The U.S. Foreign Corrupt Practices Act (FCPA) makes it a criminal offense for U.S. domestic concerns, firms that issue U.S. and any anyone acting in U.S. territory from offering or paying bribes to foreign government officials. The FCPA does not, however, apply to the foreign officials who receive those bribes. (On occasion some prosecutors have advanced the theory that a foreign government official who takes a bribe can be convicted for aiding and abetting, or conspiring in, an FCPA violation, but courts have generally rejected these theories.) Additionally, while U.S. criminal law prohibits domestic government officials from soliciting or accepting bribes, the relevant statutory provisions do not apply to foreign officials who engage in comparable conduct.
Many U.S. anticorruption activists believe that U.S. law ought to target the demand side of foreign bribery transactions (that is, the bribe-takers), not just the supply side, and have therefore advocated for the adoption of the so-called Foreign Extortion Prevention Act (FEPA). These advocacy efforts appear to be paying off: In late July, the Senate adopted FEPA as an amendment to the Senate’s version of the National Defense Authorization Act. This does not guarantee that FEPA will become law, as the House of Representatives has yet to vote on a comparable bill, and there is no guarantee that the FEPA language will remain in the bill after final negotiations conclude. But the odds have gone up significantly.
Would FEPA be a good idea? I think the answer is probably yes, though the impact is likely to be modest, and probably somewhat less than FEPA’s proponents hope. I may post again later about my own assessment of FEPA’s likely impact, should it pass in something like its current form. But for now, I want to focus on a striking argument in favor of FEPA that appeared in an op-ed a couple of weeks ago. That op-ed, coauthored by Elaine Dezenski (Senior Director at the Foundation for Defense of Democracies) and Scott Greytak,(Director of Advocacy at Transparency International’s US office), argued that FEPA would “blunt China’s malign economic influence” by countering the practice of Chinese government or government-affiliated entities using bribes to secure access to valuable resources and to expand China’s political sway over developing countries.
There are many good arguments in favor of FEPA, but I’m not sure that this is one of them. I don’t want to dismiss it outright, as it’s entirely possible that I’ve missed something. But it seems to me that FEPA would have little to no impact on corrupt overseas bribery by Chinese entities, and at least in the short term might make that problem (slightly) worse. So let me lay out the source of my confusion:
The op-ed claims, plausibly if a tad hyperbolically, that “China is building its influence throughout the Global South with infrastructure, cheap cash and bribes,” and that the willingness of Chinese entities to pay bribes to foreign government officials gives these Chinese entities a distinct advantage over American firms. After all, the op-ed points out, a U.S. firm or individual who pays bribes could be prosecuted under the FCPA, and so “American firms cannot imitate their Chinese rivals without risking steep fines and even jail time.”
So far so good. But why would enacting FEPA do anything to address this problem? FEPA does not apply to a foreign official who takes a bribe from a Chinese company (unless that company issues securities in the U.S., which is unusual, and as far as I know unheard of for the Chinese state-linked entities that are the main focus of the op-ed’s concern). So FEPA does not increase the risks, to a foreign government official, from taking bribes from a Chinese entity. FEPA would, however, increase the risks to a foreign government official who takes bribes from an American firm. For a foreign official interested in lining her own pockets, this makes dealing with the Chinese firms even more attractive, relative to dealing with U.S. firms. So, viewed from the relatively narrow perspective of whether FEPA will make it easier or harder to compete with Chinese firms in those countries where many public officials are inclined to solicit bribes, it seems to me that the answer is that it would make it harder.
But perhaps that perspective is too narrow. The op-ed hints at, though doesn’t really develop, an alternative argument as to why FEPA will help the U.S. in its strategic competition with China in the Global South: FEPA would demonstrate the U.S. commitment to “ethical business practices,” and perhaps to “rule of law” values more generally. The idea seems to be that, even if in the short term China can secure advantages by bribing corrupt officials, the citizenry in most countries throughout the Global South despise and resent the corrupt elites who line their own pockets at the public’s expense. By taking a firm stand not only against those elites—including by prosecuting them—the U.S. government will burnish its global reputation for integrity, and prevail over China in the struggle for influence in the longer term.
Maybe. But if this is indeed the argument, I do worry that there’s more than a bit of wishful thinking involved. First off, the U.S. already gets the reputational benefit of enforcing the FCPA against its own companies, so the question is how much additional reputational benefit the U.S. would get from criminally prosecuting the foreign nationals that its companies bribed. It’s a bit misleading to say that FEPA will demonstrate the U.S. commitment to ethical business practices; it would be more accurate to say that it would demonstrate an especially strong commitment to ethics in (somebody else’s) government. And while it’s true that many citizens dislike the corruption of their government officials, it’s not so clear that those same citizens would be enthusiastic about the U.S. government taking it upon itself to prosecute those officials. There’s a risk that it would seem like foreign meddling, or (perhaps inadvertent) taking sides in an internal political dispute. So it seems to me that aggressive FEPA enforcement is more likely than aggressive FCPA enforcement to stoke resentment and cries of neo-imperialism.
I don’t want to exaggerate this concern. The U.S. government already prosecutes foreign officials on occasion (for example, for things like money laundering), and this doesn’t typically provoke widespread resentment, so far as I know. But that observation cuts both ways: There’s also not much evidence that these prosecutions have much positive impact on America’s image in these countries either, at least not at the level that would matter for something like a geostrategic competition with China.
So at the end of the day I’m a bit puzzled about the argument that FEPA would help counter Chinese corruption (strategic or otherwise). Now, maybe I’m taking this too seriously. Given the rise of anti-China sentiment in Washington—in both parties, but especially on the Republican side—perhaps the best way to advocate for pretty much anything (at least anything even vaguely related to foreign affairs) in the U.S. Congress is to claim that the proposed measure will help counter China. If the goal is convincing Republican Members of Congress to vote for FEPA, then packaging it as an anti-China measure may well be more politically effective than talking about protecting people in poor countries from exploitation by their leaders. So maybe this op-ed can be written off as politically expedient rhetoric in the service of a good cause. But still, I’m curious as to whether I’ve missed something important here. Is there a convincing argument that FEPA will help the U.S., and U.S. firms, compete with China? I don’t see it, but I’d welcome any thoughts that readers may have.
Leaving aside the specifics of this matter, the continuing American presumption that it can legislate for the world is a vile form of imperialism, and amounts to corruption in its own right. If America’s congress wants to reduce corruption in the world, their best investment would be in 535 mirrors.
I find this comment, and comments like it, deeply puzzling. What’s the point of “leaving aside the specifics of this matter” when the post is, in fact, about the specifics of this matter?
To the extent that I can understand you to be making a substantive argument, it’s that you oppose FEPA because you think the U.S. Congress has no business exercising extraterritorial jurisdiction over foreign officials who solicit bribes from American citizens. I can certainly think of strong arguments for that position, but you don’t seem to actually offer any. And it seems a tad hyperbolic to say that this amounts to “corruption in its own right,” unless we want to define “corruption” so broadly that it is basically synonymous with “bad.”
I do think there’s an important debate to be had about the wisdom and propriety of the proposed FEPA, and similar measures. Perhaps I could invite you to present the case against it, with substantive arguments rather than invective?