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TACKLING CORRUPTION IN THE TRADING SYSTEM THROUGH A CULTURE OF INTEGRITY

corruption

TACKLING CORRUPTION IN THE TRADING SYSTEM THROUGH A CULTURE OF INTEGRITY

No Disagreement Here

For decades, economists have extolled the virtues of the rule of law as a critical factor in leveling the playing field through a framework of rules and regulations that are easy to understand and evenly, logically and fairly applied to all participants in an economic system. This central premise is reflected in the principle of “predictability through transparency,” one of three pillars of the World Trade Organization (WTO) and the global trading system. At the heart of this focus has been an emphasis on reducing the role that corruption can play in the administration of laws, function of government, conduct of business, and protection of citizen rights.

Back in an October 1996 address to the Board of Governors at the Annual Meetings of the World Bank and the International Monetary Fund, then World Bank President James Wolfensohn gave a groundbreaking speech in which he described corruption as a cancer and committed the Bank to strengthen its internal controls and supporting the international fight against corruption.

“…corruption diverts resources from the poor to the rich, increases the cost of running businesses, distorts public expenditures, and deters foreign investors…it erodes the constituency for aid programs and humanitarian relief.”

– James Wolfensohn, President of the World Bank, October 1996

The Heavy Toll of Corruption

Significant attention has been paid to the goal of reducing corruption, particularly for emerging economies. The World Economic Forum calculates the global cost of corruption is at least $2.6 trillion, or roughly 5 percent of global GDP. For emerging economies alone, the UN estimates that corruption costs these countries some $1.2 trillion annually through bribery, theft and tax evasion.

Cost of Corruption

It is also widely recognized that global corruption can undermine the benefits of agreements negotiated to introduce predictability and transparency into the trading system. Former WTO Director-General Pascal Lamy described corruption in the international trading system as tantamount to “a hidden increase of the cost of trade.” Within the UN Sustainable Development Goals, the global community identified the promotion of the rule of law as a key priority for development through Goal 16, which is dedicated to promote just, peaceful and inclusive societies, and to achieve this goal by 2030.

Given the consensus among stakeholders within the international trade community, the question is: how to effectively combat corruption to achieve our shared goals of rules and laws that are applied objectively, consistently and equitably to all?

Since the time of Wolfensohn’s catalyzing speech, governments, the business community, civil society and international institutions have rallied around global efforts to create initiatives and mechanisms to mitigate the scourge of corruption. Member states and international organizations drafted and signed anti-corruption conventions through the Organization for Economic Cooperation and Development (OECD) and the United Nations (UN), and established regional conventions and working groups in Africa, the Americas and Asia.

Corruption Agreements Table

A Comprehensive Approach to Dismantling Corruption

In spite of the proliferation of anti-corruption instruments in regional and international organizations, the issue of corruption persists as a challenge. Punitive measures only go so far in achieving anti-corruption aims. A more comprehensive approach to dismantling corruption centers on enhancing integrity and ethics in an effort to affect the cultural practices and norms that perpetuate corruption.

This change was reflected in the 2017 OECD Recommendation of the Council on Public Integrity that reframed the anti-corruption strategy to focus on promoting the essential societal pillar of integrity as a sustainable response to the global problem of corruption. The adoption of these recommendations was part of a deliberate shift to go beyond ad hoc efforts toward a more comprehensive and strategic approach to promoting integrity through systems, culture, and accountability.

Defining Public Integrity

The OECD defines the term public integrity as “a consistent alignment of, and adherence to, shared ethical values, principles and norms for upholding and prioritizing the public interest.” Consistent with describing public integrity as an aspirational goal (versus the punitive connotation of combatting corruption), this definition grounds the work of promoting integrity in global efforts to make government functions more effective, economies more accountable, and societies more inclusive by involving all stakeholders in the effort to improve governance and strengthen the rule of law.

In May, the OECD took the next step in publishing the OECD Public Integrity Handbook. The handbook details best practices, principles and concrete actions for promoting a culture of integrity in government functions with an emphasis on generating dialogue between business, government and civil society to promote greater stakeholder collaboration in upholding public integrity values. The report expands on the 13 public integrity recommendations articulated in 2017 and goes a step further by translating those principles into practical measures governments can implement to institute change.

