Mexico Illicit Financial Flows Aff
1AC
Plan(s)
Plan: The USFG should offer to create an Automatic Exchange of Information and Trade
Transparency Units with Mexico.
Plan: The USFG should offer to create and provide technical assistance to support an Automatic
Exchange of Information and Trade Transparency Units with Mexico.
Plan: The U.S. Treasury and Customs Departments should offer to respectively create an
Automatic Exchange of Information and Trade Transparency Units with Mexico.
Plan: The U.S. Treasury and Customs Departments should offer to respectively create and
provide technical assistance to support an Automatic Exchange of Information and Trade
Transparency Units with Mexico.
U.S.-Mexico Drugs
Drug cartels rely on illicit financial flows (IFFs) to launder profits across the U.S.-Mexico border
Targeted News Service, 12 (“Mexico Hemorrhages US$872 Billion to Crime, Corruption,
Tax Evasion from 1970-2010,” Targeted News Service, January 29, 2012, pageLexis)//JW
The large spike in illicit outflows following the implementation of NAFTA would imply that
much of those outflows were indeed headed for the United States. This suggests that U.S.
policymakers have a significant role to play in curtailing the flow of illicit money out of
their southern neighbor.¶ In addition to the U.S., tax havens in the Caribbean and Europe were the second and third largest
recipients of Mexican capital outflows.¶ Drug Cartels and National Security Risk¶ A large portion of drug cartel activity is
conducted in cash, and none of those cash transactions are detected in GFI's data, which is one of the reasons why the
organization believes its figures to be extremely conservative. That said, drug cartels like many criminal
enterprises also utilize legitimate commercial transactions to launder their profits. In fact, the
Los Angeles Times reported last month that Mexican drug cartels were utilizing trade-based money
laundering techniques to move their money across the U.S.-Mexico border. Those kinds of business
transactions would show up in the organizations data, however it cannot be determined exactly how much of the trade mispricing in
GFI's report is attributable to the activities of drug cartels.¶ As such, the organization believes that this has serious implications for
"The ease with which money can be laundered across the U.S.-Mexico border
via trade mispricing poses a major national security risk to both the United States and Mexico,"
said Mr. Baker. "Drug traffickers, like kleptocrats, terrorists and tax dodgers, all gain from
anonymous shell companies, tax haven secrecy, and nefarious trade mispricing tactics. Taking
national security.¶
steps to address these issues would curtail a number of societal ills."
Status quo banking regulations fail – only granting Mexico’s request for automatic exchange of
information (AEI) solves
Stier, 09— Columbia University, School of International and Public Affairs (Ken, “Foreign tax
cheats find US banks a safe haven”, Time—Business and Money, October 29, 2009,
http://www.time.com/time/business/article/0,8599,1933288,00.html)//IK
Washington has spent much of this year showing how tough it is on tax cheats. The Justice Department triumphantly declared in
August that it had reached a settlement with Swiss banking giant UBS for it to turn over the names of approximately 4,450 American
account holders suspected by the IRS of evading taxes. This week, the IRS revealed the formation of a special task force to go after
wealthy tax dodgers, and members of Congress introduced a bill to force foreign firms doing business in the U.S. to disclose all its
U.S. clients with accounts overseas. (See 25 people to blame for the financial crisis.) But for all the bluster about cracking down on
the U.S. turns a virtual blind eye to foreign tax cheats who are
parking money in the U.S. banking system. In particular, the U.S. effectively serves the role of
Switzerland for Mexico, which suffers from rampant tax evasion — rates go as high as 70% among professionals and small
Americans who hide money overseas,
businesses, and 40% among larger businesses. Much of the estimated $42 billion a year of illicit funds flowing out of Mexico each
year (not including drug cartel money) ends up in U.S. banks, according to Global Financial Integrity, an advocacy group in
Washington. Soon
after the Obama Administration took office, Mexico sent Treasury Secretary
Tim Geithner a letter complaining about the de facto secrecy U.S. banks offer Mexicans
holding accounts by not reporting to anyone the names or interest income paid on those
deposits. "The exchange of information on interest paid by banks will certainly provide us
with a powerful tool to detect, prevent and control tax evasion, money laundering, terrorist
financing, drug trafficking and organized crime," said the Feb. 9 letter from Mexican Finance Secretary Agustin
Carstens, who also noted that the two countries do not have a "solid and reliable mechanism to verify actual residence of the
foreign depositors." "Replace the nationalities mentioned in the letter, and you've replicated the UBS affair point for point," says
Robert Goulder, international editor in chief at Tax Analysts, a nonprofit publisher about taxes worldwide, which first reported on
the Carstens letter. "If
you are a Mexican drug lord, you can put as much money as you want into
U.S. banks. We ain't going to tax it, and the Mexicans can't tax it because they are never
going to know about it. It's the financial equivalent of 'Don't ask, don't tell.' " It's not that the U.S. has no policies in place to
stem the flow of illicit monies into the U.S. banking system. American banks
are in fact required to file
suspicious activity reports (SARs) for cash deposits over $10,000 or when they detect deposit
patterns in lower amounts, known as "structuring." The problem is that the U.S. government
is overwhelmed by more than a million of these reports a year. Computers can detect some irregularities,
but these need to be combed through carefully by 85 SAR review teams — combining FBI, IRS, DEA and U.S. Attorneys — across the
country. That's why, says international white collar crime lawyer Bruce Zagaris, "U.S. officials have practically begged banks to call
them when they have something really good." (Read
"The Stimulus Spending Bill: Is It Working at All?")
This could change significantly with a seemingly simple regulatory adjustment, which
Mexico has requested: they want the same information-exchange arrangement that
Washington exclusively has with Canada, which automatically reports interest income paid by U.S. banks to
Canadian account holders. "Being the world's largest trading block under the NAFTA, and fighting considerably the higher security
threat than a decade ago, I truly believe that we should enhance our cooperation and strengthen our capacities to protect our peoples
and wealth," Carstens wrote in his letter.
Terrorist groups are preparing to attack the U.S. – currently expanding their ties to Mexican drug
cartels
Boyle, 12 - Investigative reporter @ Daily Caller (Matthew Boyle, 16 November 2012,
“Congressional report ties Middle East terrorists to Mexican drug cartels”, http://dailycaller.com/2012/11/16/congressional-report-tiesmiddle-east-terrorists-to-mexican-drug-cartels/)//Holmes
A new congressional report from the House Homeland Security Committee Subcommittee on Oversight,
Investigations and Management ties Middle East terror organizations to Mexican drug cartels. The report,
released Thursday, is titled “A Line in the Sand: Countering Crime, Violence and Terror at the Southwest Border.” It found that the
“Southwest border has now become the greatest threat of terrorist infiltration into the United
States.” It specifically cites a “growing influence” from Iranian and Hezbollah terror forces in
Latin America. “The presence of Hezbollah in Latin America is partially explained by the large Lebanese diaspora in South
America,” the report reads. “In general, Hezbollah enjoys support by many in the Lebanese world
community in part because of the numerous social programs it provides in Lebanon that
include schools, hospitals, utilities and welfare.” The congressional report, prepared by the subcommittee’s
chairman, Texas Republican Rep. Michael McCaul, argues that the “explanation for Iranian presence in Latin America begins with its
symbiotic relationship with Hezbollah.” “United in their dedication to the destruction of Israel, Iran
has helped Hezbollah
grow from a small group of untrained guerrillas into what is arguably the most highly
trained, organized and equipped terrorist organization in the world,” the report reads. “In return,
Hezbollah has served as an ideal proxy for Iranian military force – particularly against Israel – which affords Iran plausible deniability
diplomatically. Hence wherever Hezbollah is entrenched, Iran will be as well and vice-versa.” McCaul’s report goes on to argue Iran’s
increased presence in Latin America is because of the nation’s close relationship with Venezuela – which recently re-elected socialist
leader Hugo Chavez. The report found that Hezbollah’s
“relationship with Mexican drug cartels,” has
been “documented as early as 2005.” Quoting former Drug Enforcement Administration executive Michael Braun,
the report argues these ties are troubling. “Operativesfrom FTOs (foreign terrorist organizations) and DTOs (drug
trafficking organizations) are frequenting the same shady bars, the same seedy hotels and the same
sweaty brothels in a growing number of areas around the world,” Braun said in a statement quoted in
the report. “And what else are they doing? Based upon over 37 years in the law enforcement and security sectors, you can mark my
word that they are most assuredly talking business and sharing lessons learned.” In October 2011,
Iran apparently tried to
exploit its ties to the drug cartels to conduct its eventually foiledassassination attempt on the
Saudi ambassador to the United States. “According to a federal arrest complaint filed in New York City, the [Iranian]
Qods Force attempted to hire a drug cartel (identified by other sources as the Los Zetas) to assassinate
Saudi Ambassador Adel al-Jubeir for a fee of $1.5 million,” the report reads. “The terror attack was to take place at a popular
restaurant in Washington, D.C. without regard to collateral deaths or damage.” “The Qods Force made this solicitation because it
knows drug traffickers are willing to undertake such criminal activity in exchange for money,” the report continues. “Moreover, if this
terror attack had been successful, the Qods Force intended to use the Los Zetas for other attacks in the future. Had it not been for a
[Drug Enforcement Agency] DEA informant posing as the Los Zetas operative, this attack could have very well taken place.” In a
previous report, McCaul’s subcommittee documented “the
emerging power and influence of the Mexican
drug cartels along the Southwest border.” “The report elaborated on the increasing cooperation
between the drug cartels and prison and street gangs in the United States to facilitate the
trafficking and sale of illicit drugs along with the enforcement of remunerations,” the recentlyreleased report says of the previous report. “Those cartels diversified into other areas of criminality such as human smuggling and
arms trafficking.” In a statement, McCaul said that “Middle
East terrorist networks that continue to plot
against the United States are expanding their ties to Mexican drug trafficking organizations,
better positioning themselves for a possible attack on our homeland.” “This report documents the
increased presence of Iran and Hezbollah in Latin America and addresses the growing concern that terrorist
organizations will exploit burgeoning relationships with Mexican drug cartels to infiltrate the
Southwest border undetected,” McCaul said. The subcommittee is planning a Friday hearing to further discuss the
report’s findings.
Now is key – Mexico is at risk of turning into a narco-state without intervention
Lubnow & De Cordoba, 09 (David and José, February 21, 2009 Wall Street Journal
“http://online.wsj.com/article/SB123518102536038463.html”)
The parallels between Pakistan and Mexico are strong enough that the U.S. military singled them
out recently as the two countries where there is a risk the government could suffer a swift and
catastrophic collapse, becoming a failed state. Pakistan is the greater worry because the risk of collapse is higher and
because it has nuclear weapons. But Mexico is also scary: It has 100 million people on the southern
doorstep of the U.S., meaning any serious instability would flood the U.S. with refugees.Mexico
is also the U.S.'s second biggest trading partner. Mexico's cartels already have tentacles that stretch across the
border. The U.S. Justice Department said recently that Mexican gangs are the "biggest organized
crime threat to the United States," operating in at least 230 cities and towns. Crimes connected to Mexican cartels are
spreading across the Southwest. Phoenix had more than 370 kidnapping cases last year, turning it into the kidnapping capital of the
U.S. Most of the victims were illegal aliens or linked to the drugs trade. Former U.S. antidrug czar Barry McCaffrey
said Mexico risks becoming a "narco-state" within five years if things don't improve. Outgoing CIA
director Michael Hayden listed Mexico alongside Iran as a possible top challenge for President Obama. Other analysts say the
risk is not that the Mexican state collapses, but rather becomes like Russia, a state heavily influenced by mafias.
Drug profits will be used to finance use of WMDs against the U.S.
Anderson, 08 (10/8/2008, Curt, AP, “US officials fear terrorist links with drug lords,”
http://usatoday30.usatoday.com/news/nation/2008-10-08-805146709_x.htm)
MIAMI — There is real danger that Islamic extremistgroups such as al-Qaida and Hezbollah
could form alliances with wealthy and powerful Latin American drug lords to launch new
terrorist attacks, U.S. officials said Wednesday. Extremist group operativeshave already been
identifiedin several Latin American countries, mostly involved in fundraising and finding
logistical support. But Charles Allen, chief of intelligence analysis at the Homeland Security Department, said they could
use well-established smuggling routes and drug profits to bring people or even w eapons of
m ass d estruction to the U.S."The presence of these people in the region leaves open the
possibility that they will attempt to attack the U nited S tates," said Allen, a veteran CIA
analyst. "The threats in this hemisphere are real. We cannot ignore them." Added U.S. Drug Enforcement
Administration operations chief Michael Braun: "It is not in our interest to let that potpourri of scum to come together."
U.S. retaliation causes extinction
Ayson, 10 - Professor of Strategic Studies and Director of the Centre for Strategic Studies: New Zealand at the Victoria
University of Wellington, (Robert, “After a Terrorist Nuclear Attack: Envisaging Catalytic Effects,” Studies in Conflict & Terrorism,
Volume 33, Issue 7, July, Available Online to Subscribing Institutions via InformaWorld)
Washington’s early response to a terrorist nuclear attack on its own soil might also raise the
possibility of an unwanted (and nuclear aided) confrontation with Russia and/or China. For
example, in the noise and confusion during the immediate aftermath of the terrorist nuclear attack, the
U.S. president might be expected to place the country’s armed forces, including its nuclear
arsenal, on a higher stage of alert. In such a tense environment, when careful planning runs up against the
friction of reality, it
is just possible that Moscow and/or China might mistakenly read this as a
sign of U.S. intentions to use force (and possibly nuclear force) against them. In that
situation, the temptations to preempt such actions might grow, although it must be admitted that any
preemption would probably still meet with a devastating response. As part of its initial
response to the act of nuclear terrorism (as discussed earlier) Washington might decide to order a significant
conventional (or nuclear) retaliatory or disarming attack against the leadership of the
terrorist group and/or states seen to support that group. Depending on the identity and especially the
location of these targets, Russia and/or China might interpret such action as being far too close for
their comfort, and potentially as an infringement on their spheres of influence and even on
their sovereignty. One far-fetched but perhaps not impossible scenario might stem from a judgment in Washington that some
of the main aiders and abetters of the terrorist action resided somewhere such as Chechnya, perhaps in connection with what Allison
claims is the “Chechen insurgents’ … long-standing interest in all things nuclear.”42 American pressure on that part of the world
would almost certainly raise alarms in Moscow that might require a degree of advanced consultation from Washington that the latter
found itself unable or unwilling to provide.
Mexican Economy
Despite improved governance IFFs are crippling Mexico’s economy
Corchado, 12 - Mexico bureau chief @ Dallas Morning News (Alfredo, “Exclusive: Mexico pays heavy
price for tax evasion, report finds”, 29 January 2012, Dallas Morning News,
http://www.dallasnews.com/news/nationworld/mexico/20120128-exclusive-mexico-pays-heavy-price-for-tax-evasion-reportfinds.ece)//AE
In a nation with nearly half the population living in poverty, more
than $872 billion has been lost to the
Mexican economy over four decades to tax evasion, corruption and criminals, according to a report prepared by
the group Global Financial Integrity.¶ The report buttresses long-held concerns about the Mexican government’s inability to control its
booming underground economy and the outflow of money to foreign havens.¶ The
report, released exclusively to The Dallas
Morning News and the Mexico City magazine Proceso, says the overall loss through 41 years, from 1970 through
2010, averages 5.2 percent of the country’s annual gross domestic product, or GDP.¶ “This is a
devastatingly large amount of money for any developing country to lose,” said Raymond W. Baker,
director of Washington-based GFI, a research organization that advocates curtailing illicit cash flows out of developing countries.
“$872 billion is gone, which could have been used to develop the Mexican economy, to invest
in education, to build roads or to fight the drug cartels. The negative ramifications are huge for everyday
Mexicans.”¶ Surprisingly, perhaps, the biggest share of the money does not represent the illicit proceeds of the country’s drug cartels.
Instead, the biggest share is money lost to tax evaders using myriad schemes to avoid contributing to the country’s coffers.¶
Moreover, the
growing volume of legitimate trade between Mexico and the U.S. — now nearly $400
it extremely difficult for authorities on both sides of the border to detect
the illicit outflows. In the last decade, after passage of the North American Free Trade Agreement, the cross-border illicit
billion a year — makes
outflow of money increased to about $50 billion a year, up from an average of $3 billion in the 1970s, when Mexico had a much more
closed economy.¶ “We find that trade
liberalization without strong regulatory oversight, as in the case of
India, is probably responsible for larger illicit outflows through trade mispricing,” the report says.
Trade mispricing is the practice of either overstating or understating invoices for transactions. ¶ Pedro Canabal, a spokesman for
Mexico’s tax agency, described the rate of collection as “abysmal,” particularly at the local and state levels, but insisted that
improvements had been made at the federal level.¶ Since 2000, he said, the list of registered tax contributors has increased to 37
million from 9 million of the working population. Still, at the local level more than 90 percent of taxpayers, mostly small
entrepreneurs, evade paying their fair share, and “that’s where our biggest challenge is,” he said. “More has to be done at the
local level.”¶ Canabal also called on the United States and other governments to do “the right thing and take responsibility, help us
identify” capital flight . “We have been demanding that for years, and we haven’t been successful.” ¶ Officials at the U.S. Embassy in
Mexico City and at the U.S. State Department could not be reached for comment.¶ More than half of the money illicitly flowing out
of Mexico ends up in U.S. banks , followed by tax havens in the Caribbean and Europe, according to GFI’s 81-page report, “Mexico:
Illicit Financial Flows, Macroeconomic Imbalances, and the Underground Economy.” The report is scheduled to be released Monday
in Washington and Mexico City.¶ The capital flight parallels economic crises in Mexico , with the 1995
economic downturn leading to a massive loss of money, increasing to 12.7 percent of GDP, up from 3.8 the previous year.¶ In the past
five years, Mexico’s drug cartels have transformed themselves into powerful, sophisticated transnational criminal organizations. But
the conservative analysis “does not include drug smuggling, human trafficking, and some forms of trade mispricing, data for which are
not available,” the report says. If such data were available, “the figures would be substantially higher.” ¶ Instead, the report looks at
practices like tax evasion, including from personal income, corporate income and customs duties, said a GFI spokesman, Clark
Gascoigne. Avoiding such duties through trade mispricing is the most common practice used to funnel illicit money abroad.¶ In 2009,
Mexican tax evaders cost the economy an estimated $25.6 billion, ranking it 25th highest in the world. Such evasion forces the
has Latin America’s secondlargest economy, and over the past two decades it has gained a reputation for sound fiscal
and economic management, even amid global turmoil. But despite its achievements, the country has
yet to reach its potential, economists and analysts say.¶ “What this report points to is Mexico’s weak
government to impose higher taxes on basic grocery staples such as tortillas.¶ Mexico
institutions, the fundamental weakness of Mexican bureaucracies and administration, whether it’s the tax administration and their
ability to audit, ability to regulate business, the ability to make sure they know what they’re doing,” said Shannon O’Neil, Douglas
Dillon fellow for Latin American studies at the Council on Foreign Relations. ¶ Over the past 20 years, “Mexico
has made
some big strides,” she added. “It’s transformed its economy, democracy, but it still faces
daunting challenges of reforming the basic administration of the state to provide real
regulations. … This is happening and will continue to happen because Mexico cannot regulate the underground economy.” ¶
Douglas Farah, president of Alexandria, Va.-based IBI Consultants and a senior fellow at the International Assessment and Strategy
Center, agreed.¶ “No country can afford to lose that much money, obviously,” he said. “Mexico has a
problem of poverty, education, income distribution. This is one more proof of how difficult it is for Mexico to get control of its
economy and the challenges it faces.
to be effective.Ӧ
Problems like tax evasion cripple a government , despite good intentions
Vast majority of Mexican IFFs end up in U.S. banks
Lawton, 12 – Former Canadian policy analyst who worked on anti-money laundering
initiatives (Christopher, “U.S. Should Expand Automatic Exchange Of Tax Information To Mexico”, January 31, 2012, Financial
Transparency Coalition, http://www.financialtransparency.org/2012/01/31/u-s-should-expand-automatic-exchange-of-tax-informationto-mexico/)//AE
The U.S. government frequently raises the issue of smuggling of bulk shipments of currency
from the U.S. to Mexico as a major economic and security issue, one that demands greater effort by
Mexican authorities to detect and deter.¶ However, as a report released this week by Global Financial Integrity reveals,
bulk cash smuggling is not the only form of illicit financial transfer taking place in staggering volumes across the U.S. – Mexico
border.¶ The report’s findings indicate that
the Mexican economy lost $872 billion to illicit financial
outflows between 1970 and 2010. These non-cash outflows from Mexico serve to feed
Mexico’s underground economy, enabling the spoils of illicit activity to be stashed abroad.
Notably, the vast majority of capital leaving Mexico, including illicit transfers, is destined for
banks in the United States, and a significant increase in illicit outflows from Mexico was observed in the wake of the
coming into force of NAFTA, suggesting even more strongly that the bulk of illicit outflows from Mexico is
placed in U.S. accounts. As a result, there is a clear window of opportunity for U.S. policy
initiatives to make this country less inviting to criminals and tax evaders from our Southern
neighbor, which would benefit economic stability and national security in both the U.S. and Mexico. ¶
We isolate 2 impacts to Mexican economic instability:
First is the Economy - Mexican economic decline shatters the world economy
Rangel, 95 - Fellow at the Monterrey Bureau (Enrique Rangel, ““Pressure on the Peso;
Mexico’s Economic Crisis carries global implications”, Dallas Morning News, 11/28, Lexis)//JS
With the exception of 1982 - when Mexico defaulted on its foreign debt and a handful of giant New York banks worried they would
lose billions of dollars in loans - few people abroad ever cared about a weak peso. But now it's different, experts say. This time, the
world is keeping a close eye on Mexico's unfolding financial crisis for one simple reason: Mexico is a major international
player. If its economy were to collapse, it would drag down a few other countries and thousands
of foreign investors. If recovery is prolonged, the world economy will feel the slowdown. "It took a peso devaluation so that
other countries could notice the key role that Mexico plays in today's global economy," said economist
Victor Lopez Villafane of the Monterrey Institute of Technology. "I hate to say it, but if Mexico were to default on its
debts, that would trigger an international financial collapse" not seen since the Great Depression, said Dr.
Lopez, who has conducted comparative studies of the Mexican economy and the economies of some Asian and Latin American
countries.
Economic decline leads to nuclear war
Harris and Burrows, 09 – Counselor in the National Intelligence Council and principal drafter
of Global Trends 2025 (“Revisiting the Future: Geopolitical Effects of the Financial Crisis”,
Washington Quarterly, http://www.twq.com/09april/docs/09apr_burrows.pdf)
Increased Potential for Global Conflict
Of course, the report encompasses more than economics and indeed believes the future is likely to be the result of a number of intersecting and
interlocking forces. With so many possible permutations of outcomes, each with ample opportunity for unintended consequences, there is a growing
sense of insecurity. Even so, history may be more instructive than ever. While we continue to believe that
the Great Depression is not likely
to be repeated, the lessons to be drawn from that period include the harmful effects on fledgling democracies and multiethnic societies (think
Central Europe in 1920s and 1930s) and on the sustainability of multilateral institutions (think League of Nations in the same period). There is no reason
to think that this would not be true in the twenty-first as much as in the twentieth century. For that reason, the ways in which the
potential for
greater conflict could grow would seem to be even more apt in a constantly volatile economic environment as they
would be if change would be steadier.
In surveying those risks, the report stressed the likelihood that terrorism and nonproliferation will remain priorities even as resource issues move up on
the international agenda. Terrorism’s appeal will decline if economic growth continues in the Middle East and youth unemployment is reduced. For those
terrorist groups that remain active in 2025, however, the diffusion of technologies and scientific knowledge will place some of the world’s most
dangerous capabilities within their reach. Terrorist groups in 2025 will likely be a combination of descendants of long established groups
inheriting organizational structures, command and control processes, and training procedures necessary to conduct sophisticated attacks and newly
emergent collections of the angry and disenfranchised that become self-radicalized, particularly in the absence of economic outlets that would
become narrower in
an economic downturn.
