Trump Administration Is Walking Away from Good Governance in Oil, Gas, and Mining

March 27, 2017 3:15 PM

In the latest rebuff to the international community, the Trump administration is walking away from the successfully negotiated global standard to promote open and accountable management of oil, gas and mining, especially in poor countries. The Extractive Industries Transparency Initiative (EITI) is a groundbreaking multistakeholder initiative to prevent corruption, conflict, human rights violations, and environmental degradation while promoting good governance around extractive industries. The United States had been working toward compliance since 2012. The Trump administration, however, canceled all remaining meetings with nonprofit and industry groups related to EITI, and weekly Department of Interior conference calls related to EITI have been cancelled as well.

The EITI rejection, along with the earlier congressional disapproval of the Cardin-Lugar Amendment, which required oil, gas, and mineral companies listed on US stock exchanges to disclose billions in payments to foreign-country governments, signals a step back from the US government’s commitments to help reform a suite of industries with less-than-stellar records in lifting what is known as the “resource curse.”

EITI now has 50 country participants, and over 80 of the world’s largest oil, gas, and mining companies, including BP, Chevron, ExxonMobil, Royal Dutch Shell, and De Beers, are EITI-supporting stakeholders. Additionally, over 80 investment institutions support EITI as signatories of the Investors’ Statement on Transparency in the Extractives Sector.

EITI works in two ways: disclosure of payments and revenues, which is supposed to reduce corruption, and the establishment of country-level multistakeholder bodies, which absorb and circulate this information to enforce accountability.

Stepping away from EITI is a bad idea for at least three reasons. First, EITI is working. A multinational team of researchers in Canada and Norway found that EITI has been broadly successful in establishing transparency as a global business norm and in setting up standards for auditing, reporting, and involving civil society in the country assessment process. EITI is less than 15 years old, and many participating countries have been involved for substantially less time. It is not certain whether the early successes will translate into better governance and environmental, health, and economic outcomes for people in EITI-participating countries, but EITI has promoted investment and increased aid flows to participating countries, providing an incentive to clean up their operations.

Second, the United States abandoning the EITI puts the process in jeopardy for other countries that badly need it. In 2013, the United States committed through the G-8 to aid Myanmar—a mineral-rich yet poor country in the midst of a complex transition to democracy from a long history of ethnic conflict, human rights abuses, and military rule. In return, Myanmar is improving transparency around extractives. Putting the brakes on US attempts to gain certification places this cooperation in doubt. Without the EITI as an external policy anchor, many of the hard-fought policy reforms of the past five years may vanish.

Third, US abandonment of EITI and the Cardin-Lugar Amendment may harm, not help, the competitiveness of US firms. As transparency becomes a global norm, host countries in the developed and developing world are increasingly adopting transparent practices. Countries from Peru to Zambia have dealt with domestic political fallout from seemingly “no-strings-attached” Chinese-financed extractive projects recently. Working with more transparent companies translates to more sustainable and peaceful domestic politics in host communities. If US companies are perceived as less transparent than their Europe-, Canada- and Australia-based counterparts—Australia announced participation in EITI in 2016—they may lose business.

Despite the Trump administration’s move, many major US extractives firms like Alcoa, ExxonMobil, and Newmont Mining will still participate as EITI Supporting Companies and as stakeholders in countries where they have investments. US civil society will continue to play a prominent role in promoting transparency and good governance around extractives, both at home and abroad. But abandoning EITI at this point is bad for US firms and for countries struggling to turn their resource curse into a blessing.