The OECD describes the handbook as a roadmap to help governments identify what integrity looks like and why it is important to take a whole-of-society approach in building public trust. The handbook can thus be viewed as a toolkit that helps anti-corruption advocates undertake the hard work of creating the ‘right relationship’ between government, citizens, business, and civil society.

Public Integrity

Public Integrity is Important to Trade and Investment Flows

International organizations and governments are not the only institutions concerned about combatting corruption, creating a culture of integrity, and strengthening the rule of law.

These issues are equally significant for the private sector in an increasingly globalized world as they are determinant of the business environment. This is why trade agreements have been grounded in rule of law principles, and have incorporated transparency and anti-corruption components to instill investors with greater confidence they can compete and operate in global markets. As noted by The World Justice Project, “uneven enforcement of regulations, corruption, insecure property rights, and ineffective means to settle disputes undermine legitimate business and deter both domestic and foreign investment.”

Companies make trade and investment decisions based on where they have confidence in the integrity of public and private institutions and where there is fairness, enforcement and proper adjudication of the law. In a 2017 Business Pulse Survey conducted by the U.S. Chamber of Commerce and the Association of American Chambers of Commerce in Latin America and the Caribbean, 31 percent of respondents described the rule of law as the “most important” issue to address for business, while 45 percent of executives characterized strengthening the rule of law and fighting corruption as the most important issues to be addressed to enhance economic growth in the region.

Corruption Quote

It is this emphasis on promoting public integrity that underpinned the inclusion of an anti-corruption chapter in the United States-Mexico-Canada Agreement (USMCA) that entered into force on July 1, 2020, representing one of the first times governments have formally committed to combat bribery and corruption in a trade agreement. The private sector has also prioritized an anti-corruption component in the bilateral trade negotiations now underway between Brazil and the United States.

Given the private sector’s interest in eliminating corruption from global trade, the U.S. Chamber recently co-hosted a public forum with the OECD entitled “The Role of Public Integrity in Promoting the Rule of Law” to examine the importance of the public integrity movement for global commerce. Julio Bacio Terracino, Acting Head of the OECD’s Public Sector Integrity Division, joined government officials, senior executives and the U.S. Chamber for a dialogue to review the OECD recommendations, discuss practical considerations outlined in the new handbook, and examine how tools like this are helpful in creating trade and investment conditions that enable business success.

Public Integrity through the Private Sector Prism

There are a number of public-private interactions the OECD has flagged as vulnerable to corruption or solicitation of bribes, notably in customs clearance and trade facilitation, public procurement, licensing and permitting processes, and public infrastructure contracting. During the forum, executives highlighted the critical role that governments play in creating the conditions for trade and investment by leveling the playing field for all actors, creating certainty, operating transparently, upholding the sanctity of contracts, and enabling access to justice.

Through its Coalition for the Rule of Law in Global Markets, the U.S. Chamber defines the concept of the rule of law through the prism of the private sector by articulating the five factors that determine the ability of any business to make good investment and operating decisions. These elements are transparency, predictability, stability, accountability and due process — each of which requires adherence to the shared ethical values, principles and norms that define public integrity.

The whole-of-society focus of the OECD Public Integrity Handbook recognizes the private sector’s role as a co-creator of the rule of law and acknowledges that all facets of society must commit and contribute to building a culture of integrity. This approach aligns with the Coalition’s vision of business working in concert with governments, civil society, and international organizations to promote remedies that will advance the rule of law.

Fostering a culture of integrity in the global trading system that enables inclusive economic growth requires all actors to take concrete steps to maintain open, transparent and meritocratic environments where there is proper enforcement and adjudication of the law. These actions include addressing structural obstacles to trade and investment, simplifying regulatory frameworks, harnessing technology to increase transparency in public functions like procurement, permitting and licensing processes, supporting trade facilitation efforts that strengthen and make customs regimes more efficient, and extending legal investment protections. It is only through this collaborative action and partnership among all stakeholders that a world where corruption is vanquished and a culture of integrity thrives can truly be possible.

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Kendra Gaither

Kendra Gaither is the Executive Director of the Coalition for the Rule of Law in Global Markets at the U.S. Chamber of Commerce. Over her career spanning two decades, Kendra has specialized in international trade and investment as a career diplomat with the State Department focused working in Sub-Saharan Africa and the Americas, and global public policy innovation through strategic partnerships at Carnegie Mellon University.