The most dangerous casualty of any economically-induced drawdown of U.S. military presence
would almost certainly be the Middle East. Although Iran’s acquisition of nuclear weapons is not inevitable, worries
about a nuclear-armed Iran could lead states in the region to develop new security arrangements
with external powers, acquire additional weapons, and consider pursuing their own nuclear ambitions. It is
not clear that the type of stable deterrent relationship that existed between the great powers for most of the Cold War would emerge naturally in the
Middle East with a nuclear Iran. Episodes of low intensity conflict and terrorism taking place under a nuclear umbrella could lead to an unintended
escalation and broader conflict if clear red lines between those states involved are not well established. The close proximity of potential nuclear rivals
combined with underdeveloped surveillance capabilities and mobile dual-capable Iranian missile systems also will produce inherent difficulties in
achieving reliable indications and warning of an impending nuclear attack. The
lack of strategic depth in neighboring states like Israel,
short warning and missile flight times, and uncertainty of Iranian intentions may place more focus
on preemption rather than defense, potentially leading to escalating crises.
Types of conflict that the world continues to experience, such as over resources, could reemerge,
particularly if protectionism grows and there is a resort to neo-mercantilist practices. Perceptions
of renewed energy scarcity will drive countries to take actions to assure their future access to
energy supplies. In the worst case, this could result in interstate conflicts if government leaders deem assured access to
energy resources, for example, to be essential for maintaining domestic stability and the survival of their regime. Even actions short of war, however, will
have important geopolitical implications. Maritime
security concerns are providing a rationale for naval buildups and
modernization efforts, such as China’s and India’s development of blue water naval capabilities. If the fiscal stimulus focus for these
countries indeed turns inward, one of the most obvious funding targets may be military. Buildup of regional naval capabilities could lead to
increased tensions, rivalries, and counterbalancing moves, but it also will create opportunities for multinational cooperation in
protecting critical sea lanes. With water also becoming scarcer in Asia and the Middle East, cooperation to manage changing water resources is likely to
be increasingly difficult both within and between states in a
more dog-eat-dog world.
Second is heg - Mexico instability collapses U.S. hegemony
Haddick, 8 - Contractor at U.S. Special Operations Command who wrote the “This Week at
War” column for Foreign Policy - (Robert, “Now that would change everything” December 2008,
http://westhawk.blogspot.com/2008/12/now-that-would-change-everything.html)//WL
There is one dynamic in the literature of weak and failing states that has received relatively little attention, namely the phenomenon of
“rapid collapse.” For the most part, weak and failing states represent chronic, long-term problems that allow for management over
sustained periods. The collapse of a state usually comes as a surprise, has a rapid onset, and poses acute problems. The collapse of
Yugoslavia into a chaotic tangle of warring nationalities in 1990 suggests how suddenly and catastrophically state collapse can happen
- in this case, a state which had hosted the 1984 Winter Olympics at Sarajevo, and which then quickly became the epicenter of the
ensuing civil war. In terms of worst-case scenarios for the Joint Force and indeed the world, two large and important states bear
consideration for a rapid and sudden collapse: Pakistan and Mexico. Some forms of collapse in Pakistan would carry with it the
likelihood of a sustained violent and bloody civil and sectarian war, an even bigger haven for violent extremists, and the question of
what would happen to its nuclear weapons. That “perfect storm” of uncertainty alone might require the engagement of U.S. and
coalition forces into a situation of immense complexity and danger with no guarantee they could gain control of the weapons and with
the real possibility that a nuclear weapon might be used .
The Mexican possibility may seem less likely, but the
government, its politicians, police, and judicial infrastructure are all under sustained
assault and pressure by criminal gangs and drug cartels. How that internal conflict turns out over the next
several years will have a major impact on the stability of the Mexican state. Any descent by the Mexico into chaos
would demand an American response based on the serious implications for homeland
security alone. Yes, the “rapid collapse” of Mexico would change everything with respect to
the global security environment. Such a collapse would have enormous humanitarian,
constitutional, economic, cultural, and security implications for the U.S. It would seem the U.S.
federal government, indeed American society at large, would have little ability to focus serious attention
on much else in the world. The hypothetical collapse of Pakistan is a scenario that has already been well discussed. In the
worst case, the U.S. would be able to isolate itself from most effects emanating from south Asia. However, there
would be no running from a Mexican collapse.
Hegemonic decline causes global wars
Haas, 2/25/13 – Senior Fellow at the American Foreign Policy Council (Lawrence, “U.S.
must maintain leadership role in world's dangerous areas,
“http://www.centredaily.com/2013/02/25/3515265/lawrence-haas-us-must-maintain.html)
Surveying the Greater Middle East, where chaos reigns from Egypt to Syria and where
chances of war among any number of players are rising, you can hardly blame the typical American for
wanting to wish it away. But the 43 percent of U.S. voters who think that America is "too involved" in the Middle East, according to a
recent Rasmussen poll, or the 58 percent who think that we should "leave things alone" in the Islamic world have it backward. "Let
me underscore the importance of the United States continuing to lead
and
in the Middle East, North Africa
around the world ," a departing Secretary of State Hillary Clinton put it aptly at recent congressional hearings. "When
America is absent, especially from unstable environments, there are consequences. Extremism
takes root, our interests suffer and our security at home is threatened." Indeed, the tumult across the Greater Middle
East of late, which has emboldened America's state and non-state adversaries and worried our allies,
shows what happens when the United States reduces its voice and footprint. We want to believe that, as
President Obama likes to say "the tide of war is receding" but, beyond America's shores, the world hasn't received the memo. Quite
the contrary, as the United States seeks a respite from the region's messiness, our
reduced role is a big reason why
dangers are mounting. In Syria, for instance, our reticence to work with our European and regional allies to establish a
no-fly zone that would throttle Syria's air force has left a predictable vacuum, with Syria's neighbors predictably unable to mount a
collective effort to more effectively pressure Bashar al-Assad or aid the rebels. By enabling al-Assad to hang on, U.S. reticence has
lengthened the bloodbath through which al-Assad has now slaughtered an estimated 60,000 of his own people while giving jihadists
more time to enter the playing field and position themselves to shape a post-Assad Syria in ways that we'll regret. In Iran, the regime
continues to make progress in its nuclear pursuit, with no signs that the economic and financial sanctions that are clearing impairing
the nation's economy are deterring its leaders. Meanwhile, with America's withdrawals from nearby Iraq and Afghanistan sending
clear signals about our long-term commitment to the region, a dangerous Tehran seeks regional supremacy while Saudi Arabia and our
other allies in the Gulf Cooperation Council struggle for ways to counteract its expansionism. In Egypt, the United States showers the
Muslim Brotherhood-led government with economic and military aid, presumably to buttress regional stability by strengthening the
regime and preventing a national collapse. But, Washington sends a disturbing signal to secular reformers in the region by staying
largely mute as Cairo violates civil liberties and threatens to build a religious autocracy to replace its secular predecessor. At
least
twice before, the U nited St ates has seen the harmful consequences of its retreat on the world
stage. After Versailles, our isolationism of the 1920s and '30s nourished not only the global
economic warfare that fueled the Great Depression but also the European and Asian
militarism that produced World War II. After Vietnam, an uncertain United States turned
inward again, leaving the Soviet Union to stoke Third World revolution in Ethiopia,
Angola, and Rhodesia before invading Afghanistan in late 1979. The Islamic Revolution topped a staunch
U.S. ally in Iran, students stormed the U.S. embassy in Tehran and seize our personnel, and America assumed the embarrassing
posture of a paper tiger. That's true today has been true for decades. The
The more dangerous is the region, the
avoid the role.
world looks to America for leadership.
higher are the stakes when we decide whether to assume or
International Tax Regime
An international tax regime is inevitable but initial choices are key – promoting multilateral AEI
is essential to solidifying this approach as the global standard
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
In just a few short years, the world has gone from assuming financial institutions
generally do not support residence country taxation cross-border to arguing about how
they should act as tax agents for residence countries. This is a remarkable shift in
international norms. Focusing exclusively on the novel contest between the information
reporting and anonymous withholding models for a new regime inappropriately obscures
this growing consensus. The competing initiatives for cross-border tax administrative
assistance put forth by the United States, the EU, the OECD, and Switzerland, and the
response of financial institutions to those proposals, all highlight the development of a
new international regime in which financial institutions will be tax intermediaries crossborder.
Nevertheless, a great deal is at stake in the decisions currently being made between an
anonymous withholding and information reporting regime for administrative assistance
cross-border. The choice between the two approaches is real even if the consequences of
the choice seem somewhat distant for most jurisdictions. Path dependence and the
tendency for institutional structures in this area to become embedded suggests that suboptimal initial choices made by a small number of powerful actors may dictate outcomes
for both those actors and the rest of the world for a prolonged period. Thus the choices
being made in the current evolutionary moment in cross-border administrative assistance
are important.
Anonymous withholding is not likely to be made available to most countries. In contrast,
information reporting provides a workable architecture for an emerging regime of
financial institutions as cross-border tax intermediaries in which most countries may
reasonably aspire to participate. Even though some jurisdictions can be counted on to
resist a broadly diffused routine information reporting system, if these countries become
outliers, international regimes will evolve around them, and eventually pressure may
make non-compliance with the regime unsustainable.
Emerging economy governments and other stakeholders, including civil society, have
many reasons beyond sheer revenue to weigh in on the choices made by the major actors
in this evolutionary moment.
U.S.-Mexico agreement brings all NAFTA members on board with AEI and
demonstrates commitment to systemic exchange with regional trading partners
Lawton, 12 – Former Canadian policy analyst who worked on anti-money laundering
initiatives (Christopher, “U.S. Should Expand Automatic Exchange Of Tax Information To Mexico”, January 31, 2012, Financial
Transparency Coalition, http://www.financialtransparency.org/2012/01/31/u-s-should-expand-automatic-exchange-of-tax-informationto-mexico/)//AE
There is one most obvious way that the U.S. could make its financial system a less attractive
destination for Mexico’s illicit outflows – through the introduction of automatic tax
information exchange agreement with Mexico on U.S. deposit accounts held by Mexican
residents.¶ The Mexican government formally requested such an agreement with the
Treasury Department in 2009, in order to help counter the laundering of Mexican criminal proceeds and tax evasion
through U.S. banks, but it has yet to receive a reply. While Mexico and the U.S. do exchange tax information on a case-by-case basis
in instances of suspected tax evasion, moving to automatic exchange would greatly simplify the exchange process, and would curtail
unreported cross-border interest income by citizens of both countries.¶ Such
a policy change would not be
unprecedented. Though the U.S. does not currently collect information on interest
payments made to most non-resident account holders, U.S. financial institutions are
required to provide the IRS with such information regarding account holders that are
residents of Canada. This information is in turn automatically supplied to the Canadian tax authority under an exchange
agreement. The IRS benefits from the receipt of similar tax information in return.¶ In addition
to the automatic exchange of tax information on non-resident account holders between
Canada and the U.S., Mexico and Canada also have a similar agreement in place. This
leaves the U.S. as the only NAFTA country that has not fully committed to the systematic,
dynamic exchange of deposit account information with its major regional trading partners.¶
An agreement on automatic exchange of tax information on accounts could be readily
implemented between the U.S. and Mexico, drawing on the experience in administering the
existing agreements in North America, and in accordance with OECD standards. Given the likely volume
of illicit funds being covertly transferred from Mexico to the U.S., such an agreement would
go a long way towards interrupting the illicit outflows from Mexico, and would demonstrate
the U.S. Government’s commitment to combating illicit financial activity on the Southern
border in all its forms.
Ensuring uniform, multilateral AEI is key – benefits both emerging nations and multinational
corporations alike
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
Internationally, automatic information reporting now has the upper
hand over anonymous withholding, largely as a result of the United States’
willingness to aggressively leverage its financial markets to coerce asset
management jurisdictions into accepting automatic information reporting.11
However, to date both U.S. and European efforts have focused primarily on
addressing their jurisdiction-specific concerns with offshore tax evasion by
their own citizens and residents.
Tax administrations in emerging countries have a significant stake in
ensuring that whatever benefit the large, developed economies obtain in the
form of automatic information exchange is available to them, too. For these
countries, a uniform multilateral automatic information exchange system
could positively affect their ability to address offshore tax evasion and,
further, could serve to improve the structure of their domestic information
reporting and withholding regimes more generally. However, the prospect
of these countries benefitting from automatic information exchange turns
heavily on the question of whether any new regime provides for uniform or
fragmented compliance by financial institutions.
Meanwhile, most multinational financial institutions12 would also
benefit from a single internationally consistent system for cross-border tax
administrative assistance. Financial institutions are interested in avoiding a
situation in which they are required to implement multiple different systems
in order to satisfy different sovereigns’ demands.13 Therefore, although
their starting points are different, both multinational financial institutions
and emerging countries have a shared interest in a single, uniform, broadly
multilateral regime for addressing offshore accounts. Their prospects for
successfully influencing the architecture of an automatic information exchange regime
may be improved if they cooperate with one another.
Global IFFs outstrip global efforts to reduce poverty – study shows they outpace foreign aid
by a ratio of 10 to 1
PR Newswire, 13 (January 7, “Financial Flows Out of Developing World Overwhelm Foreign
aid,” http://www.prnewswire.com/news-releases/illicit-financial-flows-out-of-the-developingworld-overwhelm-foreign-aid-60786287.html)//SEP
WASHINGTON, Jan. 7 /PRNewswire-USNewswire/ -- Global Financial Integrity (GFI) released
today a study estimating the annual value of illicit financial flows from all poor nations at
approximately $900 million. Titled "Illicit Financial Flows From Developing Countries: 2002 2006," (http://www.gfip.org/) the ground-breaking report shows that the developing world is
losing an increasing amount of money through illicit capital flight each year. Moreover, the value
of the illicit flows surpasses the amount of Official Development Assistance (ODA) entering
those countries by an order of magnitude.
"Illicit financial flows siphon revenue out of poor countries, robbing them of much-needed assets
and forestalling economic development," said GFI director Raymond Baker. "These new figures
reveal that illicit financial flows outpace ODA by a ratio of nearly 10 to 1. This is critical to
understanding global poverty and developing effective poverty alleviation and economic
development strategies," Baker said.
Primary findings of the report include:
Total capital flight exiting the developing world may be as much as $1 trillion per year,
The volume of capital flight is increasing at an average of 18.2% a year,
IFFs structurally undermine government legitimacy and development while increasing
dependence and the risk of economic crises
Le Billon, 11 – Associate Professor of Geography and Liu Institute for Global Issues, University
of British Columbia (Philippe, CMI (Chr. Michelsin Institute, “Extractive Sectors and Illicit
Financial Flows: What Role for Revenue Governance Issues?” U4 Issue, October 2011, No. 11,
http://www.cmi.no/publications/file/4248-extractive-sectors-and-illicitfinancial-flows.pdf)
The Norway-sponsored Task Force on the Development Impact of Illicit Financial Flows (2008)
has stressed the negative development impacts of IFF and particularly those coming from natural
resource sectors in developing countries. The Task Force observes that IFF undermine health,
development, and government legitimacy, while increasing debt, aid dependence, and the risk of
economic crises.
Quantitative studies specifically testing for these impacts are lacking, largely because of the
relative novelty and persistent uncertainty of IFF data. However, it is estimated that developing
countries experienced approximately US$1.2 trillion in illicit flows during 2008, 10 times the
amount of overseas development assistance provided by members of the OECD Development
Assistance Committee that year (Kar and Curcio 2011).
A major concern of extractive sector governance is the collection and allocation of revenue flows
to maximise government revenue share, eradicate corruption, and ensure fair and efficient use of
the revenues. Illicit financial flows constitute a serious threat to several objectives:
• IFF coming from corruption encourage such illegal activities by establishing transfer networks
that facilitate the outflow of proceeds. Corruption undermines the sound governance of resources,
notably by facilitating illegal exploitation and poor environmental and social practices, as well as
by eroding the tax base.
• IFF undermine the maximisation of government revenues through tax evasion practices,
including transfer mispricing and misinvoicing. African governments have been particularly
vulnerable to this, in part because of “inadequate institutional capacity to ensure tax
compliance” (ATAF 2010, 1). In turn, this significantly reduces the contribution of mineral
resource revenues to national development.
IFF exacerbate inequalities (by increasing private gains for a few at the expense of public
gains for the many) and inefficiencies (by resulting in suboptimal policies). Because national
companies are less able to lower their effective tax rates, trade mispricing advantages
multinationals. This, in turn, negatively affects the domestic private sector. The developmental
impact of domestic companies, moreover, is frequently undermined by predatory practices. There
is a fine balance between granting sufficient autonomy to a national resource company to allow it
to thrive, and controlling it so it does not become self-serving.
• IFF discourage accountability and encourage discretionary decision making, short-term
thinking, and favouritism by bureaucrats and officials. These practices, in turn, drastically
reduce total earnings that a country derives from extractive assets.
We isolate 2 two impacts to global IFFs:
First is Poverty - Global poverty is the equivalent of a thermonuclear war every 15 years
Gilligan, 00 – Department of Psychiatry Harvard Medical School (James, VIOLENCE:
REFLECTIONS ON OUR DEADLIEST EPIDEMIC, 2000, p 195-96)
The 14 to 18 million deaths a year cause by structural violence compare with about 100,000
deaths per year from armed conflict. Comparing this frequency of deaths from structural violence
to the frequency of those caused by major military and political violence, such as World War II
(an estimated 49 million military and civilian deaths, including those caused by genocide--or
about eight million per year, 1935-1945), the Indonesian massacre of 1965-1966 (perhaps
575,000 deaths), the Vietnam war (possibly two million, 1954-1973), and even a hypothetical
nuclear exchange between the U.S. and the U.S.S.R (232 million), it was clear that even war
cannot begin to compare with structural violence, which continues year after year.
In other
word, every fifteen years, on the average, as many people die because of relative poverty as
would be killed in a nuclear war that caused 232 million deaths; and every single year, two to
three times as many people die from poverty throughout the world as were killed by the Nazi
genocide of the Jews over a six-year period. This is, in effect, the equivalent of an ongoing,
unending, in fact accelerating, thermonuclear war, or genocide, perpetrated on the weak and poor
every year of every decade, throughout the world.
IFFs uniquely exacerbate the root causes of poverty and dependency – just keeping funds within
home countries solves
Reuter, 12 – Professor in the School of Public Policy and the Department of Criminology,
University of Maryland, Senior Researcher at RAND, PhD in Economics from Yale University
(Peter, Draining Development: Controlling Flows of Illicit Funds From Developing Countries,
World Bank, https://openknowledge.worldbank.org/handle/10986/2242)
There is no doubt that illicit financial flows (IFFs) from developing countries are substantial. Even if the correct figure is only a 10th
of the oftencited Global Financial Integrity estimates (about US$1 trillion annually
according to Kar and Cartwright-Smith 2008), that is, around US$100
billion, it is large relative to either official development assistance (about
US$70 billion) or total foreign direct investment in the developing world
(around US$250 billion in 2004 according to UNCTAD 2009). Eliminating this outflow, all else being equal, would be an enormous gain to
developing countries.
This alone does not imply, however, that IFFs constitute a good focus
for policy. IFFs are a specific consequence of more fundamental
problems that have long been of great concern. Most notably, corruption and
the payment of bribes to major government officials have become a central issue for the World Bank and for the development community generally, at least since World Bank President James Wolfensohn put it on
the Bank’s agenda in the mid-1990s. Similarly, the failure of developing
countries to collect taxes has also come more into focus in the last
decade; the reliance on official development assistance is seen as, importantly, a consequence of the inability of these countries to tax their own resources (Bräutigam,
Fjeldstad, and Moore 2008). The root cause argument, then, is that one should focus on ways of reducing the underlying
problems: corruption, tax evasion, and so forth. The international fl ows
are only a manifestation of these problems. Cut down on corruption, tax
evasion, and the rest, and the IFFs will take care of themselves.
The argument for focusing on causes rather than symptoms is a common one in many domains of policy. For example, many analysts argue
that crime is a manifestation less of individual failings or moral turpitude than of social failure (Sykes, Cullen, and Merton 1992). Thus, they
say, the most effective way of responding to crime is not detection and
punishment of offenders, which treat only the symptom, but elimination of social inequality, improving the conditions in which the poor
live, and better schools and social programs, which treat the true causes of crime. In fact, there is evidence that society can usefully do
both. Police and prison do reduce crime, at least through incapacitation, and
social programs such as early childhood interventions also reduce the
propensity to crime (Spelman 2000; Greenwood et al. 1998).
There are other domains in which policy focuses on root causes,
but with little attention to amelioration of harms. For example, the current debate about financial regulation, in the wake of the global fi scal
crisis, emphasizes rules to correct fundamentals rather than postfailure
remedies. There is thus no general approach. For some problems, ameliorative
programs have a minimal role; focusing on the root causes is, indeed, the
only path to reduction of the problem. For others, treating the symptom
is also useful. What may be said about illicit fl ows in this respect?
A distinctive feature of the IFF issue is that the illicit flows may themselves exacerbate the underlying harms, that is, even if the tax evasion,
corruption, and criminal markets continued unabated and all that one
accomplished was to prevent the resulting funds leaving the home country, the result would appear to be welfare enhancing. Assuming that the
owners of the illicit funds want to do more than hide their assets under
mattresses, there would be more money for domestic investment
and,
perhaps, also a stronger tax base. Mick Moore takes this up in chapter 14. It is also possible that trapping funds in
the source countries reduces
the attractiveness of corruption, tax evasion, and so on. A focus on the
consequences might then reduce the underlying activities. This reduction could occur through at least two mechanisms. First, the returns
associated with having to spend the money at home, with only the goods
and services available, for example, in Congolese markets, may make the
marginal dollar less valuable and, thus, lower the incentive to steal from
the state. With increasing globalization, however, the consumption possibilities in developing countries are approaching those available elsewhere, at least in terms of perishables. Substitutes for homes in the south
of France may remain difficult to fi nd in poorer countries (indeed, in
almost any country). Second, the funds are less secure at home than
abroad. This will also lower the marginal return of another dollar stolen
in an ex ante calculation because a change in regime may lead to the
seizure of some of these assets. The calculation of the probabilities of
seizure is no doubt complicated, but the fear of such a loss surely weighs heavily in small countries with kleptocratic traditions. The
fear may increase the current kleptocrats’ incentives for retaining power given
that fl ight will separate them from their wealth.2 However, this seems a
modest effect; few kleptocrats quit power easily, even with vast amounts
of wealth overseas, as evidenced by Muammar Ghaddafi ’s refusal to leave
Libya under extreme pressure, despite the availability of billions of dollars in overseas accounts.
