We have met the enemy and he is us.
This often-quoted line from the comic strip "Pogo" is particularly relevant to U.S. foreign trade.
Where our trading partners offer incentives and export promotion programs, we have impediments and barriers. As a result, since 1970, the U.S. share of total world exports has declined from 15 percent to 12 percent while our competitors have maintained or increased their shares.
Improved access to foreign markets is one of this administration's priorities, but the most perfect market access arrangements will mean nothing if our domestic laws and policies discourage exports.
The list of domestic export disincentives is long. Taxation of American workers employed abroad, regulations under several export control laws and environment and safety requirements that impose U.S. standards on foreign buyers are only a few.
One of the most complex and confusing of our self-imposed laws is the so-called Foreign Corrupt Practices Act (FCPA). It's difficult to bring up in casual conversation; politically, it's a hot potato.
The FCPA started out like most other export disincentives, with good and noble intentions. When public disclosures in 1975 and 1976 revealed that U.S. multinational corporations had paid bribes to high-ranking foreign government officials, Congress reacted quickly and emotionally to daily newspaper headlines and public outcry. I know; I was in the Senate when those disclosures hit.
The Senate Banking Committee demanded a strong criminal statute making bribery punishable by a prison term. The Securities and Exchange Commission demanded greater authority to regulate accounting and bookkeeping practices. So, in the spirit of true Washington compromise, a law was produced that combined the worst of both worlds.
With members of Congress, the administration and the business community all unwilling to challenge a draft of the law for fear of being accused of favoring bribery, the bill sailed through Congress by unanimous vote and was signed into law in December 1977.
The result? Apparently, the United States is the only country in the world to impose a comprehensive extraterritorial anti-bribery law upon all of its foreign business practices, public and private. In fact, from the day of enactment, the FCPA has created problems for fully law-abiding companies engaged in overseas transactions. The law itself is difficult to decipher, hard to enforce and ambiguous enough to have bred confusion for both business people and regulators.
Far from defining black and white in business conduct, the FCPA provides vast expanses of "gray" areas, where what is and is not permissible is hard to figure out. This has had a chilling effect on U.S. export activities; many businesses have pulled their entire operations out of some countries. The law raises endless questions about business expenses, Christmas gifts, local customs or law, contributions to local charities or participation in official affairs.
The cost of complying with the accounting and record-keeping requirements of the FCPA places an excessive burden on all publicly held companies, regardless of whether they make any foreign sales. To violate the statute one need not export at all; one need only to fail to keep company books in the detail that the SEC deems necessary. Most alarming is the fact that the American Bar Association, the American Institute of Certified Public Accountants and the SEC disagree among themselves as to a firm's responsibility under the accounting provisions of the law.
To be sure, corporate bribery did undermine U.S. foreign policy and national security interests. By passing the FCPA, Congress affirmed that the U.S. government does not condone bribery. It must never do so.
If we are to continue as the world trade leader, our responsibility must include ethical leadership as well. To do so we must be sure we prohibit bribes, not the conduct of legitimate business. Because of its negative impact in the latter area, the FCPA derserve congressional attention and action. Major surgery is required.
First, unless substantially improved, the name should be change. It is a misnomer to call this law, as written, the Foreign Corrupt Practices Act when one can violate it without being involved either in foreign trade or in corrupt practices of any kind.
Second, the accounting requirements must be limited. There is no need to require all issuers of securities, large and small, to devise intricate and costly internal accounting control systems, which the law implies should be fail-safe.
Third, enforcement of an anti-bribery law must be consistent and predictable, centered in one agency, instead of divided between the Justic Department and the SEC.
Fourth, and perhaps most important, the bribery prohibition must be rewritten to protect the innocent, to remove the "chilling" requirement that every exporter be prepared to prove beyond a doubt that he did not have "reason to know" that a foreign agent ws planning to engage in a questionable payment. We must eliminate the current liability of American citizens for unknown and unauthorized actions by agents in foreign markets.
Additionally, it is an international imperative that must recognize that illicit payments are in no nation's best interest. We must provide the leadership to encourage every trading nation to halt such practices.
There was something courageous and typically American in Congress' efforts to prohibit corporate bribery overseas. Yet, the FCPA stands as a costly lesson of what can result when people don't speak up against a law, however commendable in intent, that is unenforceable and vague.
It is a lesson that need not be repeated.