This article originally appeared on TradeVistas.org. Republished with permission.

counterfeit goods

Dubai Customs Tackles Counterfeit Goods Issue with Sustainable Approach

Dubai Customs took piracy prevention and sustainable practices to a new level earlier this month when they recycled 1,906 counterfeit items including sports shoes, mobile headphones, and computers, according to a release from July 9th. This success represents one of many from Dubai Customs in addressing and putting a stop to the process of counterfeit goods in the region.

“The IPR Department works closely with different partners to curb counterfeiting in line with TRIPS agreement,” said Yousef Ozair Mubarak, Director of IPR Department. “The damage caused by counterfeit goods to the economy, environment, and even perhaps our overall quality of life should be something of a given for most people.”

“Perhaps Intellectual Property rights-holders are those most likely to feel the true pinch of this rogue industry, but when one considers the big picture it becomes clear that everyone is liable to be affected by counterfeiting and piracy,” he added.

Thanks to collaborative efforts between Color Code recycling company, CEO of Brand Owners’ Protection Group Malik Hanouf, and representatives from Air Cargo Centers Management, IPR Dispute Section, and External Relations Section, the items were successfully removed from further processing and used to support sustainable practices for the IPR Department at Dubai Customs.

“We take care of all information that helps us thwart all types of smuggling to protect our society from the hazards of illegitimate goods,” stated Shuaib Al Suwaidi, Director of Customs Intelligence Department. “Counterfeit goods are not welcome in Dubai and we work together with different partners to ensure they don’t enter the emirate.”

Photos provided by Dubai Customs

IP DEFICIENCIES

TRADE POLICY’S NAUGHTY AND NOTORIOUS LIST FOR IP DEFICIENCIES

Making a List

The Office of the US Trade Representative (USTR) published its 2020 “Special 301” and “Notorious Markets Review” annual reports on April 29. The Special 301 report identifies trading partners that do not adequately or effectively protect and enforce intellectual property (IP) or otherwise deny market access to U.S. innovators. Thirty-three countries were cited this year as presenting the most significant concerns.

The Special 301 report categorizes countries based upon the severity of the IP deficiencies as assessed by various U.S. government agencies and the private sector. The ten countries USTR placed on its “Priority Watch List” will be subject to an action plan to resolve the issues that caused this designation. The remaining 23 countries have been placed on the “Watch List” because of IP deficiencies, but deficiencies that are not as detrimental to U.S. economic interests as those on the Priority Watch List.

2020 PWL Countries on Map (1)

The Special 301 report also indicates countries that will be subject to an “out-of-cycle” review. Generally, this means that rather than waiting until the annual review occurs, USTR will conduct interim reviews of specific IP deficiencies at various times during the year to assess a country’s progress in remedying the concern. This year, USTR designated Saudi Arabia as a Priority Watch List country and also indicated it would be subject to an out-of-cycle review in 2020. Malaysia is not on either the Priority Watch List or the Watch List, but is identified as being subject to an out-of-cycle review because of concerns lingering from 2019 about its enforcement regime.

Checking it Twice

The 2020 Special 301 report also identifies “significant cross-cutting IP issues” deserving of special attention. These include: IP protections, enforcement and market access for pharmaceutical and medical devices; restrictive patentability criteria; inadequate border measures or lack of customs enforcement authority, inability to stop in-transit shipments and to destroy infringing goods; online and broadcast piracy affecting the copyright industries, government use of unlicensed software, inadequate protection of trade secrets, and market access barriers due to EU-type geographical indications implementation.

Tech Transfer and Online Infringement Top the List

In addition to these persistent cross-cutting issues, technology transfer and online IP infringement have become a key focus of U.S. concerns.

Technology transfer requirements triggered the investigation and imposition of tariffs on China-origin goods after the United States concluded that China used joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies. But China is not alone in this regard. The Special 301 report notes that U.S. IP owners operating in foreign markets find “an increasing variety of government measures, policies, and practices that require or pressure technology transfer from U.S. companies. These measures are sometimes styled as means to incentivize domestic ‘indigenous innovation.’ In practice, they disadvantage U.S. companies, requiring them to give up their IP as the price of market entry.”

The technology transfer issue may be exacerbated during a time of economic downturns and hardships as they are being experienced globally today. Thus, U.S. companies may need to be more willing to openly challenge governments that impose these requirements in the future.

The issue of IP enforcement is a mainstay in the report year after year. The report heading, Border, Criminal and Online Enforcement, now refers to traditional enforcement shortcomings (border and criminal) as well as more recent challenges posed by online infringement.

