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Five Questions with Geraldine Knatz: The Panama Canal Expansion and the Evolution of Global Trade

by Guest Blogger for Shannon K. O'Neil
People wave at a Chinese COSCO container vessel, as it arrives to Cocoli locks after crossing the Panama Canal to the Pacific side, during its first ceremonial transit of the new Panama Canal expansion project in Cocoli on the outskirts of Panama City, Panama June 26, 2016 (Reuters/Carlos Jasso). People wave at a Chinese COSCO container vessel, as it arrives to Cocoli locks after crossing the Panama Canal to the Pacific side, during its first ceremonial transit of the new Panama Canal expansion project in Cocoli on the outskirts of Panama City, Panama June 26, 2016 (Reuters/Carlos Jasso).

As the first ship goes through the expanded Panama Canal, the Development Channel sat down with Geraldine Knatz, former director of the Port of Los Angeles and now a professor of policy and engineering at the University of Southern California’s Price School of Public Policy. Dr. Knatz talked about changes in the shipping industry, trends affecting U.S. ports, and what the canal expansion will mean for trade globally.

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This Week in Markets and Democracy: Ericsson Corruption Probes, EU Spurs Antigraft Action, Modi Courts FDI

by Shannon K. O'Neil
A banner reading "Corruption kills" is placed among candles, lit in memoriam of more than 50 people killed when a fire erupted during a rock concert in a night club in Bucharest, at a memorial in Timisoara, Romania in this November 1, 2015 picture. Big public demonstrations following a fire in a Bucharest nightclub in which more than 50 people died reflect growing anger at a culture of official graft in one of Europe's most corrupt countries (Reuters/Inquam Photos). A banner reading "Corruption kills" is placed among candles, lit in memoriam of more than 50 people killed when a fire erupted during a rock concert in a night club in Bucharest, at a memorial in Timisoara, Romania in this November 1, 2015 picture. Big public demonstrations following a fire in a Bucharest nightclub in which more than 50 people died reflect growing anger at a culture of official graft in one of Europe's most corrupt countries (Reuters/Inquam Photos).

Corruption Probes Spook Ericsson Investors
Both U.S. and Greek authorities are taking on Ericsson AB, one of the world’s biggest telecoms companies, for alleged corruption. The United States is investigating its operations in both China and Romania for potential Foreign Corrupt Practices Act (FCPA) violations. The Greeks summoned seven current and former executives over whether the Swedish multinational bribed government officials to win a $597 million defense contract in 1999. These inquires come at a time when the company faces stiff competition, declining sales, and falling share prices. Ericsson is now trying to ease investors’ concerns, hoping the revelations do not get worse.

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This Week in Markets and Democracy: U.S. Hunts Stolen Uzbek Assets, Bribery Still Pays, Uganda’s Democracy Backtracks

by Shannon K. O'Neil
A man passes by a poster of Uganda's President Yoweri Museveni and a poster of opposition leader Kizza Besigye in town of Kaabong in Karamoja region, Uganda, February 17, 2016 (Reuters/Goran Tomasevic). A man passes by a poster of Uganda's President Yoweri Museveni and a poster of opposition leader Kizza Besigye in town of Kaabong in Karamoja region, Uganda, February 17, 2016 (Reuters/Goran Tomasevic).

United States Hunts Stolen Uzbek Assets
The U.S. Department of Justice (DOJ) is having a hard time collecting foreign officials’ ill-gotten gains. After finding evidence of bribery, the DOJ still needs to physically seize assets. The latest setback comes in the case against the Uzbek president’s daughter, Gulnara Karimova, for accepting bribes from Russian telecoms company VimpelCom. In the current round the DOJ and Uzbekistan are vying for some $114 million stashed in Karimova’s Irish bank accounts. This is just a small part of the $850 million the DOJ believes Karimova hid in accounts across Belgium, Luxembourg, and Ireland. If they get the money the Uzbek government, led by Karimova’s father, is already demanding its “rightful” return to Uzbekistan, the “victim” of corruption.

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This Week in Markets and Democracy: Labor Rights in Supply Chains, Bank Secrecy Act, and the Kimberley Process

by Shannon K. O'Neil
A man displays a rough diamond, from the Boda region, for sale in Bangui May 1, 2014. Despite a 2013 ban on diamond exports by The Kimberley Process, a global watchdog set up to stop the trade in "blood diamonds", rough diamonds are still commonly offered for sale in Central African Republic (Reuters/Emmanuel Braun). A man displays a rough diamond, from the Boda region, for sale in Bangui May 1, 2014. Despite a 2013 ban on diamond exports by The Kimberley Process, a global watchdog set up to stop the trade in "blood diamonds", rough diamonds are still commonly offered for sale in Central African Republic (Reuters/Emmanuel Braun).

