Governments around the world, north and south, are on the brink of making a fatal mistake that will cost countless lives: Namely, the failure to make the fight against corruption a key pillar of the Doha trade talks.

The Doha Development Agenda was intended to secure higher living standards around the world, yet the issue of transparency in government procurement is in danger of disappearing from the agenda as the World Trade Organization this week moves to finalize negotiating frameworks. This may make the WTO the only major international organization not to have addressed corruption as a priority issue, unlike the United Nations, World Bank, IMF, OECD, and regional bodies such as the African Union, the EU and the Organization of American States.

No one doubts the importance of removing tariffs that deprive developing countries of access to global markets in cotton and other agricultural goods. But it would be folly to limit talks to opening up trade while turning a blind eye to the corruption of multinational corporations and extortion by corrupt political elites.

According to Dieter Frisch, former director-general of development at the European Commission, bribery in government procurement adds at least 10-20% to the total contract costs. Given that governments around the world spend some $4 trillion each year on the procurement of goods and services, that puts the amount lost due to corruption at a minimum of $400 billion per year. Daniel Kaufmann, governance director at the World Bank Institute, has put a figure on annual bribery world-wide at $1 trillion. If he is right, $400 billion may indeed be an underestimate.

The money wasted on corruption would be enough to run 40 global campaigns against HIV/AIDS, based on what UNAIDS estimates it would cost for an effective global campaign to reverse the trend of the growing spread of the epidemic. The World Bank Institute reckons that a government that tackles corruption and improves the rule of law can reduce child mortality by as much as 75%.

Developed country governments must put more effort into enforcing the OECD Anti-Bribery Convention, which outlawed bribery of foreign public officials. Since coming into force in 1999, there have still been no convictions under new national laws – only under the previously existing U.S. Foreign Corrupt Practices Act. It is time that Western governments followed the example set by prosecutors in Lesotho. In October 2002 Acres International, a Canadian engineering consultancy, was convicted by the High Court of Lesotho, on charges of bribing a local official in connection with the Lesotho Highlands Water Project, an $8 billion scheme to build dams to supply water to South Africa. Convictions on bribery charges followed against Lahmeyer International, a German engineering consulting group, and Schneider Electric, a French company.

The World Bank’s recent move to bar Acres from receiving new Bank-financed contracts for the next three years is a welcome step. But until Western governments provide the necessary political will and financial resources to prosecute their own companies for bribery abroad, developing country governments face a huge task in countering the damaging effects of corruption.

The good news is that more and more developing country governments recognize that economic growth is impossible without tackling corruption. And from Georgia and Malaysia to Kenya, citizens have recently elected politicians demonstrably committed to tackling corruption. The African Union has estimated that corruption costs African economies in excess of $148 billion each year. This amounts to one-quarter of Africa’s GDP. But corruption is not just a problem in developing countries. In France, 37 defendants were accused in 2003 of accepting nearly $457 million from the former state-owned group Elf Aquitaine for personal enrichment and political kickbacks during the late 1980s and early 1990s. In 2002, $13 million was lost to bribes in the procurement of an oversized garbage incinerator in the city of Cologne, Germany.

Transparency in government procurement is essential to prevent, contain and minimize corruption. Many contracts are already earmarked for a particular bidder even before the tender documents have been written. Objective award criteria must be followed by public disclosure of the entire process, including the award decision and the grounds for it. Limited bidding and direct contracting are particularly prone to manipulation and corruption. Exceptions to open competitive bidding must be kept to a minimum and, when applied, should be explained and recorded.

Transparency in government procurement has been on the table at the WTO since 1996. There is a global consensus – enshrined in the new U.N. Convention against corruption signed by more than 100 governments since 2003 – that corruption distorts the market, wastes scarce resources, and leads to increased poverty. What is needed now is to deal with corruption in its own right, without linking it to other more contentious issues such as market access. No matter what a country’s stance on the market-access issue, transparency is essential for trade.

Corruption thrives in secrecy. When corruption prevails, the resultant misallocation of resources hits the pockets of taxpayers and shareholders worldwide. But the most damaging effects of corruption are felt by its victims in the developing world, ordinary people who lack the political or economic leverage to bring about change. At the WTO, all governments owe it to their citizens to insist on concrete agreements on transparency in global trade.

The Wall Street Journal Europe, July 28, 2004