Should the state dirty its hands cleaning up trade?

The Export Credit Guarantee Department dilutes its new rules on bribery, but it’s not the ECGD’s place to root out corruption overseas

In a fine piece of ethical pragmatism, the Government has let it be known that it is to take a more relaxed approach to bribery and corruption among British exporters. Last spring, ministers tightened the vetting procedures exercised by the Export Credits Guarantee Department (ECGD), with the moralising tone that has become characteristic of Blairite injunctions, to “ensure that the Government continues to play its part in rooting out wrong-doing in international business”. There followed intense pressure from businesses on the ECGD to oppose the new anti-bribery regulations and the Government has appeared to climb down. The new rules have already been diluted and the ECGD is secretly allowing exporting companies to flout the rules while consultation continues.

The line from the British export industry is that many foreign markets have entirely different standards of inducement for commerce, and that to enforce Northern European business ethics is to hobble our competitiveness in these markets. The argument runs that bribery and corruption are institutionalised in the commercial fabric of many countries and, if we do not do business their way, then we will do no business with them at all. To an extent, I understand the thinking behind this lobby. Many years ago, I ran a charter boat around the Greek islands. One day, I had a visit from a Piraeus harbour official – there was some irregularity regarding our docking procedures and some laborious paperwork to be undertaken to rectify the situation. Alternatively, I could see the official right with a couple of hundred drachmae. The “levy” was duly paid – and then, to my astonishment, he offered me a receipt.

In those days – the late Seventies – bribery was so much a part of commercial life that you accounted for it. I kept a ledger thereafter, so that I could budget for bribes. Greece has, naturally, cleaned up its commercial act in recent years in order to join the European Union, but old habits die hard. This week, EU finance ministers are learning the true extent to which Greece has misreported its budget deficit over recent years – not least during 1998/99, the period during which it was being monitored as to its fitness to join the eurozone. Meanwhile, Portugal is setting up a crack squad of tax inspectors to target evaders – particularly celebrities who flaunt their wealth in glossy magazines and then submit modest tax returns. Next door, in Spain, a friend of mine reports that paying income tax is considered “optional”. And, of course, we are familiar with Calvinist, Northern European attitudes to Italy – the recent scandal at Parmalat is widely seen as typical of Italian attitudes to financial standards.

And that’s just in the EU. The British exporting companies that expect protection and insurance schemes from the ECGD are lobbying for the freedom to trade in altogether riskier regimes, from middle Europe to the Middle East, from the former Soviet Union to South-east Asia, from South America to the developing economies of Africa. The ECGD, which has underwritten £2.9bn-worth of British business during the past financial year, hasn’t refused any company cover for reasons of corruption for at least five years, although bribery allegations are rife.

There is an interesting balance to be struck here between the buccaneering risk-takers of free and less-than-free markets and their desire to be bailed out by a Government department when it all goes wrong. But I would argue that western governments have always behaved a bit like this, with quasi-governmental organisations such as the East India Company and the trade protectionism that went with them. More interesting is to ask what we really want from our ethical standards of business – the answer must be the freedom to do business where we please at our own risk, but with standards of probity that are unlikely to hurt anyone, including ourselves.

To expect that probity to be monitored by the Government is unrealistic. Not only have governments shown that they are not very effective at regulation, such an expectation derogates from our own responsibilities for weighing prosperity against risks and ethics. The US has given us Enron and WorldCom recently; the UK has contributed a line of corrupt and incompetent retail financiers and a pensions crisis. What has been lacking is not so much a regulatory framework as a desire for businesses and the individuals who run them to take personal responsibility for the risk/reward balances they operate.

Business people in general – and retail financiers in particular – talk much about the need to re-establish “trust” in markets. Trust isn’t generated by regulations, approved corruption from the ECGD or advertising that says “Trust us”. It is generated by people speaking with authority, which is earned through their behaviour. And that is and always will be a personal – rather than a corporate or political – responsibility.

George Pitcher is a partner at communications management consultancy Luther Pendragon

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