Second impact is Growth - Growth solves war - numerous studies prove
Royal, 10 – Director of Cooperative Threat Reduction at the U.S. Department of Defense,
(Jedediah, “Economic Integration, Economic Signaling and the Problem of Economic Crises,” in
Economics of War and Peace: Economic, Legal and Political Perspectives,” ed. Goldsmith and
Brauer, p. 213-14)
Less intuitive is how periods of economic decline may increase the likelihood of external conflict. Political
science literature has contributed a moderate degree of attention to the impact of economic decline and the security and defence behaviour of
interdependent states. Research in this vein has been considered at systemic, dyadic and national levels. Several notable contributions follow. First, on the
rhythms in the
global economy are associated with the rise and fall of a pre-eminent power and the often
bloody transition from one pre-eminent leader to the next. As such, exogenous shocks such as economic
crises could usher in a redistribution of relative power (see also Gilpin. 1981) that leads to uncertainty about power
balances, increasing the risk of miscalculation (Feaver, 1995). Alternatively, even a relatively certain
redistribution of power could lead to a permissive environment for conflict as a rising power
may seek to challenge a declining power (Werner. 1999). Separately, Pollins (1996) also shows that global economic cycles
systemic level, Pollins (2008) advances Modelski and Thompson's (1996) work on leadership cycle theory, finding that
combined with parallel leadership cycles impact the likelihood of conflict among major, medium and small powers, although he suggests that the causes
and connections between global economic conditions and security conditions remain unknown. Second, on a dyadic level, Copeland's (1996, 2000)
theory of trade expectations suggests that 'future
expectation of trade' is a significant variable in
understanding economic conditions and security behaviour of states. He argues that interdependent states are
likely to gain pacific benefits from trade so long as they have an optimistic view of future trade relations. However, if the expectations of
future trade decline, particularly for difficult to replace items such as energy resources, the likelihood for conflict
increases, as states will be inclined to use force to gain access to those resources. Crises
could potentially be the trigger for decreased trade expectations either on its own or because it triggers protectionist moves by
interdependent states.4 Third, others have considered the link between economic decline and external armed
conflict at a national level. Blomberg and Hess (2002) find a strong correlation between internal
conflict and external conflict, particularly during periods of economic downturn. They write: The
linkages between internal and external conflict and prosperity are strong and mutually reinforcing. Economic conflict tends to spawn internal conflict,
which in turn returns the favour. Moreover, the presence
of a recession tends to amplify the extent to which
international and external conflicts self-reinforce each other. (Blomberg & Hess, 2002. p. 89) Economic
decline has also been linked with an increase in the likelihood of terrorism (Blomberg, Hess, & Weerapana,
2004), which has the capacity to spill across borders and lead to external tensions. Furthermore, crises generally reduce the popularity of a sitting
government. "Diversionary
theory" suggests that, when facing unpopularity arising from
economic decline, sitting governments have increased incentives to fabricate external
military conflicts to create a 'rally around the flag' effect. Wang (1996), DeRouen (1995). and Blomberg, Hess, and
Thacker (2006) find supporting evidence showing that economic decline and use of force are at least indirectly correlated. Gelpi (1997), Miller (1999),
and Kisangani and Pickering (2009) suggest that the
tendency towards diversionary tactics are greater for
democratic states than autocratic states, due to the fact that democratic leaders are generally more susceptible to being removed from office due
to lack of domestic support. DeRouen (2000) has provided evidence showing that periods of weak economic performance in
the United States, and thus weak Presidential popularity, are statistically linked to an
increase in the use of force. In summary, recent economic scholarship positively correlates economic integration with an increase in the
frequency of economic crises, whereas political science scholarship links economic decline with external
conflict at systemic, dyadic and national levels.5 This implied connection between integration, crises and armed conflict has
not featured prominently in the economic-security debate and deserves more attention.
Cyberterrorism
IFFs facilitate and preserve organized cyberterrorist networks – disaster is imminent without
intervention
Caryl, 7/24/13 - Senior fellow at the Legatum Institute in London and a Contributing Editor at
Foreign Policy Magazine (Christian, “What a tangled web global criminality weaves,” Australian
Financial Review, LexisNexis)//YS
Mexicans are celebrating a victory over the drug mafia this week. The arrest of Miguel Angel Treviño Morales, the head of the Zeta
drug cartel, is big news. Treviño, alias Z-40, made a name for himself as one of the most brutal gangsters in a country that has
become inured to violence. But will Z-40's arrest put an end to Mexico's drug wars? There's reason to doubt it. Demand for drugs from
the United States remains strong, and until that underlying structural cause is addressed, this lucrative trade will continue to thrive.
Some experts point out that one of the biggest beneficiaries of Treviño's downfall is likely to be JoaquÃ-n Guzmán Loera ("El
Chapo"), the head of the rival Sinaloa cartel, who can revel in the elimination of one of his most energetic competitors. Analysts put
the value of the global drug trade at some $US350 billion a year, and that's probably a conservative estimate. And yet narcobusiness
comprises only one relatively small slice of the much larger world of global criminality. According to the World
Economic Forum: "The cross-border flow of global proceeds from criminal activities, corruption
and tax evasion is estimated at over $US1 trillion, with illegal drugs and counterfeit goods each
accounting for 8 per cent of world trade." Organised crime lurks behind many of the stories in
the headlines today, though the connection rarely becomes explicit. Alexey Navalny, the Russian opposition leader who
was just convicted on probably spurious charges of embezzlement, made a name for himself by targeting the corruption that is
so deep-seated in today's Russia that it's often hard to see where the government leaves off and the
mob begins. European Union law enforcement officials warned recently that mobsters are
capitalising on the European financial crisis by taking advantage of black markets in goods and
services. Meanwhile, the increasing prominence of the Internet in the global economy is fueling
worries about the rising power of organized cybercriminals. Gangsters are cropping up in all sorts of odd
places. Criminal syndicates are implicated in everything from the poaching of rare wildlife to the counterfeiting of drugs and
manufactured goods. That growing range of activities attests to the criminals' skill at exploiting the possibilities offered by deepening
global interconnectedness. Consider the opening of this story about a recent raid by Interpol: "More than 6000 people around the
world were arrested in a two-month anti-counterfeiting sweep that netted tens of millions of dollars worth of fake shampoo in China,
phony cigarettes in Turkey and bogus booze in Chile." The investigators discovered everything from a subterranean factory in Ukraine
making counterfeit cigarettes to a workshop in Peru that puts false labels on motors from China. What
we're seeing, though,
is just the proverbial tip of the iceberg. Criminals, by definition, prefer to avoid the light of day, so the
dimensions of the real mafia problem remain obscure. Was that Vatican official who was
arrested in June on money-laundering charges merely trying to make himself and some well-connected friends a
bit richer, or is he part of a much broader pattern of institutionalized corruption within the bank
of the Holy See? Was that recent police raid in New Delhi that netted a huge haul of black-market weapons a victory over
mobsters or terrorists? Did that witness who met an untimely end just before he was to testify in the Whitey Bulger case here in the
United States really die of natural causes? Why did the Chinese harbor one of Taiwan's most prominent triad leaders for 17 years
before handing him over to Taipei earlier this month? In most cases, we'll probably never know the whole story. But there are a few
things that we can say with certainty. First, organised crime in cyberspace is becoming a core problem, one that's particularly hard to
combat precisely because of its amorphousness. Indeed, there's considerable anecdotal evidence that hackers-for-hire are increasingly
lending their services to governments and gangs. The opacity of the culprits shouldn't delude us about the scale of what's at stake. A
report issued earlier this week by a global financial organization noted that half of the
world's securities exchanges came under attack by hackers last year. That means that webbased criminals are potentially in a position to destabilise the global financial system, entirely
aside from the untold losses from mushrooming cybercrime. Second, illicit financial flows are a big part of the
problem . The biggest problem for large-scale criminals is banking their ill-gotten gains,
and right now there are plenty of entirely legal lawyers, accountants and offshore tax
havens that are happy to help. Let's put aside for the moment the theoretical arguments over the virtues and drawbacks
of secrecy jurisdictions, and note simply that preserving the present system , which allows criminals to
shift their profits almost effortlessly across the globe without scrutiny, will lead to disaster
if allowed to continue unchecked. One recent report co-published by Global Financial Integrity and the African
Development Bank claims that Africa alone lost up to $1.4 trillion to illicit financial flows. Surely the continuing existence of a
system that allows for the existence of a "shadow financial system" on this scale is not good for anyone -- countries developed and
developing alike. Third, powerful global crime syndicates are the enemy of good government. Democracy can hardly flourish when
politicians meld with the shadowy forces of the mafia. It's precisely this understanding that has spurred the recent wave of protests in
Bulgaria, where demonstrators took to the streets after a thuggish young tycoon was appointed as the government's top security
official. Such concerns are by no means restricted to Eastern Europe, though. The wave of recent protests in places from Turkey to
Brazil shows citizens are increasingly worried about official malfeasance and the lack of transparency that allows it. They're right to
worry.
Hackers threaten to cripple the U.S. economy at any moment – pose one of the largest threats to
international security
Gable, 10 - Adjunct Professor of Public International Law, Drexel University Earl Mack School
of Law (Kelly, Vanderbilt Journal of Transnational Law, “Cyber-Apocalypse Now: Securing the
Internet Against Terrorism and Using Universal Jurisdiction As a Deterrent,” Vol. 43/57,
http://www.vanderbilt.edu/jotl/manage/wp-content/uploads/Gable_camera_ready_final.pdf)
It is a cold December day, already dark, when Aidan Smith
leaves his office to catch the train home. As he is leaving the
building, the power suddenly cuts out, bringing the elevator he is in
to a screeching halt on the ground floor. He presses the emergency
button, and the doors open, begrudgingly, to let him out. Shaken, he
heads for the train station. As he steps out into the street, he realizes
it is much darker than usual—every building, every street light,
every stoplight is dark. Only the headlights from passing cars light
the sidewalk as he slowly makes his way to the train station. He
finally arrives, but finds that the station is barely lit and is jammed
with people waiting for trains that are not coming. Checking the
news on his BlackBerry, he sees that Washington, D.C., New York,
Chicago, and Los Angeles have simultaneously lost all electricity and
that Al Qaeda replaced the White House website with a message
proclaiming that they have hacked into and shut down these major
power grids to cripple the U.S. economy, as the stock markets,
airports, and banks cannot function without electricity. In short, Al
Qaeda has caused a cyber-apocalypse.1
Although this situation is hypothetical, the possibility is
disturbingly real. Hackers scan U.S. government computer systems
literally thousands of times a day, looking for a way in.2 In 2001,
hackers successfully attacked an electric power grid in California and
a seaport in Houston;3 more recently, hackers planted malicious
software in the U.S. power grid, oil and gas distribution computer
systems, telecommunications networks, and computer systems of the
financial services industry.4 In March 2007, researchers at the
Department of Energy’s Idaho National Laboratory caused a
generator to self-destruct, just to see if they could.5 Although these
attacks were narrower in scope and magnitude than the hypothetical
scenario, they each demonstrate the vulnerability of critical U.S.
infrastructure. The fact that each of these critical infrastructure
systems is accessible via the Internet heightens (and arguably
creates) this vulnerability.6
The Internet has revolutionized and exponentially increased the
threat that terrorism poses to national and international security.
The Internet not only makes it easier for terrorists to communicate,
organize terrorist cells, share information, plan attacks, and recruit
others,7 but also is increasingly being used to commit cyberterrorist
acts. In February 2009, the Director of National Intelligence testified
before the Senate Select Committee on Intelligence that terrorist
groups have expressed their intent to use cyber attacks against the
United States.8 Indeed, cyberterrorists and hackers attempt to
penetrate Department of Defense computer systems thousands of
times a day.9
Cyberterrorism has become one of the most significant threats to
the national and international security of the modern state, and
cyberattacks are occurring with increased frequency.
Economic decline leads to nuclear war
Harris and Burrows, 09 – Counselor in the National Intelligence Council, the principal drafter
of Global Trends 2025 (“Revisiting the Future: Geopolitical Effects of the Financial Crisis”,
Washington Quarterly, http://www.twq.com/09april/docs/09apr_burrows.pdf)
Increased Potential for Global Conflict
Of course, the report encompasses more than economics and indeed believes the future is likely to be the result of a number of intersecting and
interlocking forces. With so many possible permutations of outcomes, each with ample opportunity for unintended consequences, there is a growing
sense of insecurity. Even so, history may be more instructive than ever. While we continue to believe that
the Great Depression is not likely
to be repeated, the lessons to be drawn from that period include the harmful effects on fledgling democracies and multiethnic societies (think
Central Europe in 1920s and 1930s) and on the sustainability of multilateral institutions (think League of Nations in the same period). There is no reason
to think that this would not be true in the twenty-first as much as in the twentieth century. For that reason, the ways in which the
potential for
greater conflict could grow would seem to be even more apt in a constantly volatile economic environment as they
would be if change would be steadier.
In surveying those risks, the report stressed the likelihood that terrorism and nonproliferation will remain priorities even as resource issues move up on
the international agenda. Terrorism’s appeal will decline if economic growth continues in the Middle East and youth unemployment is reduced. For those
terrorist groups that remain active in 2025, however, the diffusion of technologies and scientific knowledge will place some of the world’s most
dangerous capabilities within their reach. Terrorist groups in 2025 will likely be a combination of descendants of long established groups
inheriting organizational structures, command and control processes, and training procedures necessary to conduct sophisticated attacks and newly
emergent collections of the angry and disenfranchised that become self-radicalized, particularly in the absence of economic outlets that would
become narrower in
an economic downturn.
The most dangerous casualty of any economically-induced drawdown of U.S. military presence
would almost certainly be the Middle East. Although Iran’s acquisition of nuclear weapons is not inevitable, worries
about a nuclear-armed Iran could lead states in the region to develop new security arrangements
with external powers, acquire additional weapons, and consider pursuing their own nuclear ambitions. It is
not clear that the type of stable deterrent relationship that existed between the great powers for most of the Cold War would emerge naturally in the
Middle East with a nuclear Iran. Episodes of low intensity conflict and terrorism taking place under a nuclear umbrella could lead to an unintended
escalation and broader conflict if clear red lines between those states involved are not well established. The close proximity of potential nuclear rivals
combined with underdeveloped surveillance capabilities and mobile dual-capable Iranian missile systems also will produce inherent difficulties in
The lack of strategic depth in neighboring states like Israel,
short warning and missile flight times, and uncertainty of Iranian intentions may place more focus
on preemption rather than defense, potentially leading to escalating crises.
Types of conflict that the world continues to experience, such as over resources, could reemerge,
particularly if protectionism grows and there is a resort to neo-mercantilist practices. Perceptions
of renewed energy scarcity will drive countries to take actions to assure their future access to
energy supplies. In the worst case, this could result in interstate conflicts if government leaders deem assured access to
achieving reliable indications and warning of an impending nuclear attack.
energy resources, for example, to be essential for maintaining domestic stability and the survival of their regime. Even actions short of war, however, will
have important geopolitical implications. Maritime
security concerns are providing a rationale for naval buildups and
modernization efforts, such as China’s and India’s development of blue water naval capabilities. If the fiscal stimulus focus for these
countries indeed turns inward, one of the most obvious funding targets may be military. Buildup of regional naval capabilities could lead to
increased tensions, rivalries, and counterbalancing moves, but it also will create opportunities for multinational cooperation in
protecting critical sea lanes. With water also becoming scarcer in Asia and the Middle East, cooperation to manage changing water resources is likely to
be increasingly difficult both within and between states in a
more dog-eat-dog world.
Cyberterrorists will fake or actually cause a nuclear state to attack another, resulting in nuclear
retaliation – multiple scenarios for escalation
Koeppen, ’09 (Brynn, Executive Biz, “Nation Nuclear Control Centers Vulnerable to
Cyberterrorism Report,” July 29,
http://blog.executivebiz.com/2009/07/nation-nuclear-control-centers-vulnerable-to-cyberterrorism-report/)
A recent report by the International Commission on Nuclear Non-proliferation and Disarmament
(ICNND) entitled “Hacking Nuclear Command and Control” found that terrorist organizations
have the potential to use the Internet and private network infrastructures to stage a nuclear attack.
“If access to command and control centres is obtained, terrorists could fake or actually cause one
nuclear-armed state to attack another, thus provoking a nuclear response from another nuclear
power. This may be an easier alternative for terrorist groups than building or acquiring a nuclear
weapon or dirty bomb themselves. This would also act as a force equaliser, and provide terrorists
with the asymmetric benefits of high speed, removal of geographical distance, and a relatively
low cost,” the report found.
Internet attacks appeal to terrorist organizations because cyberattacks can be accomplished at
offsite locations. The report gives the example of terrorists hacking into a Russian nuclear
network infrastructure from China, to make it appear that Russia is forging a nuclear attack on the
United States. The report goes on to name scenarios where terrorists could shut down
communication networks between nuclear countries and leak false reports to the media,
causing chaos and an escalated potential for a nuclear attack under false information. Hacking
into a nation’s nuclear command center is also cheaper for a terrorist organization than building a
nuclear weapon from scratch.
Heavy provisions are already in place to prevent terrorist access to nuclear command centers. Yet
the report suggests that terrorists could hack into government emails and private
networks, eliminating the need to attack a nuclear command and control center directly.
Furthermore, although orders to launch a nuclear attack are reserved for the top officials and
leaders, there is a significant potential for outside individuals to feed false information through
media networks, emails, and even government private networks.
Warming
Curbing IFFs is key to raising domestic climate change financing – multilateral AEI solves
Tax Justice Network, ’09 (Stop Illicit Capital Flows to Tackle the Climate Crisis,” December
11, http://taxjustice.blogspot.com/2009/12/stop-illicit-capital-fligh-to-solve.html)//SEP
What about mitigation, i.e. reversing the trend of increasing CO2 and other greehouse gas (GHG)
emissions in the atmosphere? Estimates vary even more here: the UNFCCC estimates US$ 52.4
billion, while the World Bank says US$ 140-175 billion -- with cost of financing even higher if
that money has to be borrowed and then repaid (financing cost is estimated anywhere between
US$ 265-565 billion), hence the figure of US$ 400 billion to bring the level of CO2 in the climate
down to a safer level of 450 parts per million (ppm) of CO2 in the climate.
Meanwhile there is a petition on the 'safe' level actually being 350 ppm, requiring a lot more
climate financing.
Whatever the 'magic figure', the demand for climate change finance is huge.
One solution is this: tackle illicit financial flows from developing countries, estimated by Global
Financial Integrity (GFI), our colleagues in Washington D.C. annually between US$ 858.61060 billion annually for the years 2002-2006.
This point was completely lost in the United Nations Climate Change Conference 2009 in
Copenhagen (COP15) -- the 15th climate conference since the first one in Rio de Janeiro in 1992.
If we want to adapt to climate change, and further mitigate it, we need to look at the capacity of
especially the developing countries in raising domestic climate change financing.
Alongside tax evasion, illicit flows, and avoidance, there are questions such as low royalties and
imbalanced mineral contracts, sources of large losses. Ghana, for instance, in a report titled
'Breaking the Curse' says the state could have raised further US$ 54.46-163.39 million due in
mining royalties if a range of 6-12 per cent were applied instead of the current minimum rate of 3
per cent, that all mining companies pay due to low reported profits from gold, diamonds,
manganese and bauxite mining. Meanwhile, in Sierra Leone, it is estimated in another report
titled 'Sierra Leone at Cross-Roads' that US$ 110 million more could be raised annually by
2020 in the future from the mining sector. This potential for mobilising further domestic
resources is there.
Indeed, just as we argued at the Doha Financing for Development (UNFfD) conference in Doha
in November-December 2008, involving pledges to reinforce international tax co-operation, to
tackle illicit financial flows and to work towards a multilateral framework of automatic
information exchange. These will be productive ways of tackling the financial costs of the climate
crisis.
Global warming is real and human induced – top climate scientists agree
Anderegg et al, 10 – PhD Candidate @ Stanford in Biology
(William, “Expert credibility in climate change,” National Academy of Sciences, p. 1210712109)//BB
Preliminary reviews of scientific literature and surveys of cli- mate scientists indicate striking agreement with the primary
conclusions of the Intergovernmental Panel on Climate Change (IPCC): anthropogenic greenhouse gases have been
responsible for “most” of the “unequivocal” warming of the Earth’s average global temperature over the second half of the
20th century (1–3). Nonetheless, substantial and growing public doubt remains about the anthropogenic cause and scientific
agreement about the role of anthropogenic greenhouse gases in climate change (4, 5). A vocal minority of researchers and
other critics contest the conclusions of the mainstream scientific assessment, frequently citing large numbers of scientists
whom they believe support their claims (6–8). This group, often termed climate change skeptics, contrarians, or deniers, has
received large amounts of media attention and wields significant influence in the societal debate about climate change
impacts and policy (7, 9–14). An extensive literature examines what constitutes expertise or credibility in technical and
policy-relevant scientific research (15). Though our aim is not to expand upon that literature here, we wish to draw upon
several important observations from this literature in examining expert credibility in climate change. First, though the degree
of contextual, political, epistemological, and cultural in- fluences in determining who counts as an expert and who is credible
remains debated, many scholars acknowledge the need to identify credible experts and account for expert opinion in technical (e.g., science-based) decision-making (15–19). Furthermore, delineating expertise and the relative credibility of claims
is critical, especially in areas where it may be difficult for the majority of decision-makers and the lay public to evaluate the
full complexities of a technical issue (12, 15). Ultimately, however, societal decisions regarding response to ACC must
necessarily include input from many diverse and nonexpert stakeholders. Because the timeline of decision-making is often
more rapid than scientific consensus, examining the landscape of expert opinion can greatly inform such decision-making
(15, 19). Here, we examine a metric of climate-specific expertise and a metric of overall sci- entific prominence as two
dimensions of expert credibility in two groups of researchers. We provide a broad assessment of the rel- ative credibility of
researchers convinced by the evidence (CE) of ACC and those unconvinced by the evidence (UE) of ACC. Our consideration
of UE researchers differs from previous work on climate change skeptics and contrarians in that we primarily focus on
researchers that have published extensively in the climate field, although we consider all skeptics/contrarians that have signed
pro- minent statements concerning ACC (6–8). Such expert analysis can illuminate public and policy discussions about ACC
and the extent of consensus in the expert scientific community. We compiled a database of 1,372 climate researchers based
on authorship of scientific assessment reports and membership on multisignatory statements about ACC (SI Materials and
Methods). We tallied the number of climate-relevant publications authored or coauthored by each researcher (defined here as
expertise) and counted the number of citations for each of the researcher’s four highest-cited papers (defined here as
prominence) using Google Scholar. We then imposed an a priori criterion that a researcher must have authored a minimum of
20 climate publications to be considered a climate researcher, thus reducing the database to 908 researchers. Varying this
minimum publication cutoff did not ma- terially alter results (Materials and Methods). We ranked researchers based on the
total number of climate publications authored. Though our compiled researcher list is not comprehensive nor designed to be
representative of the entire cli- mate science community, we have drawn researchers from the most high-profile reports and
public statements about ACC. Therefore, we have likely compiled the strongest and most credentialed re- searchers in CE
and UE groups. Citation and publication analyses must be treated with caution in inferring scientific credibility, but we
suggest that our methods and our expertise and prominence criteria provide conservative, robust, and relevant indicators of
relative credibility of CE and UE groups of climate researchers (Materials and Methods). Results and Discussion The UE
[unconvinced by evidence] group comprises only 2% of the top 50 climate researchers as ranked by expertise
(number of climate publications), 3% of researchers of the top 100, and 2.5% of the top 200, excluding researchers present in
both groups (Materials and Methods). This result closely agrees with expert surveys, indicating that ≈97% of selfidentified actively publishing climate scientists agree with the tenets of ACC (2). Furthermore, this finding complements
direct polling of the climate researcher community, which yields quali- tative and self-reported researcher expertise (2). Our
findings capture the added dimension of the distribution of researcher expertise, quantify agreement among the highest
expertise climate researchers, and provide an independent assessment of level of scientific consensus concerning ACC. In
addition to the striking difference in number of expert researchers between CE and UE groups, the distribution of expertise of
the UE group is far below that of the CE group (Fig. 1). Mean expertise of the UE group was around half (60 publications)
that of the CE group (119 pub- lications; Mann–Whitney U test: W = 57,020; P < 10−14), as was median expertise (UE = 34
publications; CE = 84 publications). Furthermore, researchers with fewer than 20 climate publications comprise ≈80% the
UE group, as opposed to less than 10% of the CE group. This indicates that the bulk of UE researchers on the most prominent
multisignatory statements about climate change have not published extensively in the peer-reviewed climate literature. We
examined a subsample of the 50 most-published (highest- expertise) researchers from each group. Such subsampling facilitates comparison of relative expertise between groups (normalizing differences between absolute numbers). This method
reveals large differences in relative expertise between CE and UE groups (Fig. 2). Though the top-published researchers in
the CE group have an average of 408 climate publications (median = 344), the top UE re- searchers average only 89
publications (median = 68; Mann– Whitney U test: W = 2,455; P < 10−15). Thus, this suggests that not all experts are equal,
and top CE researchers have much stronger expertise in climate science than those in the top UE group. Finally, our
prominence criterion provides an independent and approximate estimate of the relative scientific significance of CE and UE
publications. Citation analysis complements publication analysis because it can, in general terms, capture the quality and
impact of a researcher’s contribution—a critical component to overall scientific credibility—as opposed to measuring a
research- er’s involvement in a field, or expertise (Materials and Methods). The citation analysis conducted here further
complements the publication analysis because it does not examine solely climate- relevant publications and thus captures
highly prominent re- searchers who may not be directly involved with the climate field. We examined the top four most-cited
papers for each CE and UE researcher with 20 or more climate publications and found immense disparity in scientific
prominence between CE and UE communities (Mann–Whitney U test: W = 50,710; P < 10−6; Fig. 3). CE researchers’ top
papers were cited an average of 172 times, compared with 105 times for UE researchers. Because a single, highly cited paper
does not establish a highly credible reputation but might instead reflect the controversial nature of that paper (often called the
single-paper effect), we also considered the av- erage the citation count of the second through fourth most-highly cited papers
of each researcher. Results were robust when only these papers were considered (CE mean: 133; UE mean: 84; Mann–
Whitney U test: W = 50,492; P < 10−6). Results were ro- bust when all 1,372 researchers, including those with fewer than 20
climate publications, were considered (CE mean: 126; UE mean: 59; Mann–Whitney U test: W = 3.5 × 105; P < 10−15).