Supply Chains Take Center Stage at International Labor Conference
Of the $26 trillion in commerce flowing around the world, over 70 percent are intermediate goods. This reflects the rise of global supply chains. The International Labor Organization (ILO) conference put this dominant means of production on the agenda for the first time this year, addressing working conditions for those within these chains. Government and business leaders from the ILO’s 187 member countries spent the past two weeks debating whether to set official standards to push companies like Walmart, Gap, and Nestlé to address labor violations along their transnational production chains. Though any new rules would be non-binding, historically ILO standards have prompted legislation.

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This Week in Markets and Democracy: Deadly Kenyan Protests, Vietnam’s Labor Rights, Still No Haiti Election

by Shannon K. O'Neil
A riot policeman fires a teargas canister to disperse supporters of Kenya's opposition Coalition for Reforms and Democracy (CORD) during a protest at the premises hosting the headquarters of Independent Electoral and Boundaries Commission (IEBC) to demand the disbandment of the electoral body ahead of next year's election in Nairobi, Kenya, May 23, 2016 (Reuters/Thomas Mukoya). A riot policeman fires a teargas canister to disperse supporters of Kenya's opposition Coalition for Reforms and Democracy (CORD) during a protest at the premises hosting the headquarters of Independent Electoral and Boundaries Commission (IEBC) to demand the disbandment of the electoral body ahead of next year's election in Nairobi, Kenya, May 23, 2016 (Reuters/Thomas Mukoya).

Electoral Violence Starts Early in Kenya
In Kenya, police cracked down on opposition protests, killing three and injuring more. With elections still more than a year away, the Coalition for Reforms and Democracy (CORD) party is demanding that current electoral officials resign for corruption and bias toward President Uhuru Kenyatta’s ruling Jubilee coalition. In the wake of the bloodshed CORD halted the demonstrations and agreed to negotiations, responding to other governments’ calls for dialogue. But given Kenya’s history of electoral violence and impunity, many expect clashes to continue.

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This Week in Markets and Democracy: Protectionism Rises, Mexico Anticorruption Bill Delayed, How Corruption Affects Business

by Shannon K. O'Neil
Protesters demonstrate against Transatlantic Trade and Investment Partnership (TTIP) free trade agreement ahead of U.S. President Barack Obama's visit in Hannover, Germany April 23, 2016 (Reuters/Kai Pfaffenbach). Protesters demonstrate against Transatlantic Trade and Investment Partnership (TTIP) free trade agreement ahead of U.S. President Barack Obama's visit in Hannover, Germany April 23, 2016 (Reuters/Kai Pfaffenbach).

Protectionism by the Numbers
It is not just anti-trade rhetoric spreading on both sides of the Atlantic; it is also policies. The Global Trade Alert, an online index that monitors trade policy, reports a rapid rise in protectionist measures worldwide since 2008. The database documents over 5,000 new barriers to trade, including import quotas, stricter rules for migrant workers, and local content requirements. The United States leads this turn toward protectionism, creating more than eighty new rules in the last year alone. These measures are one of the main causes slowing global trade.

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This Week in Markets and Democracy: Nike’s Bribes in Kenya, Elections in Benin and Niger, and Women’s Anticorruption Role

by Shannon K. O'Neil
A policeman is seen outside the gates of Riadha House the Athletic Kenya (AK) Headquarters during a protest in capital Nairobi November 23, 2015. Dozens of Kenyan athletes stormed the athletics federation headquarters in Nairobi on Monday, locking out officials and demanding that top Athletics Kenya (AK) bosses step down following allegations of graft and doping cover-ups (Reuters/Noor Khamis). A policeman is seen outside the gates of Riadha House the Athletic Kenya (AK) Headquarters during a protest in capital Nairobi November 23, 2015. Dozens of Kenyan athletes stormed the athletics federation headquarters in Nairobi on Monday, locking out officials and demanding that top Athletics Kenya (AK) bosses step down following allegations of graft and doping cover-ups (Reuters/Noor Khamis).

