At fifth anniversary, time to finish a key Dodd-Frank rule

At fifth anniversary, time to finish a key Dodd-Frank rule
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One need look no further than Russia or Iran to witness the confounding paradox that in many countries, oil, gas and mineral resources are used to entrench corruption, authoritarianism and instability, rather than uplift citizens. The so-called “resource curse” is more than an academic quandary for development economists — it is a curse of geopolitical urgency to U.S. interests around the world. 

The good news is that we can do far more than just talk about putting power with those who deserve it — the citizens of resource-rich countries. We can empower them through transparency. The bad news is that the U.S. is now following, not leading, in that area.

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This month is the fifth anniversary of our bipartisan law, known as the Cardin-Lugar amendment, or Section 1504 of  the Dodd-Frank financial reform law, that put the U.S. at the head of the global wave of transparency and government accountability. Regrettably, five years later, the law has yet to be implemented by the Securities and Exchange Commission (SEC). Section 1504 of Dodd-Frank requires any U.S. or foreign company listed on U.S. stock exchanges to publicly disclose resource extraction payments made to governments on a project basis.

It is time for the SEC to act. While transparency is not sufficient to bring the governance changes our country seeks, it is necessary for citizens to hold their governments accountable.

There are 3.2 billion people living in developing countries, and 663 million of them live in absolute poverty. Yet according to Oxfam America, in the past five years, the oil produced in these countries was worth $1.55 trillion for their governments. To give a sense of the scale, this revenue is enough to close the funding gap for healthcare and education in the world’s 42 poorest countries — five times over. This figure is almost 10 times the amount of U.S. foreign aid distributed over the same period. Transparency is critical to leveraging those aid dollars, as well as our diplomatic and security efforts.

Stopping the illicit flow of natural resource revenue is a national security and economic priority for the United States. It helps to create more stable economies and shrink the breeding ground for terrorism and conflict. It benefits American business by fostering more stable, less risky operating environments, and in turn provides more energy security for American citizens. It also helps U.S. investors by giving them valuable and detailed information about their holdings to evaluate and reduce their risks.

Passage of the Cardin-Lugar amendment demonstrated America’s determination to turn the tide in favor of transparent governance for all. Congressional action spurred the European Union, Canada and Norway to follow suit, creating a global standard that encompasses companies from Gazprom to Sinopec. But now the U.S. is falling behind. 

It’s time for the U.S. to take the lead on transparency again; it is time for the SEC to complete the final rule. 

Cardin is Maryland’s junior senator, serving since 2007. He sits on Environment and Public Works; the Finance; the Foreign Relations; and the Small Business and Entrepreneurship committees. Lugar represented Indiana in the Senate from 1977 to 2013.