Number of citations is an imperfect but useful benchmark for a group’s scientific prominence (Materials and Methods), and
we show here that even considering all (e.g., climate and nonclimate) publications, the UE researcher group has substantially
lower prominence than the CE group. We provide a large-scale quantitative assessment of the relative level of agreement,
expertise, and prominence in the climate re- searcher community. We show that the expertise and prominence, two integral
components of overall expert credibility, of climate researchers convinced by the evidence of ACC
vastly
overshadows
that of the climate change skeptics and contrarians. This divide is even starker when considering the top
researchers in each group. Despite media tendencies to present both sides in ACC debates (9), which can contribute to
continued public misunderstanding re- garding ACC (7, 11, 12, 14), not all climate researchers are equal in scientific
credibility and expertise in the climate system. This extensive analysis of the mainstream versus skeptical/contrarian
researchers suggests a strong role for considering expert credibi- lity in the relative weight of and attention to these groups of
re- searchers in future discussions in media, policy, and public forums regarding anthropogenic climate change.
Warming is an existential risk – quickening reductions is key to avoiding extinction
Mazo, 10 – PhD in Paleoclimatology from UCLA
(Jeffrey Mazo, Managing Editor, Survival and Research Fellow for Environmental Security and
Science Policy at the International Institute for Strategic Studies in London, 3-2010, “Climate
Conflict: How global warming threatens security and what to do about it,” pg. 122)//BB
The best estimates for global warming to the end of the century range from 2.5-4.~C above pre-industrial levels, depending
on the scenario. Even in the best-case scenario, the low end of the likely range is 1.goC, and in the worst 'business as usual'
projections, which actual emissions have been matching, the range of likely warming runs from 3.1--7.1°C. Even keeping
emissions at constant 2000 levels (which have already been exceeded), global temperature would still be expected to reach
1.2°C (O'9""1.5°C)above pre-industrial levels by the end of the century."
Without early and severe
reductions in emissions, the effects of climate change in the second half of the
twenty-first century are likely to be catastrophic for the stability and security of countries in the
developing world - not to mention the associated human tragedy. Climate change could even undermine the
strength and stability of emerging and advanced economies, beyond the knock-on effects on
security of widespread state failure and collapse in developing countries.' And although they
have been condemned as melodramatic and alarmist, many informed observers believe that unmitigated climate
change beyond the end of the century could pose an existential threat to civilisation." What is
certain is that there
is no precedent in human experience for such rapid change or such
climatic conditions, and even in the best case adaptation to these extremes would mean
profound social, cultural and political changes.
Action now averts extinction
Morgan, 09 – Professor at Hankuk University of Foreign Studies (Dennis Ray, “World on
Fire: Two Scenarios of the Destruction of Human Civilization and the Possible Extinction of the
Human Race”, 2009)//Beddow
As horrifying as the scenario of human extinction by sudden, fast-burning nuclear
fire may seem, the one consolation is that this future can be avoided within a
relatively short period of time if responsible world leaders change Cold War thinking
to move away from aggressive wars over natural resources and towards the eventual
dismantlement of most if not all nuclear weapons. On the other hand, another
scenario of human extinction by fire is one that may not so easily be reversed within a
short period of time because it is not a fast-burning fire; rather, a slow burning fire is gradually
heating up the planet as industrial civilization progresses and develops globally. This gradual process and course is longlasting; thus it cannot easily be changed, even if responsible world leaders change their thinking about ‘‘progress’’ and
industrial development based on the burning of fossil fuels. The way that global warming will impact humanity in the future
has often been depicted through the analogy of the proverbial frog in a pot of water who does not realize that the temperature
of the water is gradually rising. Instead of trying to escape, the frog tries to adjust to the gradual temperature change; finally,
the heat of the water sneaks up on it until it is debilitated. Though it finally realizes its predicament and attempts to escape, it
is too late; its feeble attempt is to no avail— and the frog dies. Whether this fable can actually be applied to frogs in heated
water or not is irrelevant; it still serves as a comparable scenario of how the
slow burning fire of global
warming may eventually lead to a runaway condition and take humanity by surprise.
Unfortunately, by the time the politicians finally all agree with the scientific consensus
that global warming is indeed human caused, its development could be too advanced
to arrest; the poor frog has become too weak and enfeebled to get himself out of hot water. The Intergovernmental Panel
of Climate Change (IPCC) was established in 1988 by the WorldMeteorological Organization (WMO) and the United
Nations Environmental Programme to ‘‘assess on a comprehensive, objective, open and transparent basis the scientific,
technical and socio-economic information relevant to understanding the scientific basis of risk of humaninduced climate
change, its potential impacts and options for adaptation and mitigation.’’[16]. Since then, it has given assessments and reports
every six or seven years. Thus far, it has given four assessments.13 With all prior assessments came attacks fromsome parts
of the scientific community, especially by industry scientists, to attempt to prove that the theory had no basis in planetary
history and present-day reality; nevertheless, as more and more research
continually provided concrete
and empirical evidence to confirm the global warming hypothesis, that it is indeed
human-caused, mostly due to the burning of fossil fuels, the scientific consensus grew
stronger that human induced global warming is verifiable. As a matter of fact, according to Bill
McKibben [17], 12 years of ‘‘impressive scientific research’’ strongly confirms the 1995 report ‘‘that humans had grown so
large in numbers and especially in appetite for energy that they were now damaging the most basic of the earth’s systems—
the balance between incoming and outgoing solar energy’’; ‘‘. . . their findings have essentially been complementary to the
1995 report – a constant strengthening of the simple basic truth that humans were burning too much fossil fuel.’’ [17].
Indeed, 12 years later, the 2007 report not only confirms global warming, with a stronger scientific consensus that the slow
burn is ‘‘very likely’’ human caused, but it also finds that the
‘‘amount of carbon in the atmosphere is
now increasing at a faster rate even than before’’ and the temperature increases
would be ‘‘considerably higher than they have been so far were it not for the blanket of soot and
other pollution that is temporarily helping to cool the planet.’’ [17]. Furthermore, almost ‘‘everything frozen on
earth is melting. Heavy rainfalls are becoming more common since the air is warmer and therefore holds more water
than cold air, and ‘cold days, cold nights and frost have become less frequent, while hot days, hot nights, and heat waves
have become more frequent.’’ [17]. Unless
drastic action is taken soon, the average global
temperature is predicted to rise about 5 degrees this century, but it could rise as
much as 8 degrees. As has already been evidenced in recent years, the rise in global
temperature is melting the Arctic sheets. This runaway polar melting will inflict great
damage upon coastal areas, which could be much greater than what has been
previously forecasted. However, what is missing in the IPCC report, as dire as it may seem, is sufficient emphasis
on the less likely but still plausible worst case scenarios, which could prove to have the most devastating, catastrophic
consequences for the long-term future of human civilization. In other words, the IPCC report places too much emphasis on a
linear progression that does not take sufficient account of the dynamics of systems theory, which leads to a fundamentally
different premise regarding the relationship between industrial civilization and nature.
Russia
Growing Russian IFFs undermine the economy and nation state – international
transparency is key to solve
Awoko, 13 (“Threat From Illicit Financial Flows From Russia, April 12, 2013
http://awoko.org/2013/04/12/threat-from-illicit-financial-flows-from-russia/)
The GFI recommended that Russia used its influence in global forms such as the G20, G8, and
United Nations to increase the transparency in the international financial system and curtail the
illicit flow of money into and out of Russia.
According to Bloomberg News, Russian Central
Bank Governor Sergei Ignatyev said that the majority of these illicit flows “seem to be controlled
by one well-organised group of people”.
The Director of the GFI, Raymond Baker said: “Russia
has a severe problem with illegal flows of money. It’s gratifying to see the Governor of the
Central Bank acknowledging it. That’s the first step to curtailing these outflows.
“Claims by the
Kremlin later in the day that Ignatyev’s estimates may have been ‘exaggerated,’ were followed by
radio silence from the Central Bank Chief on the topic after he made his initial remarksdespite
being asked follow-up questions by reporters,” said Mr. Baker.
“Russia is the most opaque
economy we’ve analysed at GFI, and the Russian people really deserve to have an open and
honest discussion about the illicit money flowing into and out of the country. As our research
shows, hundreds of billions of dollars have been lost since the fall of the Soviet Union that could
have been used to invest in Russian healthcare, education, and infrastructure. At the same time,
more than a half trillion dollars has illegally flowed into the Russian underground economy,
fuelling crime and corruption,” Mr. Baker added.
The GFI report said that the Russian economy
haemorrhaged $211.5 billion in illicit financial outflows from 1994 the earliest year for which
data is available following the dissolution of the Soviet Union through 2011.
The study, titled
“Russia: Illicit Financial Flows and the Role of the Underground Economy,” also measures
massive illicit inflows to the Russian economy of $552.9 billion over the 18-year time-span,
raising serious questions about the economic and political stability of the nation currently
chairing the G20.
“Russia has a severe problem with illegal flows of money,” said Mr. Baker.
“Hundreds of billions of dollars have been lost that could have been used to invest in Russian
healthcare, education, and infrastructure.”
Dr. Kar and Ms Freitas estimated the size of Russia’s
underground economy at a massive 46 per cent of GDP per year over the time period. Moreover,
illicit outflows and inflows were found to drive the domestic underground economy, which
includes among other things drug smuggling, arms trafficking and human trafficking. Thus,
illegal capital flight was determined to contribute to a fall in governance. Growth in the
underground economy likewise was shown to drive illicit flows, creating “a snowballing effect,
whereby both the underground economy and illicit flows continue to grow at an increasing rate
unless policy measures and institutions intervene,” according to Dr. Kar, the principle author of
the report, who worked as a senior economist at the International Monetary Fund before joining
GFI.
A one per cent increase in the size of the underground economy was found to increase the
cross-border flow of illicit money by seven per cent.
The report revealed that, according to
World Bank staff, Russia’s underground economy was 3.5 times larger than corresponding G7
economies like the US, France, and Canada, and Russia lagged far behind every G7 country in all
six dimensions of governance measured by the World Bank.
Further, illicit flows and the
underground economy both grew significantly over the 18-year period studied, driven in large
part by an overall deterioration in governance and widespread tax evasion.
The study
highlighted that in three out of the six key governance factors measured by the World Bank voice
and accountability, control of corruption, and regulatory quality Russia’s standings had
deteriorated since the fall of the Soviet Union, while remaining poor in the other categories rule
of law, government effectiveness, and political stability.
“So long as the Russian authorities fail
to shrink the underground economy, Russia will continue to haemorrhage scare capital, both
illicit and licit, to the detriment of economic and political stability and undermining the nationstate,” write Dr. Kar and Ms Freitas in the 68-page report.
Russian IFFs are directly linked to government deterioration – including the defense sector
Stratrisks, 13 (“Booming Black Market, Illicit Finance Flow in and out of Russia in Post-Soviet
Era,” February, 13, 2013, http://stratrisks.com/geostrat/10798)
The Russia report’s lead researchers, Dev Kar and Sarah Freitas, both economists, said they
believe a link exists between the state of overall governance in Russia and the volume of illicit
financial flows into and out of the country.
Russia is seen as one of the world’s most corrupt countries, ranking 133rd out of 176 scored on
Transparency International’s Corruption Perceptions Index. It ranks last out of the 28 countries
the group studied for its Bribe Payers Index, and its defense sector got a D-Minus grade in TI’s
study of government defense departments.
Moreover, illicit flows and the underground economy both grew significantly over the 18-year
period studied by Global Financial Integrity, driven by a deterioration in governance and
widespread tax evasion, the report said.
Russian economic decline leads to nuclear terrorism
Filgerm 09 (Sheldon, Correspondent – Huffington Post, “Russian Economy Faces Disastrous
Free Fall Contraction”, http://www.globaleconomiccrisis.com/blog/archives/356)
In Russia, historically, economic health and political stability are intertwined to a degree that
is rarely encountered in other major industrialized economies. It was the economic stagnation of
the former Soviet Union that led to its political downfall. Similarly, Medvedev and Putin, both
intimately acquainted with their nation's history, are unquestionably alarmed at the prospect that
Russia's economic crisis will endanger the nation's political stability, achieved at great cost after
years of chaos following the demise of the Soviet Union. Already, strikes and protests are
occurring among rank and file workers facing unemployment or non-payment of their salaries.
Recent polling demonstrates that the once supreme popularity ratings of Putin and Medvedev are
eroding rapidly. Beyond the political elites are the financial oligarchs, who have been forced to
deleverage, even unloading their yachts and executive jets in a desperate attempt to raise cash.
Should the Russian economy deteriorate to the point where economic collapse is not out of the
question, the impact will go far beyond the obvious accelerant such an outcome would be for the
Global Economic Crisis. There is a geopolitical dimension that is even more relevant then the
economic context. Despite its economic vulnerabilities and perceived decline from superpower
status, Russia remains one of only two nations on earth with a nuclear arsenal of sufficient scope
and capability to destroy the world as we know it. For that reason, it is not only President
Medvedev and Prime Minister Putin who will be lying awake at nights over the prospect that a
national economic crisis can transform itself into a virulent and destabilizing social and political
upheaval. It just may be possible that U.S. President Barack Obama's national security team has
already briefed him about the consequences of a major economic meltdown in Russia for the
peace of the world. After all, the most recent national intelligence estimates put out by the U.S.
intelligence community have already concluded that the Global Economic Crisis represents the
greatest national security threat to the United States, due to its facilitating political instability in
the world. During the years Boris Yeltsin ruled Russia, security forces responsible for guarding
the nation's nuclear arsenal went without pay for months at a time, leading to fears that desperate
personnel would illicitly sell nuclear weapons to terrorist organizations. If the current
economic crisis in Russia were to deteriorate much further, how secure would the Russian nuclear
arsenal remain? It may be that the financial impact of the Global Economic Crisis is its least
dangerous consequence.
U.S. retaliation causes extinction
Ayson, 10 - Professor of Strategic Studies and Director of the Centre for Strategic Studies: New Zealand at the Victoria
University of Wellington, (Robert, “After a Terrorist Nuclear Attack: Envisaging Catalytic Effects,” Studies in Conflict & Terrorism,
Volume 33, Issue 7, July, Available Online to Subscribing Institutions via InformaWorld)
Washington’s early response to a terrorist nuclear attack on its own soil might also raise the
possibility of an unwanted (and nuclear aided) confrontation with Russia and/or China. For
example, in the noise and confusion during the immediate aftermath of the terrorist nuclear attack, the
U.S. president might be expected to place the country’s armed forces, including its nuclear
arsenal, on a higher stage of alert. In such a tense environment, when careful planning runs up against the
friction of reality, it is just possible that Moscow and/or China might mistakenly read this as a
sign of U.S. intentions to use force (and possibly nuclear force) against them. In that
situation, the temptations to preempt such actions might grow, although it must be admitted that any
preemption would probably still meet with a devastating response. As part of its initial
response to the act of nuclear terrorism (as discussed earlier) Washington might decide to order a significant
conventional (or nuclear) retaliatory or disarming attack against the leadership of the
terrorist group and/or states seen to support that group. Depending on the identity and especially the
location of these targets, Russia and/or China might interpret such action as being far too close for
their comfort, and potentially as an infringement on their spheres of influence and even on
their sovereignty. One far-fetched but perhaps not impossible scenario might stem from a judgment in Washington that some
of the main aiders and abetters of the terrorist action resided somewhere such as Chechnya, perhaps in connection with what Allison
claims is the “Chechen insurgents’ … long-standing interest in all things nuclear.”42 American pressure on that part of the world
would almost certainly raise alarms in Moscow that might require a degree of advanced consultation from Washington that the latter
found itself unable or unwilling to provide.
Russia economic decline leads to accidental nuclear use
Mosher, 03 – Senior Policy Analyst in Nuclear Weapons, RAND (David, “Excessive Force”,
RAND Corporation, Fall, http://www.rand.org/pubs/periodicals/randreview/issues/fall2003/force.html, Deech)
Russian strategic nuclear forces remain the only current threat to the national existence of the
United States. Although the risk of deliberate attack from Russia has sharply fallen since the end
of the Cold War, the risk of an accidental or unauthorized use of Russian nuclear forces has
arguably risen. For example, Russia’s early-warning system has severely deteriorated, as has
the country’s ability to keep its mobile (and thus survivable) nuclear forces deployed. There are
additional concerns about the state of Russia’s command-and-control system and the rise of
separatist violence. None of the nuclear arms control treaties after the Cold War have dealt with
the issue of accidental or unauthorized use of nuclear weapons. Instead, these treaties have
concentrated on reducing the total number of nuclear warheads each side wields. While these
reductions are extremely important for improving the overall U.S.-Russian relationship, they do
little to ease the risks of an accidental or unauthorized nuclear launch. This is because those risks
stem from the nuclear postures and underlying nuclear doctrines of each nation, which remain
firmly rooted in the hostile relationship forged during the Cold War.
Accidental launch causes extinction
Mintz, 01 (Morton, Former Chair – Fund for Investigative Journalism and Reporter –
Washington Post, “Two Minutes to Launch”, The American Prospect,
http://www.prospect.org/cs/articles?article=two_minutes_to_launch)
Hair-trigger alert means this: The missiles carrying those warheads are armed and fueled at all
times. Two thousand or so of these warheads are on the intercontinental ballistic missiles
(ICBMs) targeted by Russia at the United States; 1,800 are on the ICBMs targeted by the United
States at Russia; and approximately 1,000 are on the submarine-based missiles targeted by the
two nations at each other. These missiles would launch on receipt of three computer-delivered
messages. Launch crews--on duty every second of every day--are under orders to send the
messages on receipt of a single computer-delivered command. In no more than two minutes, if all
went according to plan, Russia or the United States could launch missiles at predetermined
targets: Washington or New York; Moscow or St. Petersburg. The early-warning systems on
which the launch crews rely would detect the other side's missiles within tens of seconds, causing
the intended--or accidental--enemy to mount retaliatory strikes. "Within a half-hour, there
could be a nuclear war that would extinguish all of us," explains Bruce Blair. "It would be,
basically, a nuclear war by checklist, by rote."
Democracy
Democracy is faltering globally – both in terms of overall quality and public support
Kurlantzick, 11 - Fellow for Southeast Asia at the Council on Foreign Relations. (Joshua,
“Democracy in steep decline around the world,” The National, July 15, 2011,
http://www.thenational.ae/news/worldwide/middle-east/democracy-in-steep-decline-around-theworld?pageCount=0)
But the Arab Spring is, in many ways, a mirage. Several nations in the region may eventually make the transition to
democracy - this is hardly assured - but in reality, democracy
is faltering throughout the developing
world, from Asia to Latin America, from Africa to the former Soviet states. In its
annual survey, the monitoring group Freedom House, which uses a range of data to assess social, political and
economic freedoms, found that global freedom plummeted for the fifth year in a row in
2010, the longest continuous decline in nearly 40 years. In fact, there are now fewer
elected democracies than there were in 1995. A mountain of other evidence supported Freedom House's
findings. One of the other most comprehensive studies of global democracy, compiled by Germany's
Bertelsmann Foundation, uses data examining the ability of democracies to function, manage government and
uphold freedoms to produce what it calls the Transformation Index. The most recent index found "the overall
quality of democracy has eroded [throughout the developing world] ... the key components of a functioning
democracy, such as political participation and civil liberties, have suffered qualitative erosion ... these developments
threaten to hollow out the quality and substance of governance". The index concluded
that the number of "highly defective democracies" - democracies with institutions, elections and
political culture so flawed that they no longer qualified as real democracies - had roughly doubled between 2006
and 2010. The Economist Intelligence Unit's Index of Democracy only further confirmed
these findings. The unit analyses democracy using categories for electoral process, pluralism, political participation,
political culture, functioning of government and civil liberties. It found that democracy was in retreat around the globe. "In all
regions, the average democracy score for 2010 is lower than in 2008," it reported. In
91 of 167 countries it
studied, the democracy score had deteriorated in that time period and in many others it had only
remained stagnant. Of the 79 nations that it assessed as having some significant democratic qualities, only 26 made the grade
as what the EIU calls "full democracies", while the other 53 were ranked only as "flawed democracies" because of serious
deficiencies in many of the areas it assessed. In Latin America, Africa, Asia and even most of Africa, coups, which had been
a frequent means of changing governments during the Cold War, had become nearly extinct by the early 2000s. But
between 2006 and 2010, the military grabbed power in Mauritania, Niger, GuineaBissau, Bangladesh, Fiji and Madagascar, among others. In many other developing
nations, such as Mexico, Pakistan and the Philippines, the military managed to restore
its power as the central actor in political life, dominating the civilian governments that clung to power only through the
support of the armed forces. "It's almost like we've gone back to the [Ferdinand] Marcos era," prominent Filipino rights
activist and lawyer Harry Roque Jr said, as he waited in his office for the security forces to come and interrogate him.
"There's the same type of fear, the same abuses, the same attitude by the military that their actions will never face
consequences." Support for democracy has become so tepid in parts of the developing world that many of these coups were
cheered: in Niger last year, thousands celebrated the military takeover in Niamey, the capital, in part because the overthrown
leader had been destroying the country's democratic institutions. Overall, an analysis of military coups in developing nations
over the past 20 years, conducted by David Silverman, my Council on Foreign Relations research associate, found that in
nearly 50 per cent of cases drawn from Africa, Latin America, Asia and the Middle East, middle-class men and women either
agitated in advance for the coup, or, in polls or prominent media coverage afterwards, expressed their support for the army
takeover. Opinion polls also reveal that the
quality of democracy is declining, but also that how
the public views democracy is deteriorating as well. The Barometer Series of polls uses questionnaires
to ask people in a range of nations about their views on democracy. The survey of the African continent has found declining
levels of support for democracy in many countries. Meanwhile, in Russia, where hope for democracy was high in the early
1990s, today the New Europe Barometer shows that half of Russians believe it is acceptable to stop having elections if this
decision strengthens the country. Elsewhere, in Ecuador, Guatemala, Paraguay, Colombia, Peru, Honduras and Nicaragua,
either a minority or only a tiny majority of people think democracy is preferable to any other type of government. Polls and
studies of South Asia have revealed similar dissatisfaction. In Pakistan, roughly 60 per cent of respondents in a
comprehensive regional survey said the country should be ruled by the army. Even in East Asia, one of the most
economically vibrant regions of the world, polls reveal the same rising dissatisfaction with democracy. In fact, several
countries in the region have developed what Yu-tzung Chang, Yunhan Zhu and Chong-min Park, who studied data from the
regular Asian Barometer surveys, have termed "authoritarian nostalgia".