Nike Bribes, Will the United States Prosecute?
Bank records and emails show Nike paid a $500,000 “commitment bonus” to Kenya’s athletics federation, and hundreds of thousands more in “honoraria.” Though allegedly to support poor runners, Kenyan prosecutors say athletics officials quickly transferred the money to their personal bank accounts. Yet the United States cannot use the Foreign Corrupt Practices Act (FCPA) against the mega brand. The law only covers U.S. companies that bribe “foreign officials” and “public international organizations.” Sports associations are private, so outside the FCPA’s jurisdiction. In taking on FIFA, the U.S. Department of Justice (DOJ) worked around the FCPA, indicting foreign and U.S. officials for laundering money through U.S. banks, not bribery. The United States may need to do the same in the Nike case if it wants to follow up on President Obama’s pointed criticisms of Kenyan corruption with legal actions.

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Cleaning Up Global Supply Chains

by Shannon K. O'Neil
Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province May 26, 2010. A spate of nine employee deaths at global contract electronics manufacturer Foxconn, Apple's main supplier of iPhones, has cast a spotlight on some of the harsher aspects of blue-collar life on the Chinese factory floor (Reuters/Bobby Yip). Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province May 26, 2010. A spate of nine employee deaths at global contract electronics manufacturer Foxconn, Apple's main supplier of iPhones, has cast a spotlight on some of the harsher aspects of blue-collar life on the Chinese factory floor (Reuters/Bobby Yip).

The UK’s Modern Slavery Act now requires companies to report efforts to prevent human trafficking and slavery in the making of every part and every process of production, from headquarters down to individual suppliers along production chains. In the United States, the Dodd Frank Act’s disclosure rules for conflict minerals hold mining and technology companies to similar standards. But surveys and reports show companies still fail to monitor their suppliers, let alone prevent abuses.

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This Week in Markets and Democracy: Malaysia’s Corruption Probes, Ghost Workers, and Lax OECD Bribery Laws

by Shannon K. O'Neil
Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-general said on Tuesday that $681 million transferred into Prime Minister Najib Razak's personal bank account was a gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris). Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-general said on Tuesday that $681 million transferred into Prime Minister Najib Razak's personal bank account was a gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris).

International Investigations Take Over as Domestic Malaysian Justice Fails
New evidence shows that transfers from troubled state investment fund 1MDB into Malaysian Prime Minister Najib Razak’s personal bank accounts may top $1 billion—$300 million higher than previously thought. Yet Malaysian authorities continue to clear him of wrongdoing. The attorney general’s office ended its case, saying it found no evidence of graft, and Parliament is delaying a long-awaited investigatory report on the fund. The government has also shut down a Malaysian news site reporting on corruption and threatened harsh punishments for journalists who leak “official secrets”—a thinly-veiled warning to would-be whistleblowers. Less politically malleable are international authorities who continue to probe the cross-border case. Singapore recently seized a “large number” of related bank accounts. Criminal proceedings in Switzerland allege misappropriation of up to $4 billion in state money. And in the United States, the Department of Justice opened an inquiry into Najib’s U.S. real estate holdings and the Federal Bureau of Investigation (FBI) into the 1MDB case itself. Najib maintains the money was a political donation from an unnamed Saudi royal, a claim that conflicts with the growing financial paper trail.

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This Week in Markets and Democracy: Mexico’s Anticorruption Pressure, Ukraine’s Stalled Reforms, and U.S. Acts on Forced Labor

by Shannon K. O'Neil
Pope Francis (C), Mexico's President Enrique Pena Nieto (R) and his wife, Mexico's first lady Angelica Rivera stand together during a farewell ceremony in Ciudad Juarez, Mexico, February 17, 2016 (Reuters/Jose Luis Gonzalez). Pope Francis (C), Mexico's President Enrique Pena Nieto (R) and his wife, Mexico's first lady Angelica Rivera stand together during a farewell ceremony in Ciudad Juarez, Mexico, February 17, 2016 (Reuters/Jose Luis Gonzalez).

Pressure for Mexican Action on Corruption
During a five-day visit to Mexico, Pope Francis repeatedly denounced corruption, decrying the “path of privileges or benefits for a few to the detriment of the good of all.” His message coincides with a strong push by civil society groups to change the status quo. Many are monitoring Congress to ensure it meets a May deadline for secondary legislation to get the National Anticorruption System, signed last year by President Peña Nieto, working. Others are behind the Ley3de3 campaign, which would introduce legislation that defines official corruption and conflicts of interest, and increases the ability to prosecute and convict perpetrators. Coalescing around a social media campaign, active business involvement, academic backing, and even a nod from the pope, the movement needs 100,000 signatures; they hope to collect many times that. Then the question will be whether politicians will tie their own hands.

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