The Internet’s impact on IP infringement is significant. Consumer demand supports massive production of counterfeit goods. The volume of counterfeits, in turn, spurs increased criminal conduct in producing and distributing the counterfeit goods. The Internet provides a vehicle for ordering goods and conducting financial transactions that feed the illegal activity.

Underscoring the enforcement challenge, U.S. Customs and Border Protection (CBP) reported that in fiscal year 2019 it processed approximately 1.8 million express consignment and international mail shipments every day (over 600 million in a year). CBP also reported that in fiscal year 2019, over 90 percent of the 27,599 IP seizures occurred in the express carrier and international mail environments.

IP seizures of international mail

Gaining Notoriety

USTR’s Notorious Markets List identifies online and physical markets that “reportedly engage in, facilitate, turn a blind eye to, or benefit from substantial copyright piracy and trademark counterfeiting.” Produced as the result of an annual Review of Notorious Markets for Counterfeiting and Piracy, this year’s report cited 38 online markets and 34 physical markets as rife with pirated and counterfeit goods. The report also explored the nexus between online piracy and malware.

While CBP reports enforcement challenges at the U.S. border, USTR’s Notorious Markets report underscores the economic threats posed by online and physical markets abroad that raise concerns because the “scale of infringing activity in these markets can cause significant harm to U.S. intellectual property (IP) owners, consumers, legitimate online platforms, and the economy”.

Notorious markets

The 2020 Notorious Market Review, while maintaining a focus on the distribution of pirated content and counterfeit goods online, dove deeper into challenges related to counterfeit and pirated goods on e-commerce platforms and third-party marketplaces. Emerging piracy models include illicit streaming devices and other portals and apps that harm the digital marketplace for legitimate music, television and movies.

The report identifies specific social media platforms that contribute to the proliferation of infringing goods available on the internet. USTR, in identifying specific platforms, encourages these platforms to begin to address problems of IP infringement by “establishing industry standard IP enforcement policies, increasing transparency and collaboration with right holders to quickly address complaints, and working with law enforcement to identify IP violators”. These recommendations are consistent with recommendations that were issued in the Department of Homeland Security’s January 2020 report, Combating Trafficking in Counterfeit and Pirated Goods.

Seller Beware

USTR’s annual reporting regarding the state of IP in countries around the world is a valuable tool for U.S. enterprises considering commercial activity abroad. Indeed, both reports are the product of U.S. industry engagement with government to provide valuable information about their experiences.

Due to the value of IP assets, the need to assess risk to an IP portfolio is an absolute necessity in today’s global commercial environment. USTR’s annual reports provide enterprises with an opportunity to determine how and whether countries have made progress over the past few decades to improve their IP environment for businesses or whether significant business risks remain.

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Tim Trainer was an attorney-advisor at the U.S. Customs Service and U.S. Patent & Trademark Office. He is a past president of the International AntiCounterfeiting Coalition. Tim is now the principal at Global Intellectual Property Strategy Center, P.C., and Galaxy Systems, Inc.

This article originally appeared on TradeVistas.org. Republished with permission.
slavery

“Free” Trade and Modern Slavery

Modern Slavery

It’s more common than you might think. Seeking a means to provide for themselves and their families, millions of people routinely put their fate in the hands of brokers who promise factory, fishing, farming, hospitality or healthcare jobs overseas. They leave their country, greeted in a strange land not by honest employers but by traffickers. They are now bonded laborers who are told they must work to pay off their debt under threat of violence. Sometimes that “work” is commercial sex. Against their will, by force, fraud or coercion, they have become slaves.

The International Labor Organization estimates that 20.9 million men, women and children are victims of forced labor at any point in time. Although a person does not need to be physically transported to be subject to slavery, 29 percent of victims end up in forced labor after moving across international borders.

$150 Billion in Illicit Profits – Every Year

In small numbers, we should be concerned. But this is no small problem. According to the Alliance to End Slavery and Human Trafficking, human trafficking is one of the largest criminal enterprises in the world, generating an estimated $150 billion in illicit profits annually.

In the United States, January has been designated National Slavery and Human Trafficking Prevention Month. To recognize the 20th anniversary of the landmark Trafficking Victims Protection Act of 2000 (TVPA), the White House held a Summit on Human Trafficking on January 31.