AEI fosters broad-based and transparent taxation – empirically key to encouraging
demands for meaningful representation and building liberal democracies
A cross-border anonymous withholding system also undermines the expressive role that
taxation plays within a liberal democracy. Even in major developed economies,
anonymous withholding raises concerns about the taxpayer’s engagement with the polity
and the equality of citizens in the face of the taxing authority.158 These concerns have
even greater salience in many emerging and developing economies, where tax evasion is
frequently characterized as systemic, and the taxation of elites is often a source of special
concern.159 In contrast to anonymous withholding, information reporting, like identified
withholding, allows the income taxation of elites to be sufficiently visible to support the
legitimacy of the governance structure in the eyes of all citizens.
When taxpayers feel they are subject to generally applicable taxes imposed by the
sovereign, they are more likely to collectively insist on meaningful representation.160
Some historians explain the contrast between English liberty and French absolutism for
three hundred years in part with reference to the prevalence of tax exemptions for French
nobles, as compared to a transparent direct tax burden borne relatively uniformly by the
English nobility. The argument is that in England, elites were motivated to ensure a
robust national assembly with meaningful authority and rule of law that constrained the
executive, whereas in France, those incentives were lacking.161 The slogan “no taxation
without representation” neatly summarizes the basic point. A generation of economists,
economic historians, sociologists, and political scientists has been influenced by the idea
that relatively broad-based and transparent taxation generally tends to produce more
representative government.162 For example, some scholars suggest that external funding
allowed third-world client regimes during the Cold War to avoid entering into implicit or
explicit social fiscal contracts with their citizenry in which they exchanged law and
representation for resources.163 Others argue that oil wealth hinders liberal democracy
because it allows oil-rich governments to avoid taxation of domestic residents and the
societal bargains that come with such taxation.164 In both examples, external funding
allowed autocrats to avoid liberal democracy. Similarly, in an anonymous withholding
regime, tax collected abroad becomes more akin to a source of external funding than to
funding provided by citizens in a transparent relationship with their government.
Some scholars suggest that visible, progressive taxation of capital income and closelyheld business income at the top of the income distribution is a necessary symbol of the
commitment to fairness in a liberal democracy.165 Others suggest that imposing taxes on
mobile assets in a transparent manner encourages collective bargaining with the
sovereign and results in the emergence of more representative and classically liberal
government.166 An automatic information reporting system that identifies prosperous
individual taxpayers and requires them to participate in the act of paying taxes (or to
lobby against those taxes, or for a tax base that exempts capital income) achieves both of
these ends.
Automatic information reporting can encourage income taxpayers to collectively demand
governmental accountability. In contrast, relying on foreign financial institutions for
routine tax collection, rather than on domestic withholding, information reporting, or
quasi-voluntary self-assessment, may reduce the capacity of compliant and visible
taxpayers to bargain for law and representation in exchange for tax revenues.
Anonymous withholding thus undermines the prospect that a sovereign’s desire for tax
revenue will give compliant taxpayers a tool to press for classically liberal democracy.167
Democracy solves great power wars – opt to negotiate with rather than fight other democracies
Tarzi, 07 - Professor of Economic Affairs at Bradley, (Shah, Democratic Peace, Illiberal
Democracy and Conflict Behavior, International Journal on World Peace, Vol. 24)
Bueno de Mequita, Morrow, Siverson, and Smith are among the few who have sought to overcome the conceptual dilemmas
noted above. Specifically they have provided insights on the link between institutions and foreign policy choices with
reference to international disputes and conflicts. They find that democratic leaders, when faced with a choice, are more likely
to shift greater resources to war efforts than leaders of the autocratic governments because political survival of the elected
democratic regime demands successful policy performance, especially as the winning coalition grows. Thus, democratic
regimes tend to have a military edge over autocratic regimes in war because of the extra efforts required. Also,
"democratic
leaders only choose to fight when they are confident of victory. Otherwise
they prefer to negotiate." (22) Bueno de Mequita and his colleagues conclude, Democrats make
relatively unattractive targets because domestic reselection pressures cause leaders
to mobilize resources for the war effort. This makes it harder for other states to
target them for aggression. In addition to trying harder than autocrats, democrats
are more selective in their choice of targets. Defeat typically leads to domestic
replacement for democrats, so they only initiate war when they expect to win. These two
factors lead to the interaction between polities that is often termed the democratic peace. Autocrats need a slight
expected advantage over other autocratic adversaries in devoting additional
resources to the war effort. In order to initiate war, democrats need overwhelming
odds of victory, but that does not mean they are passive. Because democrats use their resources for the war effort
rather than reserve them to reward backers, they are generally able, given their selection criteria for fighting, to overwhelm
autocracies, which results in short and relatively less costly wars. Yet, democracies
find it hard to
overwhelm other democracies because they also try hard. In general, democracies
make unattractive targets, particularly for other democracies. Hence, democratic
states rarely attack one another. (23)
Democracy eliminates terrorism- offers non-violent outlets for expression
Li, 05 – Department of Political Science, Pennsylvania State University
(Quan, “Does Democracy Promote or Reduce Transnational Terrorist Incidents?”
http://www.psci.unt.edu/jbooks/TerrorBib_files/Statistical%20Studies%20of)%20Terrorism/LiDoes%20Democracy%20Promote.pdf
One argument in the democracy-terrorism literature posits that aspects of democracy reduce terrorism. In
nondemocratic societies, the lack of opportunities for political participation induces
political grievances and dissatisfaction among dissenters, motivating terrorism
(Crenshaw 1981, 383). In contrast, in democratic societies, free and fair elections ensure that
rulers can be removed and that desirable social changes can be brought about by
voters, reducing the need to resort to violence (Schmid 1992). Democratic rules enable
nonviolent resolution of political conflict. Democracies permit dissenters to express
their policy preferences and seek redress (Ross 1993). Different social groups are able to
participate in the political process to further their interest through peaceful means,
such as voting and forming political parties (Eubank and Weinberg 1994, 2001). Since democracy lowers the
cost of achieving political goals through legal means, groups find costly illegal
terrorist activities less attractive (Ross 1993; Eyerman 1998). Wide democratic participation also has
beneficial consequences that remain largely unnoticed in the literature. To the extent that democratic participation
increases political efficacy of citizens, terrorist groups will be less successful
recruiting newmembers in democracy than in autocracy. This may reduce the number of terrorist
attacks in democracy. Within the context of transnational terrorism, wide democratic participation helps to
reduce incentives of domestic groups to engage in terrorist activities against foreign targets in
a country. When citizens have grievances against foreign targets, greater political
participation under a democratic system allows them to exert more influence on their
own government so that they can seek favorable policy changes or compensation
more successfully. Joining a terrorist group and attacking the foreign target become
less appealing options. To the extent that democratic participation leads to public tolerance
of counterterrorist efforts, a democratic government will be more effective stopping a
variety of terrorist attacks, including those by domestic terrorists against foreign targets as well as those
committed by foreign terrorists in the country.
U.S. retaliation against WMD terrorists leads to nuclear war
Ayson, 10 - Professor of Strategic Studies and Director of the Centre for Strategic Studies: New
Zealand at the Victoria University of Wellington
(Robert, “After a Terrorist Nuclear Attack: Envisaging Catalytic Effects,” Studies in Conflict &
Terrorism, 33.7, InformaWorld)//BB
But these two nuclear worlds—a non-state actor nuclear attack and a catastrophic interstate nuclear exchange—are not
necessarily separable. It is just possible that some sort of terrorist attack, and especially an
act of nuclear
terrorism, could precipitate a chain of events leading to a massive exchange of
nuclear weapons between two or more of the states that possess them. In this context, today’s
and tomorrow’s terrorist groups might assume the place allotted during the early Cold War years to new state possessors of
small nuclear arsenals who were seen as raising the risks of a catalytic nuclear war between the superpowers started by third
parties. These risks were considered in the late 1950s and early 1960s as concerns grew about nuclear proliferation, the socalled n+1 problem. It may require a considerable amount of imagination to depict an especially plausible situation where an
act of nuclear terrorism could lead to such a massive inter-state nuclear war. For example, in the event of a terrorist nuclear
attack on the United States, it might well be wondered just how Russia and/or China could plausibly be brought into the
picture, not least because they seem unlikely to be fingered as the most obvious state sponsors or encouragers of terrorist
groups. They would seem far too responsible to be involved in supporting that sort of terrorist behavior that could just as
easily threaten them as well. Some possibilities, however remote, do suggest themselves. For example, how
might the
United States react if it was thought or discovered that the fissile material used in the
act of nuclear terrorism had come from Russian stocks,40 and if for some reason Moscow denied
any responsibility for nuclear laxity? The correct attribution of that nuclear material to a particular country might not be a
case of science fiction given the observation by Michael May et al. that while
the debris resulting from a
nuclear explosion would be “spread over a wide area in tiny fragments, its
radioactivity makes it detectable, identifiable and collectable, and a wealth of
information can be obtained from its analysis: the efficiency of the explosion, the
materials used and, most important … some indication of where the nuclear material
came from.”41 Alternatively, if the act of nuclear terrorism came as a complete surprise,
and American officials refused to believe that a terrorist group was fully responsible
(or responsible at all) suspicion would shift immediately to state possessors. Ruling out Western ally
countries like the United Kingdom and France, and probably Israel and India as well, authorities in Washington would be left
with a very short list consisting of North Korea, perhaps Iran if its program continues, and possibly Pakistan. But at what
stage would Russia and China be definitely ruled out in this high stakes game of nuclear Cluedo? In particular, if
the act
of nuclear terrorism occurred against a backdrop of existing tension in Washington’s
relations with Russia and/or China, and at a time when threats had already been
traded between these major powers, would officials and political leaders not be
tempted to assume the worst? Of course, the chances of this occurring would only seem
to increase if the United States was already involved in some sort of limited armed
conflict with Russia and/or China, or if they were confronting each other from a
distance in a proxy war, as unlikely as these developments may seem at the present time. The reverse might well
apply too: should a nuclear terrorist attack occur in Russia or China during a period of heightened tension or even limited
conflict with the United States, could Moscow and Beijing resist the pressures that might rise domestically to consider the
United States as a possible perpetrator or encourager of the attack? Washington’s
early response to a
terrorist nuclear attack on its own soil might also raise the possibility of an unwanted
(and nuclear aided) confrontation with Russia and/or China. For example, in the noise
and confusion during the immediate aftermath of the terrorist nuclear attack, the
U.S. president might be expected to place the country’s armed forces, including its
nuclear arsenal, on a higher stage of alert. In such a tense environment, when careful
planning runs up against the friction of reality, it is just possible that Moscow and/or
China might mistakenly read this as a sign of U.S. intentions to use force (and possibly
nuclear force) against them. In that situation, the temptations to preempt such actions might
grow, although it must be admitted that any preemption would probably still meet with a devastating response.
Relations
U.S. refusal to comply with Mexico’s AEI request causes a breakdown in relations and NAFTA
Preslan, 11 – J.D. Cleveland State University (Kevin, Global Business Law Review,
“Turnabout is Fair Play: The U.S. Response to Mexico’s Request for Bank Account
Information,” p. 217)
In contrast, noncompliance would be the simplest solution for the United States.
Noncompliance results in expending the least amount of resources possible. The
banking sector would not lose out on any revenue from services provided to
nonresident aliens. Everything would stay as-is. There is a strong possibility,
however, that Mexico would not react well to noncompliance.
The main issue with failing to comply with Mexico’s request is a breakdown of
the two countries’ relationship in other areas. The United States and Mexico have a
strong trading relationship. An important element of this trading relationship is the
North American Free Trade Agreement (NAFTA). NAFTA created the world's
largest free trade bloc, “which now links 444 million people producing $17 trillion
worth of goods and services.”100 In terms of total trade, Mexico is the United States’
third largest trading partner, while the United States ranks first among Mexico’s
trading partners.101 In terms of U.S. imports, Mexico ranks third among United States
trading partners, after China and Canada.102 In 2008, the United States imported
$399.5 billion worth of goods from Canada and $215.9 billion from Mexico.1
Imported goods from Canada and Mexico totaled $555.4 billion in 2008, which was
up 5.2% from 2007, and up 268% since the year before the enactment of NAFTA in
1993.104 In terms of U.S. exports, Mexico ranks second, after Canada. 105 In 2008,
total U.S. exports purchased by Mexico were $151.2 billion, while Canada purchased
$261.2 billion of U.S. exports.106 These numbers are up 7.2% since the year before,
2007, and 190% since 1993.107 U.S. exports to Canada and Mexico accounted for
32% of overall U.S. exports in 2008.108 U.S. foreign direct investment in Canada and
Mexico was $348.7 billion in 2007, up 11.3% from 2006. 109 Foreign direct
investment is “any form of investment that earns interest in enterprises which
function outside of the domestic territory of the investor.” 110 U.S. direct investment
in Canada and Mexico is typically in the manufacturing, finance, nonbank holding
companies, and mining sectors.111 Canadian and Mexican foreign direct investment
in the United States was $219.2 billion in 2007, up 21.4% from 2006. 112 Canadian
and Mexican direct investment in the U.S. is typically in the finance, manufacturing,
and banking sectors.113 Given these figures, the United States and Mexico need each
other in terms of importing and exporting goods.
NAFTA is key to heg and free trade – hemispheric integration and liberal institutions
Agrasoy, 04 - Bachelor of Arts degree in International Trade and a Bachelor of Science degree in Management
Information Systems from Bogazici University in Istanbul, Turkey, where he specialized in international trade and
investment, Master of Arts in Economics from McGill University in Montreal, ROI Research Analyst Director of
Operations, Public Sector, overseeing worldwide public sector operations at ROI (Emre, “NAFTA: as a Means of an U.S.
Hegemony Creation in the Region?” May 23 2004, http://emreagrasoy.awardspace.com/nafta.pdf)
Although U.S.
seemed the sole dominant power after the collapse of Soviet Union, U.S.
areas of influence 2 would have a huge potential to challenge
its politic and economic hegemony in the world, which is leading towards a tripolar economic
envisaged that some
structure. 3 Thus, “Fortress North America” must be erected to challenge “Fortress Europe”. Both must be prepared to
repel onslaught of Asian products. 4 At that time the North American Free Trade Agreement (NAFTA) came
into
effect with the initiatives of U.S. The NAFTA includes Canada, the United States, and Mexico, with a
total (as of 2000) combined population of 410 million inhabitants, and combined GDP of over $11 billion U.S. 5 It
created the world’s largest regional freetrade zone, directly challenging the growing
primacy of the European Community and the Japan-East Asia bloc 6 and
aiming to maintain its superpower position. In contrast to the EU, the NAFTA represents a less
ambitious effort 7 to establish a common continental market for goods and services, and common protections for private
investors and businesses, with little attention or interest devoted to developing a continental political or institutional
dimension. The important structural and institutional differences among the NAFTA partners are the reasons behind that
the NAFTA has limited its scope to the deregulation of trade and investment flows within the NAFTA zone, rather than
attempting a deeper, European-style political and regulatory harmonization. The model of the world economy assumes
cut-throat trade competition between the three regional blocks. To survive in this competition each block should have a
leading nation, which provides the capital and managerial skills, and a group of less developed nations, which supply the
cheap labor and mineral resources takes the role of a regulatory body and dominates the NAFTA economically and
politically. So, U.S. as the dominant nation 8 intended to hook up with Mexico to
obtain low-cost labor and oil. Canada’s role is primarily “an energy and resource hinterland”. 9 For
U.S., NAFTA will mean a chance to regain competitive positions eroded by
Japanese and European rivals. 10 For the U.S. the implementation of a North
American free trade zone represented an important but hardly epochal development, one which mostly
served to reinforce its already-existing economic and strategic dominance on the
continent and even in the world. Trade patterns within the NAFTA conform
largely to a “hub-and-spoke” structure 11 , with the U.S. located at both the
geographical and the economic center of the continent. 12 The United States adopted economic
regionalism toward the end of the twentieth century. NAFTA of the early 1990s were crafted to apply
the liberal policies and free market principles closer to U.S policies. The United States
did not impose NAFTA on North America but it clearly had an inordinate and even hegemonic
influence on North America’s adherence to the disciplines and principles
favored by the United States. 13 Free trade, reciprocity, national treatment of investment, domestic trade
policy, dispute settlement, labor and environment protection, and liberalization of services as well as agriculture were
NAFTA tenets. 14 NAFTA is a U.S.-led RIA, a symbolic and genuine innovation that more
formally organized North America with the United States at its geoeconomic hub. The NAFTA would draw both neighbors more closely into the
U.S. sphere of influence, reducing the perceived geopolitical risk to U.S.
interests that had been posed by occasional outbreaks of nationalist
sentiment in Mexico and Canada. 15 Mexico’s place in North America raises issues about the tradeoffs
involved in integrating more closely developed and developing economies. This is what made NAFTA so
consequential for the possibility of linking the global North and the global
South in the Americas. The NAFTA is contributing to the broad US goal of
promoting economic growth, political stability, and progress toward
democracy in Mexico. 16 The NAFTA’s provisions should complement and augment the extensive economic
reforms already under way in Mexico and provide an insurance policy against any reversion to past
protectionist and interventionist policies that impeded US trade with Mexico. 17 As a result, a
prosperous Mexico would become a thriving market for U.S. exports. 18 NAFTA reinforces ongoing Mexican
trade and investment reforms 19 , which along with reforms in Mexican laws relating to intellectual property
rights have generated substantial new opportunities for U.S. firms. The United States
has long championed a Pan American vision of a liberal, democratic, capitalist
hemisphere based on precepts long held to be sacrosanct among its public 20
and private leaders. Integrating North and South America or at least bringing them
closer together meant allowing for a substantial role in Latin America for
U.S. power and policy. For the United States, organizing a RIA in North America was a strategy more than
an ultimate goal. Befitting its global status, it had a more ambitious agenda for the world economy beyond its own
neighborhood. The United States pursued two tracks in economic regionalism during the waning years of the twentieth
century. One was a North American or continental track. The second track is Pan American. As a unipolar
region, North America had unique advantages; its hegemonic structure
made NAFTA an obvious first step for a free trade area. After NAFTA, trade dependence
and other economic relations are greater than before. The steep concessions that Mexico had to make to gain admittance
to this exclusive North American club were palatable to most Mexicans because the two highly interdependent economies
made structure and policy more congruent. 21 The same is not true of the hemisphere in general. 22 During the mid1990s, the United States entertained the view that NAFTA would be the vehicle for the more
ambitious project of building a RIA for the entire hemisphere. It did not quite work out
that way. The idea was to widen or broaden NAFTA by including new members through the accession clause 23 , but
NAFTA did not expand. 24 NAFTA was bereft of support as the vehicle for creating a FTAA 25 . While structural power is
important, so too are two other elements of power: the soft power of economic liberalism and the use of leadership to
affect outcomes. U.S. influence depends partially upon an inter-American
convergence around liberal market ideas and trade policy preferences of the
United States. In other words, if Latin American leaders agree with the United States on
the principles and disciplines it advocates in the FTAA process, U.S.
dominance is more assured. The ultimate goal of U.S. is that the nations will
converge around political and economic liberalization. 26 Especially, in the wake of the
terrorist acts of September 11, Iraq War and thus increasing sociotropic threat 27 and patriotism in different countries, the
American foreign policy in NAFTA become more important in preserving
the support of its neighbors and indirectly of the entire world. U.S. should change the
context of NAFTA from mere a free trade area to a union with a Social Charter characteristic. NAFTA should better use a
regime of fair and peaceful competition, through positive integration and institution building strategies. 28 U.S should
emphasize the social quality aspects of NAFTA and help its NAFTA partners improve their economic as well as
socio-political conditions to gain new allies at the same level in the world
arena. The improvement of the rule of law and democracy should not be left in the hands of U.S., but they should be
realized by institutionalization 29 taking the E.U as a model. 30 Taking all these arguments into consideration, the
NAFTA’ s success will not only shape North America’s faith, but also the future of the U.S influence
on world politics as a superpower. NAFTA is used by U.S. to some extent as a
model 31 and a vehicle to maintain its superpower role throughout the world. U.S.
is given the opportunity to compete with the European Union and China, the most potential emerging power, by exploiting
Mexico’s cheap labor force and Canada’s natural resources. The strategic policies and actions will determine its NAFTA
partners’ position against U.S. They will either lead to stronger strategic alliances between these countries, even
including other Latin American counties, which will
enhance the U.S. dominance or lead to an
future will
play an important role; the success can help U.S. sustain its superpower
role, but failure, such faced by U.S. in the FTAA, can lead to a loss of this power, thus being a follower
opposition in Mexico and Canada, which could mean the loss of its superpower role. NAFTA’s
of E.U. in the world economy and politics it would be sufficient for U.S.
Heg is key to global stability and accesses every major impact
Thayer, 06, Professor of Strategic Studies – Associate Professor of Defense and
Strategic Study @ Missouri State University, Former Research Fellow @ International
Security Program @ Harvard Belfer Center of Science and International Affairs
(Bradley, “In Defense of Primacy,” The National Interest, November/December)
A grand strategy based on American primacy means ensuring the United States stays the world's number one power-the diplomatic,
economic and military leader. Those arguing against primacy claim that the United States should retrench, either because the United States
lacks the power to maintain its primacy and should withdraw from its global commitments, or because the maintenance of primacy will lead
the United States into the trap of "imperial overstretch." In the previous issue of The National Interest, Christopher Layne warned of these
dangers of primacy and called for retrenchment.1 Those arguing for a grand strategy of retrenchment are a diverse lot. They include
isolationists, who want no foreign military commitments; selective engagers, who want U.S. military commitments to centers of economic
might; and offshore balancers, who want a modified form of selective engagement that would have the United States abandon its landpower
presence abroad in favor of relying on airpower and seapower to defend its interests. But retrenchment, in any of its guises, must be
avoided. If the United States adopted such a strategy, it would be a profound strategic mistake that would lead to far greater instability
and war in the world, imperil American security and deny the United States and its allies the benefits of primacy. There are two critical
issues in any discussion of America's grand strategy: Can America remain the dominant state? Should it strive to do this? America can
remain dominant due to its prodigious military, economic and soft power capabilities. The totality of that equation of power answers the
first issue. The United States has overwhelming military capabilities and wealth in comparison to other states or likely potential alliances.
