preambles of bilateral and regional trade agreements that enshrine commitments to the principle of transparency. Agreements that include a “horizontal” chapter on transparency, which includes antibribery and anti-corruption commitments. Provisions stipulating the debarment of firms found guilty of corruption from competing for public contracts.
IN WHAT WAYS MIGHT THE UK COORDINATE ITS TRADE POLICY WITH OTHER POLICIES (E.G. DEVELOPMENT ASSISTANCE) IN ORDER TO SUPPORT DEVELOPMENT? The UK is in a unique position to shape the new work programme for the Commonwealth on trade and development, and should use this position to promote anti-corruption policies across the Commonwealth. Priorities for a new work programme should include:
Achieving a level playing field for business. Implement anti-bribery legislation and put proper enforcement in place to make sure that companies don’t bribe overseas and that domestic companies don’t gain an unfair advantage through bribery. These should be adopted throughout the Commonwealth and elsewhere through trade provisions and agreements.
Promoting clean procurement. Apply basic ‘open contracting’ and transparency provisions in trade agreements, with a requirement for accountability to the public throughout public infrastructure project lifecycles.
Safeguarding the rule of law. Demonstrate commitment to an independent judiciary, with the law impartially enforced, and include mechanisms for safeguarding whistleblowers.
Support for Small Island Developing States. Provide technical and financial assistance to Small Island Developing States to embed and strengthen governance systems. This could help accelerate growth and trade opportunities in less economically developed jurisdictions and raise performance across the whole of the Commonwealth8.
About Transparency International UK Transparency International (TI) is the world’s leading non-governmental anti-corruption organisation. With more than 100 chapters worldwide, TI has extensive global expertise and understanding of corruption. Transparency International UK (TI-UK) is the UK chapter of TI. We raise awareness about corruption; advocate legal and regulatory reform at national and international levels; design
8
http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:22451020~pagePK:64165401~piP K:64165026~theSitePK:469382,00.html [Accessed 8/11/2017]
practical tools for institutions, individuals and companies wishing to combat corruption; and act as a leading centre of anti-corruption expertise in the UK. We work in the UK and overseas, challenging corruption within politics, public institutions, and the private sector, and campaign to prevent the UK acting as a safe haven for corrupt capital. On behalf of the global Transparency International movement, we work to reduce corruption in the high risk areas of Defence & Security and Pharmaceuticals & Healthcare. We are independent, non-political, and base our advocacy on robust research.
CONTACT Rose Zussman, Advocacy & Campaigns Officer +44(0)20 3096 7698, rose.zussman@transparency.org.uk Transparency International UK 7-14 Great Dover Street London SE1 4YR