The summit culminated in the signing of an executive order to improve prevention, increase prosecutions, and strengthen protections for victims in the United States, recognizing that “millions of individuals are trafficked around the world each year — including into…the United States.”

To combat it requires a comprehensive government effort involving labor and criminal enforcement, public services to aid victims, counter-trafficking policies and programming in overseas assistance, intelligence and diplomatic coordination – and trade policy.

Human Trafficking Across Borders Stat

Trade Policy and Trafficking

As far back as the Tariff Act of 1930, the United States prohibits the importation of foreign goods made by means of slave labor. But more recently, Congress has debated whether the United States should grant trading privileges to governments that do not respect human rights or fail to combat trafficking. That question featured in the annual debate over whether to grant “most favored nation” trading status to China before it entered the WTO. It arose again when some Members of Congress questioned whether Malaysia should be included in the Trans-Pacific Partnership negotiations.

In January 2018, Senators Menendez and Portman introduced the Anti-Trafficking Act to suspend countries from U.S. trade preference programs for one year for failing to address trafficking.

The U.S. State Department spearheads an annual Trafficking in Persons (TIP) Report to assess the extent to which our and other governments are making efforts to meet minimum standards to eliminate human trafficking. On that basis, countries are placed into one of three tiers or on a watch list. “Tier 1” countries are deemed compliant with minimum standards under TVPA for making “serious and sustained efforts” to eliminate human trafficking.

On the other end of the spectrum, governments on “Tier 3” do not fully meet the minimum standards and are not making significant efforts to do so. A country in Tier 3 may be restricted from receiving certain U.S. foreign aid, though the president may issue a partial or full waiver, particularly if withholding such assistance would cause adverse effects to vulnerable populations. The concept of withholding benefits to Tier 3 countries has also been applied to trade.

A “Principal” Trade Negotiating Objective

The Bipartisan Congressional Trade Priorities and Accountability Act of 2015 as amended (the legislation that gives the executive branch its trade negotiating mandate and authority) added a principal trade negotiating objective on human rights. The expedited voting procedures afforded to trade deals under the Act can be conditioned on progress toward achieving this objective.

Principal negotiating objective smaller font

More powerful a lever, the Act explicitly prohibits applying so-called “fast track” voting on trade agreements with countries ranked on Tier 3 of the TIP Report.

Tier 3 exception smaller font

However, the Act was amended to allow the President to submit a waiver to Congress. The waiver is not meant to rest its case on new, untested commitments. Rather, it should describe “concrete steps” that country has taken to implement recommendations in the TIP report and should include supporting documentation. To date, no country has been denied a trade deal on this basis.

Free Trade Begins with Free

Trafficking in humans is an abomination and the worst form of illicit trade. Some policymakers believe that trading with the United States is a powerful incentive to government action and is therefore an effective tool to deploy as a punishment or carrot to improve human rights. Others argue that engagement in trade opportunities should not be withheld, lest it hold back economic progress in places and for people who need it the most.

Human rights as customary international law came into being and “grew up” alongside the international trade regime after WWII. The primacy of human rights over trade liberalization obligations is consistent with trade law itself, which explicitly provides exceptions where necessary to protect human life.

Wherever the debate comes out on how to use trade agreements and policies to promote human rights, we can all agree that free trade begins with free. The human right to be free will always come prior to free trade.

Dive Deeper: Trafficking in Persons Report 2019

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.
sand trade

WAVE OF GLOBAL SAND TRADE MAY BE DEPLETING BEACHES

Not just sand castles

It’s September, which officially marks the end of summer. Kids have headed back to school and the sandcastles are long since washed away from the shore. But you’re never really far from the beach. It’s actually all around you since most of the infrastructure in your homes, schools and offices is made of sand.

Sand is a critical component in many of the products we depend on every day: glass, concrete, asphalt, computer chips, and more. We use up to 50 billion tons of it every year, making it the second-largest resource extracted and traded by volume each year, behind water. Despite our necessity for sand, there are no international conventions that specifically regulate the extraction, use and trade of land-based sand. As demand outpaces supply, shortages have even led to illicit trade in sand in some regions of the world.

The many uses of sand

Sand is made of rocks that have eroded over thousands of years. There are many different types of sand and each has its own purpose. Sand from riverbeds is the most desired for construction materials like cement and asphalt. Silica sand from quartz is used for glass, ceramics and electronics. Marine sand is used for land reclamation. The list goes on.