Barring some disaster or tremendous folly, that will remain the case for the foreseeable future. With few exceptions, even those who
advocate retrenchment acknowledge this. So the debate revolves around the desirability of maintaining American primacy. Proponents of
retrenchment focus a great deal on the costs of U.S. action but they fall to realize what is good about American primacy. The price and risks
of primacy are reported in newspapers every day; the benefits that stem from it are not. A GRAND strategy of ensuring American
primacy takes as its starting point the protection of the U.S. homeland and American global interests. These interests include
ensuring that critical resources like oil flow around the world, that the global trade and monetary regimes flourish and that
Washington's worldwide network of allies is reassured and protected. Allies are a great asset to the United States, in part because they
shoulder some of its burdens. Thus, it is no surprise to see NATO in Afghanistan or the Australians in East Timor. In contrast, a strategy
based on retrenchment will not be able to achieve these fundamental objectives of the United States. Indeed, retrenchment will make
the United States less secure than the present grand strategy of primacy. This is because threats will exist no matter what role
America chooses to play in international politics. Washington cannot call a "time out", and it cannot hide from threats. Whether they
are terrorists, rogue states or rising powers, history shows that threats must be confronted. Simply by declaring that the United
States is "going home", thus abandoning its commitments or making unconvincing half-pledges to defend its interests and allies, does
not mean that others will respect American wishes to retreat. To make such a declaration implies weakness and emboldens
aggression. In the anarchic world of the animal kingdom, predators prefer to eat the weak rather than confront the strong . The
same is true of the anarchic world of international politics. If there is no diplomatic solution to the threats that confront the United States,
then the conventional and strategic military power of the United States is what protects the country from such threats. And when enemies
must be confronted, a strategy based on primacy focuses on engaging enemies overseas, away from .American soil. Indeed, a key tenet of
the Bush Doctrine is to attack terrorists far from America's shores and not to wait while they use bases in other countries to plan and train
for attacks against the United States itself. This requires a physical, on-the-ground presence that cannot be achieved by offshore balancing.
Indeed, as Barry Posen has noted, U.S. primacy is secured because America, at present, commands the "global common"--the oceans, the
world's airspace and outer space-allowing the United States to project its power far from its borders, while denying those common avenues
to its enemies. As a consequence, the costs of power projection for the United States and its allies are reduced, and the robustness of the
United States' conventional and strategic deterrent capabilities is increased.' This is not an advantage that should be relinquished lightly. A
remarkable fact about international politics today--in a world where American primacy is clearly and unambiguously on display--is
that countries want to align themselves with the United States. Of course, this is not out of any sense of altruism, in most cases, but
because doing so allows them to use the power of the United States for their own purposes , their own protection, or to gain
greater influence. Of 192 countries, 84 are allied with America--their security is tied to the United States through treaties and other
informal arrangements-and they include almost all of the major economic and military powers. That is a ratio of almost 17 to one (85 to
five), and a big change from the Cold War when the ratio was about 1.8 to one of states aligned with the United States versus the Soviet
Union. Never before in its history has this country, or any country, had so many allies. U.S. primacy--and the bandwagoning
effect-has also given us extensive influence in international politics, allowing the United States to shape the behavior of states and
international institutions. Such influence comes in many forms, one of which is America's ability to create coalitions of like-minded
states to free Kosovo, stabilize Afghanistan, invade Iraq or to stop proliferation through the Proliferation Security Initiative (PSI). Doing so
allows the United States to operate with allies outside of the where it can be stymied by opponents. American-led wars in Kosovo,
Afghanistan and Iraq stand in contrast to the UN's inability to save the people of Darfur or even to conduct any military campaign to realize
the goals of its charter. The quiet effectiveness of the PSI in dismantling Libya's WMD programs and unraveling the A. Q. Khan proliferation
network are in sharp relief to the typically toothless attempts by the UN to halt proliferation. You can count with one hand countries
opposed to the United States. They are the "Gang of Five": China, Cuba, Iran, North Korea and Venezeula. Of course, countries like India,
for example, do not agree with all policy choices made by the United States, such as toward Iran, but New Delhi is friendly to Washington.
Only the "Gang of Five" may be expected to consistently resist the agenda and actions of the United States. China is clearly the most
important of these states because it is a rising great power. But even Beijing is intimidated by the United States and refrains from openly
challenging U.S. power. China proclaims that it will, if necessary, resort to other mechanisms of challenging the United States, including
asymmetric strategies such as targeting communication and intelligence satellites upon which the United States depends. But China may
not be confident those strategies would work, and so it is likely to refrain from testing the United States directly for the foreseeable future
because China's power benefits, as we shall see, from the international order U.S. primacy creates. The other states are far weaker than
China. For three of the "Gang of Five" cases--Venezuela, Iran, Cuba-it is an anti-U.S. regime that is the source of the problem; the country
itself is not intrinsically anti-American. Indeed, a change of regime in Caracas, Tehran or Havana could very well reorient relations.
THROUGHOUT HISTORY, peace and stability have been great benefits of an era where there was a dominant power--Rome, Britain or the
United States today. Scholars and statesmen have long recognized the irenic effect of power on the anarchic world of international politics.
Everything we think of when we consider the current international order - free trade, a robust monetary regime, increasing
respect for human rights, growing democratization--is directly linked to U.S. power. Retrenchment proponents seem to think that
the current system can be maintained without the current amount of U.S. power behind it. In that they are dead wrong and need to be
reminded of one of history's most significant lessons: Appalling things happen when international orders collapse. The Dark Ages
followed Rome's collapse. Hitler succeeded the order established at Versailles. Without U.S. power, the liberal order created by the United States will end just as assuredly. As country and western great Rai Donner sang: "You don't know what you've got (until
you lose it)." Consequently, it is important to note what those good things are. In addition to ensuring the security of the United States and
its allies, American primacy within the international system causes many positive outcomes for Washington and the world. The first has
been a more peaceful world. During the Cold War, U.S. leadership reduced friction among many states that were historical
antagonists, most notably France and West Germany. Today, American primacy helps keep a number of complicated relationships aligned-between Greece and Turkey, Israel and Egypt, South Korea and Japan, India and Pakistan, Indonesia and Australia. This is not
to say it fulfills Woodrow Wilson's vision of ending all war. Wars still occur where Washington's interests are not seriously threatened, such
as in Darfur, but a Pax Americana does reduce war's likelihood, particularly war's worst form: great power wars. Second,
American power gives the United States the ability to spread democracy and other elements of its ideology of liberalism. Doing so is
a source of much good for the countries concerned as well as the United States because, as John Owen noted on these pages in the Spring
2006 issue, liberal democracies are more likely to align with the United States and be sympathetic to the American worldview.3 So,
spreading democracy helps maintain U.S. primacy. In addition, once states are governed democratically, the likelihood of any type
of conflict is significantly reduced. This is not because democracies do not have clashing interests. Indeed they do. Rather, it is because
they are more open, more transparent and more likely to want to resolve things amicably in concurrence with U.S. leadership.
And so, in general, democratic states are good for their citizens as well as for advancing the interests of the United States. Critics have
faulted the Bush Administration for attempting to spread democracy in the Middle East, labeling such an effort a modern form of tilting at
windmills. It is the obligation of Bush's critics to explain why democracy is good enough for Western states but not for the rest, and, one
gathers from the argument, should not even be attempted. Of course, whether democracy in the Middle East will have a peaceful or stabilizing influence on America's interests in the short run is open to question. Perhaps democratic Arab states would be more opposed to
Israel, but nonetheless, their people would be better off. The United States has brought democracy to Afghanistan, where 8.5 million Afghans, 40 percent of them women, voted in a critical October 2004 election, even though remnant Taliban forces threatened them. The first
free elections were held in Iraq in January 2005. It was the military power of the United States that put Iraq on the path to democracy.
Washington fostered democratic governments in Europe, Latin America, Asia and the Caucasus. Now even the Middle East is increasingly
democratic. They may not yet look like Western-style democracies, but democratic progress has been made in Algeria, Morocco, Lebanon,
Iraq, Kuwait, the Palestinian Authority and Egypt. By all accounts, the march of democracy has been impressive. Third, along with the
growth in the number of democratic states around the world has been the growth of the global economy. With its allies, the United States
has labored to create an economically liberal worldwide network characterized by free trade and commerce, respect for international
property rights, and mobility of capital and labor markets. The economic stability and prosperity that stems from this economic order is
a global public good from which all states benefit, particularly the poorest states in the Third World. The United States created this network
not out of altruism but for the benefit and the economic well-being of America. This economic order forces American industries to be
competitive, maximizes efficiencies and growth, and benefits defense as well because the size of the economy makes the defense burden
manageable. Economic spin-offs foster the development of military technology, helping to ensure military prowess. Perhaps the greatest
testament to the benefits of the economic network comes from Deepak Lal, a former Indian foreign service diplomat and researcher at the
World Bank, who started his career confident in the socialist ideology of post-independence India. Abandoning the positions of his youth,
Lal now recognizes that the only way to bring relief to desperately poor countries of the Third World is through the adoption of free market
economic policies and globalization, which are facilitated through American primacy.4 As a witness to the failed alternative
economic systems, Lal is one of the strongest academic proponents of American primacy due to the economic prosperity it provides.
Protectionism will cause global wars – risks extinction
Panzner, 08 – faculty at the New York Institute of Finance, 25-year veteran of the global stock, bond, and currency markets who
has worked in New York and London for HSBC, Soros Funds, ABN Amro, Dresdner Bank, and JPMorgan Chase (Michael, “Financial
Armageddon: Protect Your Future from Economic Collapse,” p. 136-138)
Continuing calls for curbs
on the flow of finance and trade will inspire the United States and other nations to spew
protectionist legislation like the notorious Smoot-Hawley bill. Introduced at the start of the Great Depression, it
forth
triggered a series of tit-for-tat economic responses, which many commentators believe helped turn a serious economic downturn into a
prolonged and devastating global disaster. But if history is any guide, those lessons will have been long forgotten during the next collapse.
Eventually, fed by a mood of desperation and growing public anger, restrictions on trade, finance, investment, and immigration will almost
certainly intensify. Authorities and ordinary citizens will likely scrutinize the cross-border movement of Americans and outsiders alike, and
lawmakers may even call for a general crackdown on nonessential travel. Meanwhile, many nations will make transporting or sending funds
to other countries exceedingly difficult. As desperate officials try to limit the fallout from decades of ill-conceived, corrupt, and reckless
policies, they will introduce controls on foreign exchange. Foreign individuals and companies seeking to acquire certain American
infrastructure assets, or trying to buy property and other assets on the cheap thanks to a rapidly depreciating dollar, will be stymied by
limits on investment by noncitizens. Those efforts will cause spasms to ripple across economies and markets, disrupting global payment,
settlement, and clearing mechanisms. All of this will, of course, continue to undermine business confidence and consumer spending. In a
world of lockouts and lockdowns, any link that transmits systemic financial pressures across markets through arbitrage or portfolio-based
risk management, or that allows diseases to be easily spread from one country to the next by tourists and wildlife, or that otherwise
facilitates unwelcome exchanges of any kind will be viewed with suspicion and dealt with accordingly. The rise in isolationism and
protectionism will bring about ever more heated arguments and dangerous confrontations over shared sources of
oil, gas, and other key commodities as well as factors of production that must, out of necessity, be acquired from less-than-friendly
nations. Whether involving raw materials used in strategic industries or basic necessities such as food, water, and energy, efforts to secure
adequate supplies will take increasing precedence in a world where demand seems constantly out of kilter with supply. Disputes over the
misuse, overuse, and pollution of the environment and natural resources will become more commonplace. Around the world, such
tensions will give rise to full-scale military encounters, often with minimal
provocation. In some instances, economic conditions will serve as a convenient pretext for conflicts that stem from cultural and
religious differences. Alternatively, nations may look to divert attention away from domestic problems by channeling frustration and
populist sentiment toward other countries and cultures. Enabled by cheap technology and the waning threat of American retribution,
terrorist groups will likely boost the frequency and scale of their horrifying attacks, bringing the threat of random violence to a whole new
level. Turbulent
conditions will encourage aggressive saber rattling and interdictions by rogue nations
China will likely assume an
increasingly belligerent posture toward Taiwan, while Iran may embark on overt colonization of its
neighbors in the Mideast. Israel, for its part, may look to draw a dwindling list of allies from around the
world into a growing number of conflicts. Some observers, like John Mearsheimer, a political scientist at the University of
running amok. Age-old clashes will also take on a new, more heated sense of urgency.
Chicago, have even speculated that an “intense confrontation” between the United States and China is “inevitable” at some point. More than
cultural and religious differences will be
transformed from wars of words to battles soaked in blood. Long-simmering resentments could also degenerate
quickly, spurring the basest of human instincts and triggering genocidal acts. Terrorists employing biological or nuclear
a few disputes will turn out to be almost wholly ideological. Growing
weapons will vie with conventional forces using jets, cruise missiles, and bunker-busting bombs to cause widespread destruction. Many will
interpret stepped-up conflicts between Muslims and Western societies as the beginnings of a new world war.
Majority of economists conclude aff – job losses are structural not NAFTA related
Teslik, 09 - bachelor's degree from Harvard University and an MBA from INSEAD, senior editor and commodities
analyst at Roubini Global Economics, associate editor of economics for the Council on Foreign Relations, (Lee Hudson,
“NAFTA's Economic Impact”, July 7, 2009 http://www.cfr.org/economics/naftas-economic-impact/p15790#p3)
Measuring the impact of a specific trade deal on a country's labor market is not a straightforward exercise, and analysts
disagree on how to gauge NAFTA's effects. The USTR claims a broadly positive influence,
citing figures that show an increase in overall U.S. employment of 24
percent since NAFTA's inception, as well as declining unemployment rates
over the same period. In addition, the USTR cites data showing that inflation-adjusted U.S.
wages rose 19.3 percent between 1993 and 2007, as compared to only 11 percent in the fourteen years prior.
Many economists agree that NAFTA has had some positive impact on overall
U.S. employment. But most also agree that gains have been accompanied by some painful side effects. Edward
Alden, a senior fellow at the Council on Foreign Relations, notes that wages haven't kept pace with labor productivity and
that income inequality has risen in recent years, in part due to pressures on the U.S. manufacturing base. To some extent,
he says, trade deals have hastened the pace of these changes in that they have "reinforced the globalization of the
American economy." Opponents of NAFTA take a starker position. Thea M. Lee is policy director for the AFL-CIO,
which opposes NAFTA and lobbies against other free trade agreements as unfair to U.S. workers and corporations unless
they include provisions that require signatory countries to raise labor and environmental standards. Lee argues one of
the main upshots of the
deal has been to "force workers into more direct
competition with each other, while assuring them fewer rights and
protections." The Economic Policy Institute, a left-leaning research organization, says in a policy paper on NAFTA
that the deal's trade agenda has served to widen U.S. trade deficits and has indirectly pushed some U.S. workers into
lower-paying jobs. But most economists say it's a stretch to blame these shifts on
NAFTA. "The problems in Youngstown, Ohio, and other places like that go back decades before
NAFTA," says Daniel T. Griswold, the director of the Center for Trade Policy Studies at the libertarian Cato
Institute. Griswold says job losses are "part of a structural shift of the U.S. economy"
away from a focus on heavy manufacturing and toward a focus on light manufacturing and highend services. "It's a cruel illusion to say if we just go in and tinker with NAFTA there will be some kind of
industrial renaissance," he says. Alden echoes this idea and says that broader economic
trends affecting U.S. employment--the rise of China and skyrocketing energy
prices, for instance--wouldn't be substantially altered by U.S. policy shifts
toward NAFTA.
International Drugs
Cracking down on IFFs is key to curtailing the drug trade - status quo put the cart before
the horse
Gascologne, 13 (Clark, “U.S. Senate Report: Tackle Money Laundering to Curtail Drug
Trafficking,” April 26, 2013, http://www.gfintegrity.org/content/view/611/70/
WASHINGTON, DC / LONDON – A bipartisan Congressional report published Thursday by
the U.S. Senate Caucus on International Narcotics Control (Senate Drug Caucus) emphasizes cracking down on
money laundering as key to curtailing the illicit drug trade. Quoting heavily from Global Financial Integrity (GFI) experts and
research, the study endorses eliminating anonymous U.S. shell companies through the passage of the bipartisan Incorporation
Transparency and Law Enforcement Assistance Act, bolstering enforcement of existing anti-money laundering (AML) policies, and
strengthening anti-money laundering laws through passage of the bipartisan Combating Money Laundering, Terrorist Financing and
Counterfeiting Act.
“You simply cannot curtail the drug trade without curtailing drug money,” said GFI Director
Raymond Baker, a longtime authority on financial crime. “The UN estimates that worldwide,
over 40 percent of cocaine is seized somewhere between production and consumption. However,
less than half of one percent of laundered criminal money is interdicted globally. We’ve put the
cart before the horse, and the Senate Drug Caucus clearly recognizes that.”
Drug trade fuels African instability --- finances conflict
Arnold, 05 – Specialist in North-South relations who writes mainly in the areas of African
history, politics, and international affairs, former director of African Bureau (Guy, The International
Drugs Trade, pg. 182-183, Routledge, Tashma)
The generally weak structure of African states has meant that the deregulation of trade and the
financial markets, coupled with the growing pressures of globalization on their sovereignty and
capacities, have led to an increase in corruption, violent conflict , the plunder of natural resources, and
growing involvement in the drugs business. The international antinarcotics institu- tions see Sub-Saharan Africa
principally as a transit territory for drugs, al- though the cultivation of cannabis for local consumption has been a traditional activity
subject to controls. By the esnly 1980s, however, there was a rapid spread of illicit cannabis crops. These were
produced to supply the expanding home markets and for the intemational trade, and from the 1980s such crops have been grown
extensively, especially in Ghana, Kenya, Nigeria, and South Africa. Experiments in growing the opium poppy and the coca leaf have
also been carried out in Benin, the Ivory Coast, Nigeria, and Togo in West Africa, and Kenya and Tanzania in East Africa.
By the end of the twentieth century, large quantities of the major drugs were known to
transit through Africa, and most of them were destined for the huge European market. The
scale of the African trade demonstrates just how quickly drugs have come to play a lead role in funding the
continent’s various conflicts. The growth of drug trafficking mirrors the continent’s problems
of poverty, economic failure, and debt and its inability to break this pattern except by resorting to illegal
means. In the Ivory Coast the cocoa crisis of 1988- 1989 acted as the stimulus to desperate farmers who switched to producing
cannabis. The attractions of the crop are obvious: The output of 0.1 hectares (0.2 acres) of cannabis in value is equivalent to 16 tonnes
(15.7 tons) of cocoa grown on 30 hectares (74.1 acres) by an owner employing l0 workers. So far, only cannabis is produced on any
scale in Africa and most of this is still des- tined for domestic markets and cross-border trading rather than for export outside the
continent? In the early 1990s, however, African production of cannabis escalated and much of it was for the European market. In 1993
cus- toms seizures of African cannabis only represented 1.5 percent of world seizures and a tiny share of the European consumer
market. By the end of the twentieth century South Africa, Kenya, Benin, and Ghana were producing cannabis and exporting it as
marijuana to Europe. Nigeria and Ghana are the main cannabis producers in West Africa, although little information, as yet, is
available as far as Nigerian production is concemed. In Ghana the cannabis crop is grown throughout the country and known as "the
Devil`s tobacco" or "wee," and a ganja farm may be as large as three hectares (7.4 acres) and re- ceive protection from the local
police.
African instability escalates to global nuclear war
Deutsch, 01 – Dr., Founder Rabid Tiger Project and Newsletter (Jeffery, Vol. 2, No. 7, 11-18,
http://www.rabidtigers.com/rtn/newsletterv2n9.html)
The Rabid Tiger Project believes that a nuclear war is most likely to start in Africa. Civil wars in the Congo (the
country formerly known as Zaire), Rwanda, Somalia and Sierra Leone, and domestic instability in Zimbabwe, Sudan and other
countries, as well as occasional brushfire and other wars (thanks in part to "national" borders that cut across tribal ones) turn into
a
really nasty stew. We've got all too many rabid tigers and potential rabid tigers, who are willing to push the button rather than
risk being seen as wishy-washy in the face of a mortal threat and overthrown. Geopolitically speaking, Africa is open range.
Very few countries in Africa are beholden to any particular power. South Africa is a major exception in this respect - not to
mention in that she also probably already has the Bomb. Thus, outside powers can more easily find client
states there than, say, in Europe where the political lines have long since been drawn, or Asia where many of the countries (China,
India, Japan) are powers unto themselves and don't need any "help," thank you. Thus, an African war can attract outside
involvement very quickly. Of course, a proxy war alone may not induce the Great Powers to fight each other. But an African
nuclear strike can ignite a much broader conflagration, if the other powers are interested in a fight. Certainly, such
a strike would in the first place have been facilitated by outside help - financial, scientific, engineering, etc. Africa is an ocean
of troubled waters, and some people love to go fishing.
Drug trade fuels conflict --- profitable production areas become conflict hotspots --- empirics
prove
Kan, 09 – Associate Professor of National Security Studies and the Henry L. Simson Chair of
Military Studies at U.S. Army War College (Paul R., Drugs and Contemporary Warfare, pg. 5, Potomac Books Inc.,
Tashma)
Warfare and drugs share many characteristics—they prolong human suffering, bedevil political leaders, and enrich a select few.
Further, they have been intertwined at vari- ous times throughout history However, the
pernicious role of drugs in
organized political violence is often overlooked. Drugs have caused wars, funded military operations,
been used by combatants, and have been part of the postwar political landscape by financing some
legitimate political actors and parties. Drugs have corrupted militaries, toppled
governments, prompted interventions, and taken thousands of lives. The insidious nature of drugs is
especially visible in t0day’s wars.
Contemporary wars generally involve sharp asymmetries where one party wields a
superior conventional military against the irregular forces of a militarily weaker party; they
are by their very nature fertile environments for a variety of drug-related activities. Today’s wars are structured differently from
traditional, large-scale interstate wars of the past. The military dimension of current conflicts is generally overshadowed by political,
social, eco- nomic, and psychological concerns} These
concerns are where the influence of drugs is most
acutely felt by societies in conflict. It is no coincidence that some of the most persistent
wars, from the Balkans to the Hindu Kush and from the Andes to the Golden Triangle,
occur in areas of widespread drug production and well—traveled distribution routes. ln fact, the rate at which
civil wars occur is much higher among drug producing countries than non-drug producing countries? Astonishingly, 95 percent
of the world’s production of hard drugs takes place in contexts of armed conflict?
No checks to escalation --- drug-fueled conflicts are distinct from conventional warfare
Kan, 09 – Associate Professor of National Security Studies and the Henry L. Simson Chair of
Military Studies at U.S. Army War College (Paul R., Drugs and Contemporary Warfare, pg. 5, Potomac Books Inc.,
Tashma)
Battlefield intoxication is also an important element when discussing the role of drugs in
warfare. With civil wars now comprising the vast majority of violent clashes, very few wars
are between professional militaries. account for the majority of lighting forces. As a result of diminished
professionalism, narcotic usage allows for "combat narcosis," which alters a person’s fear,
stress, and inhibition. Drug abuse by combatants not only presents professional militaries
with operational and tactical challenges, but it has a range of effects as well—from public health
issues to human rights abuses as well as post-conllict settlement a.t1d nation—building.
Terms like "narcoterrorist" and "narcoguerrilla" reveal the degree to which antago- nists involved in
contemporary wa.rs combine narcotraffickers activities with techniques of political violence.`These new actors have led
many to argue that the nature and character of modern warfare is changing.
Martin Vw Creveld argues that war has become "transformed" as we enter a "new era, not of
peaceful competition between trading blocks, but of warfare between ethnic and religious groups"
waged "not by armies but by groups whom we today call terrorists, guerrillas, bandits and robbers."
Barbara Ehrenriech, too, points to a "new kind of wan" one "less disciplined and more spontaneous than the old," and "one often
fought by ill-clad bands more resembling gangs than armies." In a similar vein, Mary Kaldor writes about "new wars" ones centrally
about "identity politics," fought in a context of globalization by “a disparate range of different types of groups such as paramilitary
units, local warlords, criminal gangs, police forces, mercenary groups and also regular armies including breakaway units of regular
armies.""
In response to such changes, some argue that the West should place greater focus on ongoing conflicts that "involve limited
engagements and attrition, guerrilla warfare, terror- ism and other types of low intensity cont]icts."“ In many cases, the
widespread violence created by the actors involved in these types of conflicts is fueled by their
active links to the drug trade.
