Cardin-Lugar, enacted as Section 1504 of the Dodd-Frank Wall Street reform bill, was pioneering legislation that requires all oil, gas and mineral companies listed on U.S. stock exchanges (whether or not they are U.S.-based) to disclose the royalties, bonuses, fees, taxes and other payments they make to foreign governments. For the first time, it gave citizens of oil-rich poor countries the ability to “follow the money” and hold their governments accountable for the often vast sums they receive from natural resource extraction, including oil, gas, gold, copper, etc. This kind of disclosure, or transparency, is a key tool for fighting corruption, waste and mismanagement. By passing the bill, the U.S. asserted its traditional role as a global leader in opposing corruption.

The strength of this leadership was quickly demonstrated as the European Union promptly moved to enact legislation patterned directly after the U.S. law, which was passed in 2013, as did Canada, home to some of the world’s most important mining companies.

But a key question was left hanging over the Tillerson hearing: Will the Trump administration lead a retreat from this position of global leadership by repealing Cardin-Lugar? Will it signal to the international community that America no longer cares so much about corruption? Will the new administration undermine the very corruption-fighting structure the U.S. helped build?

Tillerson was never asked directly whether he would oppose repeal of Cardin-Lugar, but as head of the world’s largest oil company, he personally lobbied against the legislation when it was being considered. So did Big Oil’s trade group, the American Petroleum Institute (API). When the implementing regulations were first issued by the SEC, API sued to overturn them, and new, improved regulations were released last summer. President-elect Trump campaigned on getting rid of regulations generally, and some in Congress say they want to target Cardin-Lugar early in this session, even though extractive industries disclosure has become the international norm. 

Ironically, events since Cardin-Lugar passed have further undercut Big Oil’s two biggest concerns, namely, that U.S. firms would be at a competitive disadvantage to drillers that didn’t have to disclose payments, and the reporting would be too burdensome. With the passage of the E.U. and Canadian legislation, most of the important oil and gas firms that operate across borders, including the Russians, are now covered. And the new SEC regulations are quite flexible—because the other laws are so similar to ours, the companies can file the same report with the SEC that they file with other jurisdictions, so there’s no needless duplication.  

There are compelling reasons to combat the “resource curse.” As Sen. Lugar noted in his introduction to the committee report, “Paradoxically, history shows that rather than a blessing, energy reserves can be a bane for many poor countries, leading to fraud, corruption, wasteful spending, military adventurism and instability. Too often, oil money that should go to a nation’s poor ends up in the pockets of the rich, or it may be squandered on the trappings of power and massive showcase projects instead of being invested productively and equitably. In some countries, national poverty has actually increased following the discovery of oil.“

Moreover, he said, “This ‘‘resource curse’’ affects us as well as producing countries. It exacerbates global poverty which can be a seedbed for terrorism, it dulls the effect of our foreign assistance, it empowers autocrats and dictators, and it can crimp world petroleum supplies by breeding instability.” And tighter oil supplies, of course, mean higher prices at the gas pump for American motorists.

Cardin-Lugar was bipartisan legislation. Fighting corruption and promoting transparency is, or should be, a bipartisan issue. Both Republicans and Democrats want to reduce poverty in developing countries, and both want to see our foreign aid dollars used more effectively. Extractives transparency costs the American taxpayer virtually nothing but can have high impact.

Tillerson sidestepped Sen. Kaine’s question about the resource curse, passing up an opportunity to endorse Cardin-Lugar. Before inserting the committee report, Sen. Kaine asked, “…how will you work with [nations that have suffered under the resource curse] to make sure they respect human rights, the rule of law and our longstanding commitment to transparency and anti-corruption interests?”

TILLERSON: “Well there's a lot of opportunity through our USAID programs to strengthen the institutional capacities and set standards of expectation in the developing part of the world including those that have resource wealth.”

Clearly, other committee members were concerned about the Trump administration’s commitment fighting corruption overseas.  A Republican from Georgia, Sen. Johnny Isakson, highlighted the problems of oil-rich countries even in the Middle East: “They decided not to invest that money in their people and in infrastructure and instead kind of bought their people off with the money they had and had kingdoms and palaces where they lived. And now we're suffering today because they have no medicine, they have no educational system, they have no infrastructure.”

And Sen. Ben Cardin (D, Md.), the co-sponsor of Cardin-Lugar, said he had discussed extractives industry transparency with Tillerson during their pre-hearing confab last week. Cardin seemed to suggest that Tillerson the nominee retained the same views as Tillerson the oil titan. Said Cardin: “And we also talked about transparency in the extractive industries, and I appreciate your candor there as to the usefulness for that, to make sure the resources actually get to the people, rather than to corrupt leaders.”

Let’s hope that Tillerson the Secretary sees the overarching importance of maintaining American’s role as an anti-corruption champion and argues against repeal of Cardin-Lugar. In his opening statement, Tillerson acknowledged, “Our role in the world has also historically entailed a place of moral leadership.” And he lamented that, “In recent decades, we have cast American leadership into doubt.”

What could be worse, then, than to undo a clear act of moral leadership by taking away a key tool for fighting corruption? Not only would it betray our own principles, it would severely undercut our allies in Europe and Canada. With the Americans out of the extractives transparency system, they would face pressure from their industries to pull out as well. Having followed us up to the high ground, they might well join us in a race to the bottom.

Simply put, America can’t lead if it retreats. We led the world in setting up a disclosure system for oil and mineral payments, a system that became the moral and practical model that others are following.  We shouldn’t back away from it now. Let’s maintain American leadership and retain Cardin-Lugar.

Jay Branegan is a senior fellow at The Lugar Center. Read his description of the Cardin-Lugar anti-corruption amendment in this E&E News article.