Public debate on globalization in the United States and many other countries has been dominated by concerns about the impact of trade, capital flows, market reforms, and technological change on social values like equity, poverty-reduction, cultural integrity, and environmental sustainability. People on all sides of this debate, whether friends or foes of globalization, often seem to regard globalization as an implacable force, whose transformation of economic and social life, for better or for worse, can only be delayed or stopped through deliberate policy intervention. In this perspective, globalizing forces, left to their devices, will never falter or relent.
Participants in globalization debates have perhaps not fully recognized the extent to which globalization is already being challenged by problems it has itself aggravated. These problems, or "pathologies," of globalization relate not to its impact on social or economic values external to the logic of globalization, but rather affect some of the very business practices and processes that drive it.
CSIS has launched a coordinated set of projects focusing on three pathologies of globalization: corruption, counterfeiting, and cyber-fraud. These pathologies pose challenges not only to the pace and direction of globalization, but also to the security of thousands of jobs, to privacy rights, and to equity.
I. CSIS Working Group on Corruption in International Business Click Here for a Summary of the July 12 meeting
The growth of global business has made it more difficult to enforce national laws and international norms aimed at curbing corruption. As developing countries attempt to privatize national industries and construct infrastructure in an era of unprecedented capital mobility, opportunities to bribe public officials to obtain or retain business are multiplying. Corruption in international business is costly to consumers, who unwittingly help pay for corporate bribes through higher prices. Corruption can penalize, and potentially even endanger, taxpayers and other citizens when government officials make business or policy decisions designed to maximize their own personal gain, rather than the public good. And when it occurs in countries that elect their own leaders, corruption weakens the faith of citizens in the democratic process.
In recent years, policymakers have sought to develop several sets of multilateral rules aimed at reducing corruption. Under the 1997 OECD Convention Against Bribery, 29 OECD member countries and five other signatories each agreed to make it a criminal offense under its own laws to offer or give bribes to public officials. The OECD also set up a Working Group to monitor each country's efforts to implement the convention. Other anti-corruption agreements have been concluded by the OAS, the Council of Europe, and the G-8 Financial Action Task Force. Countries are also discussing a global initiative in the United Nations. Despite this growing interest in measures to combat corruption, anecdotal evidence suggests that it is becoming more common.
CSIS is examining multilateral efforts to combat corruption through a series of working group sessions that began in July. The July 12 meeting focused on the work of the Inter-American Development Bank, the World Bank, and Transparency International in Latin America and other regions. A working group session in the fall will look at the prospects for anti-corruption provisions in a Western Hemisphere free trade agreement and efforts to build upon the OECD anti-bribery convention.
II. CSIS Working Group on Counterfeiting Click here for a summary of the September 28 session
Counterfeiting costs U.S. firms billions of dollars every year, and the problem is getting worse. The International Anti-Counterfeiting Coalition (IACC), a group of consumer products companies, estimates that counterfeiting costs U.S. industries over $200 billion annually. The yearly value of copyrighted U.S. exports now exceeds the combined value of U.S. agriculture, auto, and textile exports. It is not surprising that unlicensed reproduction of music, videos, books, software and other copyrighted products is at an all-time high.
The costs of counterfeiting include lost jobs as well as lost revenues and profits. The U.S. Customs Service has estimated that counterfeiting costs the United States 750,000 jobs. The U.S. Federal Trade Commission has concluded that the American auto industry could hire an additional 210,000 workers if the manufacture and sale of counterfeit auto parts could be eliminated.
Trade liberalization and the increased mobility of capital have helped improved living standards worldwide. But they have also facilitated the increased production, distribution, and sale of fake consumer goods and pirated copyrighted material. As U.S. companies seek increasingly to do business in countries where consumers have limited purchasing power and legal systems are under-developed, opportunities for counterfeiting will continue to grow. In a dialogue between business and government on the growing global problems of counterfeiting of consumer goods and piracy of CDs, music, films and other copyrighted media, all speakers at the September 28 CSIS seminar agreed the most effective tool to combat these abuses is to persuade problem countries that enforcing intellectual property regulations is in their strong national interest. At the same time, USTR said it has limited power to impose sanctions in case of violations in view of competing foreign policy priorities. These insights underscored the need for public-private partnership to motivate local governments towards more rigorous enforcement.
III. Cyberfraud Cybercrime is already a multi-billion dollar business. At a Berlin conference of 100 Internet experts from the G-8 group of industrialized nations in October 2000, German Foreign Minister Joschka Fischer said cybercrime losses have reached 100 billion German marks ($43 billion) in the G-8 countries, including the United States.
Cyberfraud continues to top the list of cyber-crimes. According to the U.S. Federal Trade Commission, Internet-related complaints jumped from 1% of total fraud reported in 1996, to 11% in 1998, and to 25% in 2000. The proliferation of "dot cons" and "electronic con artists" hits merchants hard in the pocketbook: online credit card fraud is expected to cost them $9 billion this year alone.
Cyberfraud refers to both Web-based hoaxes and Internet-assisted scams. Examples include: (1) Internet auction/online sales (the buyer either receives nothing or something markedly different from what was described); (2) identity theft (proprietary information, such as a social security number or credit card number, is obtained from the Net and used to advantage); and (3) securities fraud (market manipulation or "pump and dump" schemes; the sale of false or misleading securities; and fraudulent disclosure statements).
At a June 21, 2001, session entitled "Cyberfraud: Scoping the Problem," CSIS brought together representatives from the Department of Justice, FBI, Federal Trade Commission, Secret Service, Securities and Exchange Commission, Motion Picture Association of America, National White Collar Crime Center, Better Business Bureau Online, Interactive Digital Software Alliance, and PriceWaterhouseCoopers to examine the nature of cyber-fraud threats and to assess what is being done to counter them. |
