When a state systematically fails to suppress bribery in its customs service, should that be an actionable violation of international trade law? More broadly, to what extent do anticorruption provisions have a place in the law of the World Trade Organization? In a 2014 post on this blog, Colette van der Ven squarely addressed these questions and concluded that the answer is no: the WTO, in her view, is not well suited to handling complaints of corruption.
I disagree with Colette’s well-reasoned analysis. While she is right to point out substantial challenges to grappling with anticorruption through the WTO, these challenges are surmountable—and the importance of a WTO remedy counsels in favor of surmounting them.
- First, an anticorruption rule and remedy fit neatly into the WTO’s trade liberalization mandate. Border corruption violates several of the guiding principles listed on the WTO’s website: openness, predictability and transparency, and competitiveness. And rampant customs corruption can function as a de facto barrier to trade, rendering negotiations and disputes over de jure trade restrictions largely irrelevant. If customs officials regularly keep shipments from crossing the border unless the importer pays 1% of the shipment’s value as a bribe, then eliminating customs corruption will do as much to liberalize trade as a tariff reduction of one percentage point would. A recent study of customs computerization in Colombia—which removed discretion from potentially corrupt officials—found that the change substantially improved the growth of affected firms, and though the study can’t prove the mechanism, it’s highly likely that the reason is that the reduction in discretion reduced customs corruption. Admittedly corruption can have the opposite effect, too: if customs officials regularly allow importers to evade tariffs in exchange for a small bribe, then cleaning up the customs service may, in theory, restrict trade. But even if that’s the case, customs corruption (a) makes trade more difficult for those subject to anti-bribery statutes like the U.S. Foreign Corrupt Practices Act (FCPA), potentially violating the most-favored-nation principle of equal treatment for trading partners, and (b) may increase uncertainty and transaction costs for all.
- Second, a WTO remedy would address customs corruption more directly than existing legal remedies like the FCPA. Criminal investigations into bribe payers under these statutes aren’t the best tool for changing systemic bribe seeking by customs officials. A better approach would allow a WTO member to challenge another member’s customs administration head-on, and then to seek a remedy requiring the defendant to regularize its customs administration. Additionally, a WTO remedy would avoid the concern (raised by some FCPA critics) about discouraging much-needed investment in developing countries.
- Third, a WTO remedy could help elicit useful information about corruption from those engaged in international trade. Today, a U.S. corporation engaged in international trade has little incentive to report to the United States when another government seeks a bribe. But if that corporation believed that reporting bribe-seeking could prompt the U.S. government to take effective action against the bribe-seeker through the WTO, the corporation might find it worthwhile to collect and report such information. That data would help buttress a WTO claim but could also help in other contexts, such as providing enforcement leads or crafting development assistance policies.
Could the WTO handle corruption-related complaints as a practical matter? In arguing against using the WTO system to combat corruption, Colette points out that the WTO’s Dispute Settlement Body (DSB) lacks the resources and expertise to adjudicate claims of trade-related bribery. She is right that the DSB already has a heavy caseload. But the fix is straightforward: increasing staffing. Overall, the DSB is well suited to handling complex issues like corruption that lie at the intersection of law and social science. Its judges are accustomed to adjudicating fact-heavy technical questions and have access to a large staff, including more than 35 economic and statistical researchers. The Appellate Body typically receives fewer than ten appeals per year. It is, in fact, hard to imagine a tribunal better suited to assessing trade-related bribery than the DSB. And like any court, the DSB benefits from the pleadings of the parties before it.
Furthermore, the idea that corruption issues are simply not germane to the WTO’s mission, or somehow beyond its competence, is belied by the fact that, as two researchers have carefully documented (see here and here), many WTO treaties already contain provisions related to anticorruption goals, from transparency requirements (e.g., the Agreement on Sanitary and Phytosanitary Measures) to guarantees of timely advance rulings (e.g., the Trade Facilitation Agreement). Outside the WTO, countries have experimented with express anticorruption provisions in plurilateral agreements like the Government Procurement Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which incorporates nearly all of the Trans-Pacific Partnership’s anticorruption measures, including a requirement that members ratify the UN Convention Against Corruption. And the fact that import licensing is especially prone to corruption is one motivating policy behind the GATT’s general prohibition on quantitative restrictions and preference for tariffs. As for the fact that the sort of WTO complaint envisioned here would involve a challenge to how a party administers (or fails to administer) its customs service, there is precedent for this too: In EC – Selected Customs Matters, the DSB Appellate Body addressed the United States’ due process challenge to European customs administration, and concluded that the United States could challenge European customs administration “as a whole.” Though the Appellate Body ultimately rejected the U.S. claim, the reason was that it concluded that it had insufficient facts on the record to decide the U.S. claim—not that the tribunal could not, as a matter of principle or institutional competence, assess allegations of procedural irregularities in customs administration. In the corruption context, appropriate pleading—along the lines of EC – Selected Customs Matters but with a better developed factual record—could support a claim that rampant bribe-seeking within the customs service violated WTO obligations.
In sum, the WTO’s DSB provides a forum well suited to combat trade-related bribery. A limited anticorruption agenda fits neatly within the WTO’s ambit and would make valuable use of the DSB’s expertise and resources. The main question is how long—given the larger, non-corruption-related disputes occupying trade ministries today—we will have to wait for a WTO member to bring a successful challenge.