Sand is also pivotal for oil and gas companies for hydraulic fracking. Oil companies mix silica sand (also called “frac sand”) with water and shoot it into shale rocks to break them apart and access the oil and natural gas inside. Companies recently discovered that using more silica sand makes the fracking process more efficient. This has led to increased U.S. consumption of industrial sand and gravel, up 13 percent to 110 million tons consumed in 2018.

Despite increased consumption of sand, the United States is still the world’s top exporter, responsible for nearly 30 percent of the world’s natural sand exports in 2018. Top destinations for U.S. sand exports include Canada, China, Japan and Mexico.

Sand trade top exporters

As cities grow, so does demand for sand

Demand for sand is expected to increase in the coming years, especially in developing countries faced with increasing populations, urbanization and economic growth. Nearly two-thirds of global cement production happens in China and India, reflecting their rapidly urbanizing populations. China alone produced more cement last year than the rest of the world combined.

In the past, sand trade has stayed mostly regional because it’s heavy to transport. But in the coming years, as demand outpaces supply, international trade in sand is forecasted to grow at 5.5 percent each year, according to the United Nations Environment Program (UNEP). Resource-constrained countries will be particularly dependent on sand imports to meet the needs of their rapidly growing urban areas.

Singapore is the world’s largest sand importer, importing an estimated 517 million tons of sand over the last 20 years. Most of this sand came from its Southeast Asian neighbors including Indonesia, Malaysia, Thailand and Cambodia. Singapore has used this sand to increase its land area by 20 percent over the last 40 years, but Singapore’s thirst for sand has led to tensions in the region.

According to the UNEP, sand exports to Singapore were reportedly responsible for the disappearance of 24 Indonesian sand islands. Indonesia formally banned sand exports to Singapore in 2007. In the last two years, Cambodia and Malaysia have also banned sea sand exports citing environmental concerns. Malaysia’s 2018 ban will likely have a big impact on Singapore, since Malaysia was the source for 96 percent of Singapore’s sand imports last year.

Another top importer of sand in the region is the United Arab Emirates, which is surprising given its prime desert location. Desert sand, however, is not useable for construction purposes since desert winds make it too fine and smooth. The UAE is thus dependent on sand imports to continue making roads, buildings and other infrastructure in Dubai. The UAE imported over two million tons of natural sand in 2018, according to the International Trade Centre.

Sand trade top importers

Sand mafias are stealing entire beaches

The growing need for sand has led to illicit sand trade and “sand mafias” in developing and emerging economies across the world. Stories abound of beaches disappearing overnight, rivers drying up and more.

In Morocco, an estimated 10 million cubic meters per year— about half the sand the country uses— is illegally stripped from its coast. The erosion has caused serious issues for the country’s tourism sector, as many buildings are now at risk from beach erosion due to illegal sand mining.

“Sand mafias” are another example of the perils of the illegal sand trade. Due to the increasing price of sand, organized crime surrounding it is also thriving, according to the UNEP. Activists who speak out against these sand mafias that illegally strip river beds and coasts in countries like India have been threatened and even killed, the organization says.

Likes grains in an hourglass

We may take sand for granted, but we’re extracting it far faster than nature can replenish it. Most major rivers across the world have already lost between 50 and 95 percent of their natural sand and gravel, the UNEP says. Matters are made worse by irrigation and hydroelectricity dams, which also reduce the natural amount of sediment flowing in rivers. These factors can cause serious environmental issues, including erosion, pollution, flooding and droughts.

Despite its importance worldwide, sand is one of the least regulated resources today. There are no international conventions regulating the extraction, use or that specifically govern trade in land-based sand. Rules for sand extraction are largely written at the national and regional levels, leading to a variation of standards and different levels of enforcement across the world.

The UNEP is trying to change this by calling on international organizations, national governments, private sector companies, civil society groups and local communities to come together and have a global conversation on sand extraction. As the world’s sand grains continue to slip quickly through the hourglass, the time for that conversation should be sooner rather than later.

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Lauren Kyger

Lauren Kyger is Associate Editor for TradeVistas. Prior to joining TradeVistas, she was a Research Associate at the Hinrich Foundation focused on international trade issues. She is a Hinrich Foundation Global Trade Leader Scholar alumna, earning her Master’s degree in Global Business Journalism from Tsinghua University in Beijing. She received her Bachelor’s degree from the Walter Cronkite School of Journalism and Mass Communication at Arizona State University.