Development
Stopping IFFs is key to a post-aid-dependent world
Gascolgne, 12 (Clark, “GFI Calls on G8 to Tackle Illicit Financial Flows at Camp David
Summit), May 17, 2012, http://www.gfintegrity.org/content/view/510/70/)
WASHINGTON, DC – Global Financial Integrity (GFI) today called on leaders of the G8 to
concretely tackle the issue of illicit financial flows and end tax haven secrecy when they meet this
weekend at Camp David. Illegal capital flight costs the developing world roughly $1 trillion per
year, according to GFI research.
“A major focus of this weekend’s summit is the issue of food security in the developing world,”
said GFI Director Raymond W. Baker. “What better way to ensure food security than to
guarantee that developing countries have the finances necessary to invest in agriculture and
nutrition programs? We cannot reach a post-aid-dependent world without curtailing illicit
financial flows.”
Nayar, 99 - Faculty of Law at University of Warwick (Jayan, Transnational Law and Contemporary Problems,
SYMPOSIUM: RE-FRAMING INTERNATIONAL LAW FOR THE 21ST CENTURY: Orders of Inhumanity)
International cooperation is key to solving IFFs – leaders of developing countries agree
U.N. Commission for Africa, 6/19/13 (“The High Level Panel on Illicit Financial Flows
Meets in Lusaka,”http://www.uneca.org/media-centre/stories/high-level-panel-illicitfinancial-flows-meets-lusaka#.UfvM2M3B-jQ)
The meeting which brought together over 60 delegates comprising key stakeholders from East
and Southern Africa is part of a continental wide consultative process aimed at sensitizing and
building a coalition on illicit financial flows which are grossly hurting the continent. It is
estimated that Africa loses USD$50 billion a year in illicit financial flows that find their way to
developed countries draining the continent of the much needed resources.
The Panel led by former President Mbeki also held separate meetings with H.E. President of
Zambia, Mr. Michael Sata, as well as Vice President Guy Scott. Speaking during the meeting
with the Zambian Head of State, Mr. Mbeki called for a stronger African voice on illicit financial
flows which he said was the single economic issue hampering Africa’s development.
H.E. Mbeki told President Sata that illegal financial flows was a complex and global problem
which Africa could not solve on its own without other players such as the G8 countries. “What
we are saying is that what role can we play ourselves as Africans where these flows originate and
what role can the G8 play as a major destination for these illegal flows? We are in
communication with the G8 and we will be watching closely the outcome of their summit.”
Former President Mbeki said on behalf of the Panel.
Development impetus leads to inevitable genocide
Despite the vision of world-order founded on a notion of a universal society of humankind aspiring toward a universal
common good, (first given meaning within a conceptual political-legal framework through the birth of the so-called
"Westphalian" state system 14 ), the materialities of "ordering" were of a different complexion altogether. Contrary
to
the disembodied rhetoric of world-order as bloodless evolution, the new images of the
world and languages of "globality" did not evolve out of a sense of "hospitality" 15 to
the "other," the "stranger." Rather, the history of the creation of the post-Westphalian "world" as one
world, can be seen to be most intimately connected with the rise of an expansionist and
colonizing world-view and practice. Voyages of "discovery" provided the necessary
reconnaissance to image this "new world." Bit by bit, piece by piece, the jigsaw of the globe was
completed. With the advance of the "discoverer," the "colonizer," the "invader," the "new" territories were given meaning
The significance of this evolution of the
world does not, however, lie merely in its acquiring meaning. It is not simply the "idea" of the world that
was brought to prominence through acts of colonization. The construction of the "stage" of the
world has also occurred, albeit amid the performance of a violent drama upon it. The idea of a single world in
need of order was followed by a succession of chained and brutalized bodies of the
"other." The embodied world that has been in creation from the "colonial" times to
the present could not, and does not, accommodate plurality. The very idea of "one
world" contains the necessary impetus for the absorption, assimilation, if not
destruction, of existing worlds and the genocide of existing socialities. This violence of
within the hermeneutic construct that was the new "world." [*607]
"order-ing" within the historical epoch of colonialism is now plainly visible.
Development enables the state to expand biopolitical control
Gorden, 04 – Ph.D Politics from University of California, Santa Cruz (Kea, “Depoliticizing
Effects of International Development at the Praxis of Liberal Institutionalism,” Field Statement
No. 2, May 10, 2004)
With the prevalence of project failure, there is an associated call for increasingly technical
solutions. However failure is judged for the particular engineering project to which one is
referring--perhaps the voting system needs to be altered or the pipe design for water delivery needs to be rethought--the
politics that lie underneath the project failure are increasingly ignored. Ferguson argues for the
productive effect of such failures. He cites Foucault who, “speaking of the prison, suggest that dwelling on the ‘failure’ of the prison
may be asking the wrong question.” Perhaps, he suggests, One
should reverse the problem and ask oneself
what is served by the failure of the prison; what is the use of these different phenomena that are continually being
criticized; the maintenance of delinquency, the encouragement of recidivism, the transformation of the occasional offender in a
The implication, Ferguson
state can justify further intervention in areas that will expanding
its scope into the private sphere of people’s lives under the pretense of attempting to fix past
mistakes. More studies, more extension agents, more infiltration of the social environment allows,
perversely, for more control and manipulation of society. While Marx describes the retreat of the state from
development projects so that development become depoliticized, Ferguson call attention to the ways that development can be
a tool of the state to insert itself deeper into the surveillance and extraction of capital from
society.
habitual delinquency, the organization of a closed milieu of delinquency. (Foucault 1979: 272).
argues, is that, through failure, the
Biopower makes life meaningless and mass extinction inevitable
Foucault, 78 – Professor of Philosophy at the College de France (Michel, The History of
Sexuality: An Introduction, Vol. 1, pp. 136-7)
Since the classical age the West has undergone a very profound transformation of these mechanisms of power. “Deduction” has tended to be no longer the major form of power but merely one element among others,
working to incite, reinforce, control, monitor, optimize, and organize the forces under it: a power bent on generating forces, making them grow, and ordering them, rather than one dedicated to impeding them,
making them submit, or destroying them. There has been a parallel shift in the right of death, or at least a tendency to align itself with the exigencies of a life-administering power and to define itself accordingly. This
death that was based on the right of the sovereign is now manifested as simply the reverse of the right of the social body to ensure, maintain, or develop its life. Yet wars were never as bloody as they have been since
the nineteenth century, and all things being equal, never before did regimes visit such holocausts on their own populations. But this formidable power of death—and this is perhaps what accounts for part of its force
and the cynicism with which it has so greatly expanded its limits—now presents itself as the counterpart of a power that exerts a positive influence on life, that endeavors to administer, optimize, and multiply it,
Wars are no longer waged in the name of a sovereign who must
be defended; they are waged on behalf of the existence of everyone; entire populations are
mobilized for the purpose of wholesale slaughter in the name of life necessity: massacres have become vital.
It is as managers of life and survival, of bodies and the race, that so many regimes have been able to wage
so many wars, causing so many men to be killed. And through a turn that closes the circle, as the technology of wars has caused them to tend increasingly toward all-out
subjecting it to precise controls and comprehensive regulations.
destruction , the decision that initiates them and the one that terminates them are in fact increasingly informed by the naked question of survival. The atomic situation
is now at the end point of this process: the power to expose a whole population to death is
the underside of the power to guarantee an individual’s continued existence. The principle underlying the
tactics of battle—that one has to be capable of killing in order to go on living—has become the principle that defines the strategy of states. But the existence in question is no longer the juridical existence of
If genocide is indeed the dream of modern powers, this is not
because of a recent return of the ancient right to kill; it is because power is situated and
exercised at the level of life , the species, the race, and the large-scale phenomena of population.
sovereignty; at stake is the biological existence of a population.
Solvency
Exchange must be automatic – on request method empirically fails to deter
Economist, 2/16/13 (“Tax transparency: Automatic response,” The Economist,
2/16/2013, http://www.economist.com/news/special-report/21571561-way-make-exchange-taxinformation-work-automatic-response)//YS
NOT ONE TO mince words, Daniel Mitchell of the right-wing Cato Institute denounces the OECD’s push to co-ordinate global tax
enforcement as “the devil’s spawn” and possibly even a step towards the fiscal equivalent of—shudder!—the World Trade
Organisation. Tax havens “should not have to enforce the burdensome tax laws of other countries”, he thunders. “Having grown rich
with the tax policies of their choosing, the OECD countries are pulling up the ladder and saying, ‘you can’t do the same to attract
investment’. It’s fiscal imperialism.” To tax-freedom advocates like Mr Mitchell, one of the most infuriating aspects of this perceived
imperialism is the complete overhaul of cross-border information exchange. It is technical stuff, but the changes are extremely
important. They promise to shine a light on some of the darkest corners of banking and investing, not only making tax evasion much
harder but also casting a net over a host of other financial sins—and, along the way, testing financial firms’ compliance departments to
the limit. The new era began in 2009 with something of a false start. The G20 decreed that in order to be considered clean, tax havens
had to sign bilateral tax-information exchange agreements (TIEAs) with at least 12 other jurisdictions. This led to a
surge in
TIEAs and tax-treaty amendments (see chart 4 below) and the fairly prompt removal of tax havens from the OECD
blacklist. The accords call for exchange “on request”. A country has to share information only if
the other signatory asks for it and the request is based on well-founded suspicions. Ask, and it
shall be given? The OECD touted this as a step towards transparency that would also respect individuals’ right to confidentiality as
much as possible. But
tax investigators complain that the process for getting information is
cumbersome and the bar has been set too high. “You already have to have pretty much all the information you’re
after to get the last piece. It’s a catch-22,” says one. That may explain why the number of requests made has been small. Offshore
officials have complaints of their own. Françoise Hendy, Barbados’s chief tax negotiator, thinks that the real motive for promoting
TIEAs was to draw the tax havens’ competitive sting, because TIEAs do not offer the same benefits as the full-blown double-taxation
treaties that OFCs such as Barbados generally prefer. And small jurisdictions felt obliged to comply even though they knew that the
main target was Switzerland. Moreover, the
TIEAs did not appear to reduce financial flows to tax
havens. An academic study of the crackdown by Niels Johannesen of the University of
Copenhagen and Gabriel Zucman of the Paris School of Economics looked at data on crossborder bank deposits in 2009-11 and found that, despite modest outflows from less
compliant jurisdictions, the overall level of funds in OFCs barely changed. Tax NGOs say the
“on request” model is a dud and that tax transparency can be achieved only through the
regular, automatic exchange of information . America gave the world a big push in this
direction in 2010 when it passed the Foreign Account Tax Compliance Act (FATCA). This requires foreign
financial firms to identify account-holders and investors who might be American. If the clients do not reply to inquiries, they will have
a 30% tax withheld from their income arising in America. The rules will be phased in over four years, starting in 2014. FATCA’s
intrusiveness has caused concern among banks and fund managers. It raises big questions about data privacy. Compliance costs,
mostly borne overseas, are likely to be at least double the revenue that the law will generate for America. The necessary overhauls of
systems and procedures and the extra digging around to identify American clients could add $100m or more to a large bank’s
administrative costs. No wonder bankers have dubbed FATCA the Fear And Total Confusion Act. An OECD tax official describes the
law as “awful, in a way, like a nuclear bomb” but also sees it as “a remarkable leap forward for transparency”. And though it began as
a brazenly unilateral move, it has since become more inclusive. America has signed or is negotiating bilateral agreements with 50
countries, each of which would accept some version of FATCA. In return America would offer information on its holdings of their
citizens’ money. The resulting patchwork of intergovernmental agreements, each one slightly different, will add further to the
compliance burden for international banks and fund managers. The biggest
benefit of automatic exchange is that
it deters rather than detects.
Developing countries – including Mexico - are capable of implementing AEI –contrary
arguments are specious and condescending
Gurtner et. al, 09 – Chairman Tax Justice Center International Board, International, nonaligned group or researchers and activists concerned about tax evasion (Bruno, David Spencer,
Senior Advisor Tax Justice Center, and Jon Christensen, Secretary for Tax Justice Center,
“Automatic Exchange of Information and the United Nations Tax Committee,” December 19,
http://www.taxjustice.net/cms/upload/pdf/Info_Exchange_Letter_0912.pdf)
(10) DEVELOPING COUNTRIES AND THE TECHNICAL CAPACITY
ARGUMENT. It has been asserted that automatic information can not be implemented by
developing countries because they do not have the technical capacity. That argument is not
valid for at least three reasons: First, as indicated in paragraph (9), above, implementing
automatic exchange of information does not, in the initial stage, require great technical capacity.
Second, that argument is very condescending to developing countries because it
assumes not only that developing countries do not at present have the technical capacity but
also that developing countries are not capable of acquiring such technical capacity. If
developing countries do not at present have the technical capacity, the UN Tax Committee
should focus on helping developing countries acquire that capacity. Third, some developing
countries clearly have at present the technical capacity to implement automatic exchange of
information. Mexico has indicated in the February 9, 2009 letter from Agustin Carstens to
Timothy Geithner that it receives automatically some tax information form the United States.
Also, Chile has a highly developed electronic tax compliance system, and is providing technical
advice about that to certain developing countries in Latin America and Africa. Therefore, it
would be possible to focus initially on those developing countries which already have the
necessary technical expertise. Clearly, the tax administrations of developing countries have
various levels of technical expertise. And therefore, common sense leads us to conclude that
automatic exchange should be implemented initially with those developing countries which at
present can most easily implement such automatic exchange, and that programs should be
developed in order to enhance the technical capacity of other developing countries, so that they
also can implement automatic exchange of formation. In view of the above, the argument that all
developing countries do not have the technical capacity to implement automatic exchange of
information is specious. That argument merely masks a policy (most likely based on the position
of OECD financial centers and other financial centers) against automatic exchange of
information. As most cross-border illicit financial flows are from developing countries to OECD
financial centers and other financial centers, with the resulting tax evasion in developing
countries, those financial centers have a vested interest in not having automatic exchange of
information implemented with developing countries.
Trade Transparency Units (TTUs) solve trade mispricing – the largest source of IFFs between the
U.S. and Mexico
U.S. Senate Caucus on International Narcotics Control, 13 (“The Buck Stops Here:
Improving U.S. Anti-Money Laundering Practices,”
(April, p. 20, http://www.feinstein.senate.gov/public/index.cfm/files/serve/?File_id=311e974afeb6-48e6-b302-0769f16185ee)
Experts at Global Financial Integrity have estimated that $642.9 billion in
cumulative illicit financial flows from Mexico between 1970 and 2010 can be
attributed to trade mispricing, and have concluded that “trade mispricing is the
preferred method of transferring capital out of the country.” Global Financial
Integrity also found that illicit financial flows from Mexico have been rising since
1970, with an increase from 4.5 percent of Mexican Gross Domestic Product
before the adoption of the North American Free Trade Agreement (NAFTA) to an
average of 6.3 percent of Gross Domestic Product during the 17 years after
NAFTA was implemented. While the data sources used by Global Financial
Integrity do not allow the organization to determine what specific illicit activity the
trade mispricing activities are enabling or obscuring, at least a portion of this
massive amount of trade mispricing activity is likely to be related to the drug
trade.33
Trade based money laundering poses a number of significant and complex
challenges for law enforcement and regulators, not the least of which is the sheer
enormity of global trade. With global trade volumes and values at or near record
levels, launderers have an endless number of opportunities to conceal their illicit
monetary flows. While this can make the problem seem insurmountable, a number
of concrete steps can be taken to identify and seize the proceeds of crime.
One such action is the creation and expansion of Trade Transparency Units
(TTUs). Operated by Immigrations and Customs Enforcement (ICE), these units
use sophisticated computer programming to analyze trade flows between the
participating countries and the United States to identify suspicious patterns
provided by the Data Analysis and Research for Trade Transparency System. This analysis allows
customs officials to detect anomalies such as over or
undervaluing of traded goods and provides actionable leads to investigate
suspected money laundering.
Sanctions empirically ensure international compliance – worked for upon request exchanging
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
For information exchange upon request, achieving universal
compliance with international standards required global leaders to declare
that they “stand ready to take agreed action against those jurisdictions that
do not meet international standards for tax transparency” and list specific
suggested sanctions and non-cooperative countries.185 Within a few years
of being threatened with sanctions by the G-20, those jurisdictions
previously unwilling to exchange information upon request in accordance
with OECD standards, including some OECD member states, changed their
position and began to comply with what was now a global norm. In the
aftermath of the April 2013 G-20 Finance Ministers’ communiqué, it is
possible to imagine a similar threat of sanctions against major financial
centers that are not prepared to participate in automatic information
exchange.
Reputational sanctions will be effective – reputation is key to cross-border dealings
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
Indeed, the U.S. penalty withholding tax imposed under FATCA
combined with the IRS lists of participating and nonparticipating FFIs may
set the stage for reputational sanctions to be effective.190 Many of the
potential defectors in a multilateral system—in particular, financial
institutions with regular cross-border dealings and a tax evasion business—
operate in a reputational market that can have important influence on
behavior under appropriate circumstances.191 The FATCA withholding tax
penalty is sufficiently high that it prompts self-identification by compliant
financial institutions, and the FATCA reporting rules that require reporting
to the IRS about transactions with non-compliant FFIs raise concerns on the
part of FFIs about the consequences of dealing with non-compliant
institutions. In those circumstances, reputational consequences from being
labeled non-compliant by a multilateral body would likely be a salient
reputational threat. Thus, compliance might improve if, as discussed in Part
III.C., a monitoring body were able to review financial institutions’
compliance in appropriate instances.
Plan solves your alt causes - Curbing tax havens is the fastest route to better governance,
democratic institutions and tax morale
Tax Justice Network, 09 – International, non-aligned group or researchers and activists
concerned about tax evasion (“The Non-Perils of Information Exchange,”
http://taxjustice.blogspot.com/2009/07/non-perils-of-information-exchange.html)
Taxing élites properly could be the fastest route to better governance
Were the élites to be subjected to the same constraints and laws that ordinary people are under,
you could be sure that the élites would soon be pressing for better governance – and because they
are the influential players in any developing country, this could be the most powerful pressure of
all.
And if élites were subjected to information exchange, they would press influentially for
mechanisms to stop information leakage, as part of pressure for better governance overall.
What happens instead, however, is that the services provided by secrecy jurisdictions offer the
élites an escape route, curbing any pressure for better governance. Meanwhile ordinary people
know all too well what games are being played and they lose confidence in the fairness of the tax
system and the rule of law, triggering a vicious circle of decline in the institutions of democracy.
AEI solves corruption – empowers legitimate tax officials to tackle elites
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
In some emerging countries, it may be that some finance ministry
and tax administration leaders are beholden to elites who take advantage of
offshore tax evasion opportunities and will therefore resist using automatic
information exchange as a vehicle to improve taxation of capital income.
But even in a country where these problems exist, both potential and actual
availability of information about offshore accounts may help shift the
balance in favor of unbiased tax administration. The development of
uniform automatic information exchange can empower relatively
corruption-free tax administrations or honest individual tax administrators
who are battling with other state actors to improve tax administration.119
Further, many countries have in recent years established semiautonomous tax administrations. In a country struggling with corruption, an
automatic information exchange system may reduce the pressures on a
semi-autonomous tax administration because, unlike information exchange
upon request, investigations begun as a result of automatic information
exchange are less likely to be perceived as politically motivated. Similarly,
a tax administration may find it less difficult to open an audit of politically
connected persons when information that suggests such an audit should be
conducted is provided spontaneously from abroad.
Advantages
Mexican Economy
AT Alt C – Macroeconomics
No economic alt causes – Mexico is already attaining macroeconomic stability
Kar, 12- Lead Economist at Global Financial Integrity, Former Economist at IMF
(Dev, Global Financial Integrity, Mexico: Illicit Financial Flows, Macroeconomic Imbalances,
and the Underground Economy, January 2012, http://mexico.gfintegrity.org/en/)
The simulation model developed in this paper showed that in retrospect, macroeconomic
instability played an important role in driving illicit financial flows from Mexico. Fiscal policies
that result in large deficits lead to monetary expansion to the extent that deficits are financed
through central bank credits or outright money creation. The model shows how expansionary
fiscal policies drive growth in the money supply which together with inflationary expectations,
drive inflation. High (and, for that matter, highly variable) inflation in turn was found to be a
significant driver of illicit flows from the country. We also found illicit outflows to have
increased significantly following every macroeconomic crisis that Mexico faced over the period
covered in this study. Outflows always increased over the year immediately preceding the crisis
and tended to fall below crisis levels at varying speeds. Following the first oil crisis and global
economic crisis, illicit flows from Mexico fell below crisis levels in the year following the crisis.
For instance, the peso crisis had a strong impact on illicit flows—the troughs still exceed the peak
reached during the peso crisis. Often, macroeconomic imbalances lead to widely anticipated
exchange rate depreciation, inducing capital flight and further instability. It therefore follows that
sustainable fiscal policies together with monetary discipline can go a long way in ensuring
macroeconomic stability which can help curtail illicit financial outflows. This finding contrasts
with the case of India where we did not find a strong link between macroeconomic stability and
illicit flows. A possible explanation is that unlike Mexico, India hardly experienced inflation in
the double- and sometimes, triple-digit levels. Moreover, central government deficits as percent
of GDP in the case of Mexico were on average much higher than those registered in India.
Finally, Mexico also racked up external debt much more than India did so that rising debt
contributed to macroeconomic instability in a way that was not the case with India. Briefly, the
observation that macroeconomic instability is more likely to drive licit than illicit flows needs to
be qualified—if instability is severe enough, it can indeed drive illicit outflows. In the more
recent decade, the Mexican central bank has been quite successful in bringing down inflation and
lowering its variability. Fiscal deficits as percent of GDP have also been reduced significantly
and the external debt to GDP ratio has fallen to about 23.0 percent. There is no question that
Mexico has managed to attain macroeconomic stabilization in recent years which has contributed
to a much better investment climate according to World Bank estimates. While illicit flows have
continued to increase due to a number of other factors, the attainment of macroeconomic
stabilization has had a salutatory effect on total outflows. Hence, it would be very important for
Mexican economic policies to continue to pursue macroeconomic stability in an effort to contain
illicit flows. (vii) Tax havens, banks, and the absorption of illicit financial flows A recent study at
Global Financial Integrity found that offshore financial centers (or OFCs also called tax havens)
and developed country banks are the major points of absorption of illicit financial flows from
developing countries. Although tax havens have attracted media attention regarding their lack of
transparency, a recent GFI study found that large data gaps exist for banks as well.18 These gaps
make it difficult to analyze the absorption of illicit funds, defined as the change in private sector
deposits of developing countries in banks and OFCs. The paper argues that both need to greatly
improve the transparency of their operations. Regular reporting of detailed deposit data by sector,
maturity, and country of residence of deposit holder would close many of the data gaps identified
in this paper and allow for a more robust analysis of the absorption of illicit flows from
developing countries.
The GFI study found that while OFCs have been absorbing an increasing share of illicit flows
from developing countries over the five-year period of this study, international banks have played
a pivotal role in facilitating that absorption. Depending upon whether one uses the narrower Bank
for International Settlements or broader International Monetary Fund definition, OFCs hold an
estimated 24 to 44 per cent of total absorption respectively, while banks hold the balance. As total
absorption consists of both licit and illicit funds, the paper presents a simple algebraic analysis to
estimate the portion of such deposits in banks and offshore centers. Furthermore, the analysis
shows that the polar extreme (all illicit or all licit) in such holdings by either group is not logically
(or mathematically) tenable given the overall volume of illicit flows and absorption. The
curtailment of illicit financial flows is difficult, if not impossible, without national and
international efforts to reign in the role of OFCs and banks in the unbridled absorption of these
funds including, in many cases, the active facilitation of “private banking” involving illicit funds.
