The Foreign Corrupt Practices Act: A New Perspective
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Abstract.TheForeignCorruptPracticesAct (FCPA)was foundto haveno negativeeffecton ofAmericanindustry.Marketshareof U.S.industryincountrieswhere the exportperformance tradedisincentivewas comparedwithU.S.market the FCPAis reportedto be an important shareinothercountries.Nodifferenceswerediscovered. * Perhaps the strongest criticism of the Foreign CorruptPractices Act (FCPA)of 1977 has been the "competitive disadvantage" argument. That is, the law has had a negative impact on U.S. industry relative to European and Japanese competitors, who freely continue to use payments to key foreign officials as a promotional device. The evidence most often cited to support this hypothesis is found in the results of a series of opinion surveys of executives [forexample, Peat, Marwick,Mitchelland Co. 1979; U.S. Department of Commerce 1980; Kim 1981]. In these studies, many of the company representatives polled reported losing business to foreign competitors, and an even larger majoritytended to support the "competitive disadvantage" argument in general. For a more extensive presentation of this point of view, see Kaikatiand Label [1980]. One researcher, however, using similar survey methods, has reported different conclusions. Richman [1979] suggests that often improper payments made overseas are ineffective in gaining business forAmericanfirms. Instead, business has been lost to other American firms; agents or employees have failed to pass along the payments; or the contracts might have been won without the payments. Additionally, he reports, "Quite a few of the firms that have disclosed large improperpayments and have since refused to make such payments are experiencing high, if not record, revenues, profits, and backlogs" [Richman 1979, page 16]. Moreover, Richman indicates that the amount of business lost to foreign competitors because of the FCPAis inconsequential.' Up until now, the resolution of these conflicting reports has been impossible. The GAO has concluded, "Claims that U.S. companies have lost sales, however, are difficult,if not impossible, to substantiate and quantify because of the sensitivity of the bribery subject and the numerous factors affecting overseas business" [U.S. General Accounting Office 1981, page 16]. Recently published trade statistics and other government reports, however, provide the data for a test of the "competitive disadvantage" hypothesis. The results of this test indicate that the FCPA has not negatively affected the competitive position of American industry in the world marketplace. The remainderof this paper is divided into 4 sections. First, the hypothesis to be tested is specified. Second, the methods used in the analysis are described. Third,results are reported. Finally,a discussion and interpretationof the findings are presented, including mention of the limitationsof the approach.
INTRODUCTION
As mentioned previously, there is wide agreement among executives that American firms have lost business to foreign competitors because of the FCPA. Particularlyin those countries where impro
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