This article originally appeared on TradeVistas.org. Republished with permission.

From Fashion Textiles to Money Laundering

The owners of Los Angeles-based import and export textiles company, Pacific Eurotex, were sentenced to federal prison time and hefty liabilities on December 18, 2018 for their involvement with laundering money related to international drug cartels, according to a release from U.S. Immigration and Customs Enforcement.

Formally known as the “Black Market Peso Exchange” scheme, it’s known as one of the primary strategies drug cartels use to gather proceeds resulting from illicit drugs in the United States. The strategy mechanism enables drug traffickers to eventually convert proceeds into another form of currency through internationally shipped goods.

Brothers Morad and Hersel Neman (CEO and CFO) pleaded guilty to filing false tax returns in addition to other IRS and defrauding-related crimes. Both were sentenced to more than a year in federal prison with six months of home confinement thereafter. Additionally,  Morad “Ben” Neman is jointly liable with the company to forfeit $3,178,230 million to the government while CFO Hersel Neman is liable for approximately $370,000. The company faces three years of probation and a $400,000 fine.

According to court documents the textiles company, “Received, laundered and structured approximately $370,000 in bulk cash delivered on four separate occasions over 2½ months in 2013 by an undercover agent posing as a money courier.”

The arrests originally occurred in 2014 after a Fashion District investigation using the “Black Market Peso Exchange” tactic resulted in law enforcement seizing over $100 million in laundered drug money.

Source: U.S. Immigration and Customs Enforcement 

 

Ecuador and Illicit Trade

Ecuador currently ranks 60th out of 84 countries evaluated for illicit trade prevention or enabling according to the Global Illicit Trade Environment index, serving as a primary location for illicit trade inclusive of tobacco, alcohol, textiles and untaxed market imports.

Illicit trade concerns were the primary focus during a recent conference with Transnational Alliance to Combat Illicit Trade (TRACIT) this week. During the conference, government officials and stakeholders were confronted on the ranking and the current issues within the illicit trade region in an effort for increased regulation.

“The findings are intended to help policy makers better understand the regulatory environment and economic circumstances that enable illicit trade,” TRACIT Director-General Jeffrey Hardy said. “It can help the government take steps to improve Ecuador’s defense against the import of illicit products and to prevent extraction and exploitation of timber, marine and mineral resources.”

Ecuador was presented a set of regulatory recommendations in an effort to combat illicit trade during the conference. Some of the recommendations included:

-Strengthen interagency cooperation at the regional and national level

-Intensify public-private coordination

-Ensure the adoption and full enforcement of anti-money laundering regulations

-Improve public awareness and education on the threat of illicit trade.

“Ecuador already has many important laws in place to address Illicit trade, money laundering and corruption,” Hardy said. “But findings from the Global Illicit Trade Environment Index show that much more attention must be given to enforcement and improved regulation. Ecuador can no longer afford to look the other way on illicit trade.”

Source: TRACIT

Illicit Trade: The Fight Continues

The United Arab Emirates is the latest region of focus in the fight against illicit trade after the The Transnational Alliance to Combat Illicit Trade (TRACIT) asked for increased efforts this week during a conference in Abu Dhabi.

The conference, hosted by Global Trade Development Week, consisted of industry leaders analyzing the illicit trade vulnerabilities in the wake of increased trafficking in the region of Jebel Ali Free Trade Zone.

The United Arab Emirates currently ranks 34th globally with an overall rank of 68/100 for structural capability to effectively address illicit trade according to 2018 Global Illicit Trade Environment Index.

“I’m not surprised that UAE has scored in the top third of our global rankings,” TRACIT Director-General Jeffrey Hardy said. “The country has demonstrated its commitment to wiping out corruption, standing up against money laundering and strengthening laws to fight against counterfeiting and other forms of IP Theft.”

With successful initiatives to-date for the region, Hardy continues to adamantly encourage the region to combat illicit trade efforts through  improved customs operations, rationalizing tax policies and overall cleaner operations in Free Trade Zones.

“Strengthening cooperation with neighboring countries and working with international organizations like INTERPOL can rapidly improve UAE’s ability to defend against illicit trade,”  Hardy said. “Similarly, the government can shift public perception and understanding of the negative impacts of illicit trade by improving public awareness and education.”

Source: tracit.org