TABLE OF CONTENTS I. INTRODUCTION II. THE COST OF FCPA ENFORCEMENT III. REFORMING THE FCPA A. Compliance Defense B. Narrow and Clarify the Definitions of "Instrumentality" and "Foreign Official" C. Other Substantive Amendments D. Procedural Reforms IV. A BROADER APPROACH V. CONCLUSION
President Obama announced in his 2011 State of the Union address that the Administration aims to double the level of exports from the U.S. by 2014. (1) The President explained the importance of his National Export Initiative:
But this isn't just about where jobs are today; this is where American jobs will be tomorrow. Ninety-five percent of the world's customers and fastest growing markets are beyond our borders. So if we want to find new growth streams, if we want to find new markets and new opportunity, we've got to compete for those new customers--because other nations are competing for those new customers. (2)
The President explained that every $1 billion increase in exports would support more than 6,000 American jobs. (3) With approximately fifteen million Americans unemployed, (4) the economic and social importance of this effort is not in doubt.
This paper sets out to criticize the failure of the U.S. government to adapt its policy on combating foreign corruption to its goal of increasing the competitiveness of the U.S. export sector and to the harsh economic reality of this decade. The government's broad and discretionary approach to enforcement of the Foreign Corrupt Practices Act (FCPA) is having a significant chilling effect on U.S. business activity. It is an unremarkable proposition that job creation is a more important policy objective than combating foreign bribery. However, these two goals do not have to be mutually defeating. The U.S. government can pursue both by narrowing and clarifying the scope of the FCPA while initiating a more comprehensive anti-corruption effort that goes beyond FCPA enforcement.
Part II of this paper describes the U.S. government's wide-net approach to FCPA enforcement and the economic costs it has imposed. Part III analyzes several proposed reforms to the FCPA, including the ideas that are currently under consideration by Congress, designed to focus the prohibition on culpable conduct and reduce collateral harm to productive business activity. Part IV suggests ways in which the government can broaden its anti-corruption efforts beyond FCPA enforcement in order to achieve the goals of that statute without harming the economy; criminal laws and securities laws are not the only tools in the toolbox.
II. THE COST OF FCPA ENFORCEMENT
The U.S. government has shackled its export engine with regulations. Approximately 65% of U.S. exporters have fewer than twenty employees. (5) These firms incur regulatory costs 42% higher than businesses with up to 500 employees, and the average regulatory cost for each employee of a small business exceeds $10,000 per year. (6) The Administration is aware of this problem. In his 2011 State of the Union address, the President proclaimed: "To reduce barriers to growth and investment, I've ordered a review of government regulations. When we find rules that put an unnecessary burden on businesses, we will fix them." (7) There is a consensus both inside and outside of government that the U.S. must remove the unproductive weights that restrain its competitiveness.
Of course, some regulations are necessary. The President immediately struck a note of caution by affirming that "I will not hesitate to create or enforce common-sense safeguards to protect the American people. That's what we've done in this country for more than a century. It's why our food is safe to eat, our water is safe to drink, and our air is safe to breathe." (8) The question that the Administration seems to have failed to examine is whether the marginal improvement in foreign business conduct that it appears to be seeking through its harsh, discretionary, and broad-reaching enforcement of the FCPA is such a fundamental regulatory goal, akin to safe drinking water and clean air, that it is worth the severe economic cost it has entailed. …