AT Banking Reform Solves
Banking reform won’t solves – takes years, assuming it’s even successful
Sarmiento and Hughes, 5/20 – Correspondent, Reuters AND Chief Economics
Correspondent, Reuters (Tomas AND Krista, “Mexico will see bank reform impact in 2-3 years:
Banorte's Ortiz”, 5/20/2013, Reutershttp://www.reuters.com/article/2013/05/20/us-latam-summitbanorte-idUSBRE94J0I620130520)//JW
(Reuters) - Mexico's banking reform will take two or three years to have an impact on credit and
access to financial services, said the chairman of Mexico's largest locally-owned bank, Grupo Financiero Banorte.¶ The reforms, unveiled earlier this
month, aim to increase lending in Latin America's second-largest economy to improve development of the small
business sector and boost growth.¶ But Guillermo Ortiz, also a former finance minister and head of the central bank, said it would
take time for the reform to seep through to the real economy, where many workers have jobs in the informal sector and
don't have bank accounts.¶ "The banking reform will not have a notable impact in the short term ," Ortiz said at the
Reuters Latin America Investment Summit.¶ "If it is successful, we'll see an acceleration in financial penetration after two or three years."¶ Mexican banks, which
include the local units of Spain's BBVA (BBVA.MC) and U.S. bank Citigroup (C.N), are well capitalized but conservative lending practices mean private sector financing stands
at just 26 percent of gross domestic product - below Brazil, Argentina, Uruguay, Peru and Chile.¶ Ortiz declined to give a forecast on how much credit could increase as a result of
the reform, but pointed to the success of reforms in Brazil. Private sector credit in Brazil jumped from less than 25 percent of GDP to 35 percent between 2004 and 2007 after
changes in the 1990s and early 2000s.¶ "In Mexico we have one of the most solid and healthy financial systems in the world, but at the same time one of those which lend the
least," President Enrique Pena Nieto said in launching the reform.¶ Ortiz said the large informal sector, which employs 60 percent of the workforce, made it impossible for banks
to properly gauge credit risk.¶ Shrinking the informal sector is one of the objectives of fiscal reform that Finance Minister Luis Videgaray is preparing and aims to present later this
year.¶ The finance ministry estimates small- and medium-sized companies generate nearly three-quarters of Mexican jobs but receive just 15 percent of credit.¶ Central bank
governor Agustin Carstens has said the reform could add around 0.5 percentage point to growth in two or three years.
International Tax Regime
Now is Key
Now is key – U.S. support for multilateral AEI will wane once FATCA begins operating
successfully on a unilateral basis
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
At their April 2013 meeting the G-20 Finance Ministers reached the
conclusion that Global Forum peer reviews could be deepened to examine
jurisdictions’ legal regimes and practices surrounding automatic
information exchange.168 The Global Forum should start by evaluating
legal regimes and implementation in countries that are already committed to
multilateral automatic information exchange. Through this process, they
would set monitoring standards against which other countries could be
evaluated by first imposing discipline on “members of the club .”169
One
could expect the United States to support a rigorous monitoring effort if it
focused on FATCA-type exchange, and if plans for the monitoring body
were established before FATCA compliance was otherwise routine.
However, timeliness is important. U.S. support is likely a necessary
although not sufficient condition for establishing a rigorous monitoring
would be less likely to be forthcoming once FATCA begins to
operate successfully on a unilateral basis.
body, and
Must act now –FATCA’s unilateral framework will go into effect in 2014
Curry, 7/2/13 (Bill, “Privacy debate looms as Canada prepares to share bank data with U.S.”
The Globe and Mail, http://www.theglobeandmail.com/news/politics/canadas-informationsharing-deal-with-us-under-fire/article12913617/)//YS
The Foreign Account Tax Compliance Act (FATCA) was signed into law in March 2010, and
many of its provisions start on Jan. 1, 2014. It requires financial institutions in other
countries to tell the U.S. Internal Revenue Service about Americans’ offshore accounts
worth more than $50,000. Canada and the U.S. are negotiating whether Ottawa or the financial institutions will send the
information, but the clock is ticking. If no deal is reached, banks operating in Canada will have to give the data directly to the IRS.
Canada and the U.S. already share financial information to track activity like money laundering and terrorist financing, but the U.S.
tax act creates a need to sort out exactly what will be shared and how. Canadian banks have urged Ottawa to take on the reporting
duties through the Canada Revenue Agency, which could ensure that privacy laws are respected when information is sent south of the
border. Over
the past year, the U.S. has signed bilateral deals to enforce the act with
Germany, Japan, Spain, Norway, Switzerland, Ireland, Mexico, Denmark and the United
Kingdom. The FATCA has created considerable concern for Americans in Canada, given that many have long ignored a U.S. rule
requiring citizens to file annual tax returns even if they are not earning income in the United States. The leaders of the G8 recently
pledged support for the automatic transfer of financial information to crack down on global tax evasion. Critics said the pledges were
vague, but more concrete proposals are in the works through the G20 and the OECD. G20 finance ministers and central bankers meet
in Moscow July 19-20 and G20 leaders meet in St. Petersburg Sept. 5-6.
banks –
The U.S. law
– which would affect all but the smallest
adds some urgency to the push for a global tax exchange system, and it is fast
becoming the model.
Developing Countries Key AEI
Now is key time to push for AEI including developing countries and their needs
Information reporting can help sustain tax morale in a
financially integrated world. Information reporting also allows capital income taxation to
play an expressive role in building a liberal democracy that is accepted as legitimate by
its people, and to encourage taxpayers to engage with the polity and demand government
accountability. In contrast, anonymous withholding institutionalizes differentiated
treatment for the most sophisticated taxpayers from the rest of society. Further,
anonymous withholding systems leave open the possibility that foreign jurisdictions may
one day decline to implement a country’s changes in its own tax regime, thereby
undermining domestic authority, as well as policy flexibility, especially for less powerful
states.
Together, the emerging models presented by the OECD, the EU, and the United States
hold within them the seeds of a workable automatic information reporting regime.
Multilateral vehicles also already exist to work towards a multilateral system. For
instance, the Coordinating Body of the Multilateral Convention has the authority to study
methods and procedures to increase international cooperation in tax matters, and the
Multilateral Convention provides the legal authority for multilateral automatic
information exchange. International tax policymakers should seize the present
evolutionary moment, and push for the emerging automatic information exchange
approaches to be reconciled in a manner that supports the tax administration needs of
developed and emerging economies alike.
Automatic exchange is uniquely key to developing countries – 25-33% of their wealth is
held offshore
The best available data suggests that compliance concerns over tax evasion through
offshore accounts are likely to be greater for emerging economies than for developed
economies. Meanwhile, the emerging economies’ lower administrative capacity reduces
the efficacy of information exchange upon request as a tool with which they can combat
offshore tax evasion. They often lack the audit and investigative skills to determine
which country to ask about which resident taxpayer.
Offshore wealth represents 6.4% of the more than $120 trillion of global wealth.36
However, the extent to which taxpayers’ assets are managed offshore is not uniform
across regions of the world. BCG estimates that less than 2% of North American wealth
and less than 8% of European wealth is held offshore.37 In contrast, more than 25% of all
Latin American household wealth, representing $900 billion, and almost 33% of all
Middle Eastern and African wealth, representing $1.4 trillion, is held offshore.38
Households outside the major developed economies hold approximately 25% of global
wealth (including $21.7 trillion in wealth for households in Asia-Pacific ex-Japan).39
Wealth is also much more concentrated40 and growing at a significantly faster rate
outside North America, Japan, and Western Europe, with experts expecting that trend to
continue.41 Thus, the taxation of offshore wealth should be of greater relative importance
to Latin America, the Middle East, and Africa, than to the United States and Canada or the major
European economies. Data on actual revenues lost by developing countries and
emerging economies overall from offshore tax evasion is unreliable. However, OECD
estimates put such losses, only a portion of which are attributed to the use of offshore
accounts by resident individuals, at a magnitude that approximates all official
development assistance worldwide (totaling $120 billion per year).42
IFFs Key to Poverty
Taxing IFFs solves poverty – yields more than double the revenue needed
Oxfam International, 13 (May 22, “Tax Havens Private Billions Could End Extreme Poverty
Twice Over,” http://www.oxfam.org/en/eu/pressroom/pressrelease/2013-05-22/tax-havensprivate-billions-could-end-extreme-poverty-twice-over)
At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide, representing a
loss of more than $156 billion in tax revenue, according to new figures published today by
international agency Oxfam.
The missing money is twice that required for every person in the world to be living above the
$1.25-a-day “extreme poverty” threshold.
Oxfam’s Kevin Roussel said: “It’s scandalous that so much money is allowed to sit untaxed,
letting off the hook those individuals who can most afford to pay for public goods and services.
Many governments claim to have no alternative but to cut public spending and development aid,
but we’ve found there’s enough potential tax to be had on hidden “private” money to end extreme
world poverty twice over.”
Democracy
AEI Solves Democracy
AEI is key to building democracies in developing countries – key to legitimacy and demands for
accountability
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
At the same time, information reporting provides some assurance to the entire society that
tax on capital income is in fact being collected from wealthy taxpayers. A government
can, for example, provide reports showing distributional breakdowns of the tax burden.
In contrast, cross-border anonymous withholding can undermine the perceived legitimacy
of the government by eroding the citizenry’s confidence that the government is raising
funds in an equitable matter.168 If the transparency of taxation has any role to play in
constituting the democratic experience, then moving to an anonymous withholding
system to collect those taxes most likely to be associated with privilege undermines that
role. Anonymous cross-border withholding of income tax on capital income changes the
taxing relationship between the citizen and the state. At minimum it reduces the
taxpayer’s awareness of a domestic fiscal process and any consequent likelihood to
engage the polity to demand accountability.169 Beyond that, cross-border anonymous
withholding may shake all citizens’ confidence that the government is raising funds
equitably, and therefore weaken the legitimacy of the state.170 In this sense it differs
dramatically from domestic withholding or information reporting systems for collecting
tax revenues. In the context of major developed economies, the consequent pressures on
liberal democracy may be significantly less relevant. But in the context of emerging and
developing economies still working to achieve robust democratic governance, these same
pressures should not be underestimated.171
AEI fosters tax morale, governance, and liberal democracies – studies prove morale is key to
compliance
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Even if anonymous withholding could be globalized (which I will argue it cannot be),
most countries, especially emerging economies, should prefer automatic information
reporting for governance-related reasons. This claim may be controversial, because
anonymous cross-border withholding could theoretically provide revenue to emerging
economy government fiscs without those governments needing to build an effective tax
administration in order to collect that revenue. I argue that anonymous cross-border
withholding threatens domestic tax morale, undermines the expressive role of taxation as
a building block of liberal democracy, and erodes sovereign policy flexibility.
Meanwhile cross-border information reporting undergirds tax morale and strengthens the
capacity to govern.
Compliance with domestic tax policy is quasi-voluntary; tax collection is significantly
less costly and more effective if it is motivated by a willingness to cooperate (“tax
morale”) even while backed by coercive authority. As long as domestic authorities
handle tax compliance, governments are compelled to respond to citizen demands in
order to enhance tax compliance and sustain state revenues.149 Cross-border anonymous
withholding obviates the need to strengthen governance institutions in order to collect
revenue, as it presupposes collection and remittance by a foreign financial institution
under the regulatory authority of a foreign sovereign. In contrast, automatic information
exchange strengthens domestic governance institutions both by improving the capacity of
domestic authorities to handle tax compliance and forcing an interaction between
government and taxpayers in order for tax to be collected. 150
Evidence from experimental studies and survey data reveals that tax morale is affected
by
factors such as citizens’ trust in other citizens’ compliance and perceptions of the
trustworthiness and competence of the government.151 Recent work further suggests that
tax measures that increase the transparency of tax matters help build a culture of tax
compliance, and thus help maximize revenue while minimizing political conflict.152 In
contrast, cross-border anonymous withholding prevents governments from receiving the
data that would suggest that tax is being collected equitably or indicating to a citizenry
that the government is seeking out non-payers.153 It singles out an elite class of potential
non-payers who have the sophistication to utilize foreign institutions and provides them
with special treatment. The nature of that special treatment is such that a cross-border
anonymous withholding system can never provide any evidence to citizens that revenues
are being collected in a reasonably equitable manner. That belief in equitable treatment
is absolutely crucial to tax morale.
Tax compliance research also suggests that the government’s level of commitment to
enforcing the tax law has an important effect on tax morale.154 If there is a widespread
perception that the government is not willing to detect and penalize tax evaders, then tax
evasion is socially legitimized and tax morale falls.155 In countries like Greece, Italy, or
the Philippines, weak tax administrations lacking vigorous enforcement programs have
contributed to a state of affairs in which tax evasion carries very little moral opprobrium.
Thus, in discussing anonymous withholding, Sigmar Gabriel, Chairman of Germany’s
Social Democratic Party, has suggested that the Swiss-German anonymous withholding
agreement is “making common cause with lawbreakers,” “destroying people’s sense of
justice” and sending a message that “whoever is rich can buy themselves free from
punishment.”156
AEI builds liberal democracies – encourages taxpayers to demand government accountability
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).//SEP
Emerging economy governments and other stakeholders, including civil society, have
many reasons beyond sheer revenue to weigh in on the choices made by the major actors
in this evolutionary moment. Information reporting can help sustain tax morale in a
financially integrated world. Information reporting also allows capital income taxation to
play an expressive role in building a liberal democracy that is accepted as legitimate by
its people, and to encourage taxpayers to engage with the polity and demand government
accountability. In contrast, anonymous withholding institutionalizes differentiated
treatment for the most sophisticated taxpayers from the rest of society. Further,
anonymous withholding systems leave open the possibility that foreign jurisdictions may
one day decline to implement a country’s changes in its own tax regime, thereby
undermining domestic authority, as well as policy flexibility, especially for less powerful
states.
Solvency Mechanisms
AEI
AEI Solves - Miscellany
AEI solves –addresses untaxed principal, promotes tax morale, and is capable of being accepted
globally
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Automatic information reporting systems and cross-border anonymous withholding
systems both clearly break from past practice, moving towards a global norm of financial
institutions serving as tax agents for governments cross-border. Neither system
represents the most comprehensive solution to address offshore accounts, which would
involve non-anonymous cross-border withholding in combination with information
reporting. However, when choosing between the two systems presently under
consideration internationally, an information reporting model is superior to an
anonymous withholding model. Anonymous withholding is substantively inferior
because information reporting is able to address concerns regarding the accretion of
untaxed principal, whereas withholding solutions are not. Furthermore, contrary to some
conventional wisdom, anonymous withholding is not significantly cheaper, simpler, or
more administrable than information reporting.
More importantly, cross-border anonymous withholding institutionalizes differentiated
treatment of the most sophisticated taxpayers from the rest of society. In doing so, it
undermines tax morale and the expressive role in citizenship that taxation plays in a
democratic polity. Information reporting instead empowers the tax system to act as a
building block of liberal democracy. Where anonymous withholding reduces policy
flexibility and sovereign authority, information reporting preserves sovereign policy
autonomy. Particularly outside the largest developed economies, these differences argue
strongly in favor of information reporting.
Finally, politically speaking, anonymous withholding will not be accepted globally, while
an automatic information reporting solution has the capacity to develop into a global
regime. Information reporting regimes could conceivably grow to serve a wide range of
states, whereas anonymous withholding regimes will, at best, only serve the interests of
the wealthiest states with the most influential financial centers. Despite the superiority of
information reporting, if a crucial subset of major financial centers accepts anonymous
withholding, the suboptimal result represented by anonymous withholding for a limited
number of countries may become a stable equilibrium. This dynamic makes the
outcomes of the current evolutionary moment crucial to the development of cross-border
administrative assistance.
AEI Solves- Sanctions
Sanctions won’t need to be imposed – prospect is enough for compliance
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
FATF and the Financial Stability Board, like FATCA, threaten
capital market sanctions as the ultimate tool for ensuring compliance with
their respective international regulatory architectures. The legal burden of
imposing those sanctions is borne largely by the large developed
economies. However, just the prospect of capital market sanctions creates a
great degree of uncertainty for other actors and therefore few costs are
actually imposed on the countries threatening sanctions. Instead, significant
incentives emerge for financial institutions and other governments to
comply.186 This same dynamic—basically a game of chicken—explains
why FATCA’s 30% withholding threat has been effective in creating a
global procession toward a system that automatically provides information
on U.S. accountholders’ offshore accounts to the IRS.
Both carrots and sticks are key to global compliance
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Advocates of anonymous withholding often suggest that anonymous withholding is more
administrable and less costly than information reporting by comparing the Swiss model to
FATCA and noting that anonymous withholding does not require withholding on any
entity, or on passthru payments, as does FATCA. These arguments are specious. The
withholding imposed by FATCA on financial institutions for noncompliance is not a cost
of the information reporting system. Rather, it is simply the stick chosen by the United
States to try to encourage global compliance. The United States could equally have
chosen to use FATCA’s withholding rules to instead impose an anonymous withholding
regime. Any system with global aspirations needs a combination of carrots and sticks if
it is to drive the vast majority of institutions and governments into the system. FATCA
attempts to create a global regime to improve cross-border administrative assistance in
the face of resistance from certain foreign sovereigns and financial institutions. It
therefore requires means of coercion without which various financial institutions and
sovereigns would not comply. Swiss anonymous withholding, in contrast, is intentionally
characterized by contracting. It requires no coercive measures, because Switzerland is
not attempting to globalize the regime. Indeed, Switzerland would prefer to establish
anonymous withholding with only as few countries as is necessary to stop the spread of
automatic information reporting. Coercion inevitably imposes greater compliance and
political costs than contracting, even if the results from coercion are justified.146
AEI Solves – Governance
AEI strengthens governance and policy flexibility – especially for emerging economies
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
In contrast to anonymous withholding, an automatic information exchange regime would
strengthen sovereign authority and thereby improve policy flexibility and governance
capacity, particularly for less powerful sovereigns. Rather than constraining the set of tax
policy choices a government may make, as anonymous withholding would, automatic
information exchange broadens the potential for tax policies that can be consistently
enforced among all residents. It allows for a more legitimate and comprehensive
domestic political authority while reclaiming for the state authority over the
consequences of financial globalization. Thus, automatic information exchange regimes
fortify sovereign state-building and effective governance, particularly for emerging
economies and less powerful states.
AEI Solves – Admin/Cost
AEI is easy to administer - criticisms overstated
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Another argument made in favor of anonymous withholding is that even if automatic
information reporting is a substantively preferable system, anonymous withholding is less
costly and more administrable. This claim is grossly overstated. Anonymous
withholding and automatic information reporting share almost all of the same operational
challenges. A multilateral anonymous withholding system along the lines of the Swiss
model must (1) determine how to identify taxpayers’ country of residence, (2) collect
information about amounts of interest, dividends, capital gains, and other income in order
to impose the right withholding rates, (3) determine which financial institutions are
included in the withholding system, (4) ensure financial institutions comply with the
requirements to identify taxpayers with a country of residence and withhold appropriate
amounts on identified types of income, (5) determine how to route payments to residence
country governments,139 and (6) determine how to encourage widespread multilateral
participation. The only important aspect of information reporting that is more
burdensome than anonymous withholding is its requirement for taxpayer identification
numbers (TINs). On the other hand, an anonymous withholding system is more
burdensome than information reporting along other dimensions. In an anonymous
withholding system a financial institution must keep track of tax rates and rate changes in
different categories of income for every country in the world for which it applies
withholding and then must in fact withhold, instead of simply tracking income and
reporting it.
AEI Solves - Feasible
Multilateral AEI is very feasible- success has already been demonstrated by the EUSD
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
The only important element of a regime for cross-border administrative assistance that an
information reporting system must develop more thoroughly than an anonymous
withholding regime is a mechanism to transmit information from the asset management
jurisdiction to the residence country in a form that tax administrations can match against
residents’ tax returns.140 Assuming that a financial institution were to arrange its IT
systems to successfully collect the necessary information to impose a withholding tax the
rate of which varies by type of income and country of residence of the customer,
providing automatic information reporting instead of withholding requires adding only
two pieces to the system: TINs, and information technology solutions to allow secure
transfer of the requisite information in a mutually intelligible format. Solving the former
problem requires every residence country interested in benefitting from automatic
information exchange to issue its taxpayers TINs if it has not done so. It also requires
every financial institution with offshore accounts to collect those numbers from
nonresident account holders.141 Solving the latter problem involves significant but
feasible investment in IT development and allowing time to implement the new
technology. That much has already been demonstrated by the successful operation of the
EUSD,142 as well as the work of expert groups at the OECD.143
AT Misuse of Info
G20’s Global Forum oversight solves for misuse of information
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
The Global Forum should also examine whether taxpayer
information is being used properly and kept private by jurisdictions
benefitting from automatic information exchange. The current Global
Forum review process already includes examination of protections for
taxpayer information and adherence to global norms regarding taxpayers’
rights.170 Further, over the last couple of years, the professional staff of the
Global Forum learned some invaluable lessons about how to monitor
implementation of this issue in practice.171 Thus it could be reasonably
straightforward to amplify the Global Forum’s work in this area to address
the risks around misuse of information in an environment characterized by
automatic information exchange.172 Importantly, work to date in the Global
Forum does not suggest that protection of taxpayer information outside the
OECD countries is a systematically intractable problem, although new
protocols may need to be developed for use in various countries in order to
ensure protection of larger databases of electronically received information.
Countries will not misuse information – safeguards will be in place
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
One of the critical principles under today’s existing international standards for
information exchange upon request is that the residence state receiving information must
ensure that exchanged information is only used for legitimate tax administration
purposes.200 Countries that do not abide by this standard are not entitled to information
exchange upon request under current international standards. The Global Forum on
Transparency and Exchange of Information for Tax Purposes (“Global Forum”), a peer
review body that includes over 100 member jurisdictions, is mandated to assess
jurisdictions to ensure that they all adhere to this high standard, and those assessments are
ongoing today. In an automatic information exchange system, the same high standards
proscribing misuse of information would presumably apply. In fact, the current members
of the Multilateral Convention have clarified that they will not admit to the convention
new countries that do not have proper safeguards in place to ensure that exchanged
information will not be misused. A multilateral automatic information exchange system
would need to enforce both (1) the existing Multilateral Convention’s upfront
requirement that governments have laws in place consistent with international standards
to prevent the misuse of exchanged information and (2) provide for monitoring systems
and credible sanctions over time (most notably, denial of information exchange or
removal from the multilateral system) as part of the establishment of any multilateral
automatic information exchange system.201 Taking these two steps would both protect the
integrity of an automatic information exchange system and very substantially encourage
improved compliance with global standards for protecting taxpayer information from
misuse.
AT Swiss Model Good
AEI is superior to anonymous withholding –addresses untaxed principal, promotes tax morale,
and is capable of being accepted globally
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Automatic information reporting systems and cross-border anonymous withholding
systems both clearly break from past practice, moving towards a global norm of financial
institutions serving as tax agents for governments cross-border. Neither system
represents the most comprehensive solution to address offshore accounts, which would
involve non-anonymous cross-border withholding in combination with information
reporting. However, when choosing between the two systems presently under
consideration internationally, an information reporting model is superior to an
anonymous withholding model. Anonymous withholding is substantively inferior
because information reporting is able to address concerns regarding the accretion of
untaxed principal, whereas withholding solutions are not. Furthermore, contrary to some
conventional wisdom, anonymous withholding is not significantly cheaper, simpler, or
more administrable than information reporting.
More importantly, cross-border anonymous withholding institutionalizes differentiated
treatment of the most sophisticated taxpayers from the rest of society. In doing so, it
undermines tax morale and the expressive role in citizenship that taxation plays in a
democratic polity. Information reporting instead empowers the tax system to act as a
building block of liberal democracy. Where anonymous withholding reduces policy
flexibility and sovereign authority, information reporting preserves sovereign policy
autonomy. Particularly outside the largest developed economies, these differences argue
strongly in favor of information reporting.
Finally, politically speaking, anonymous withholding will not be accepted globally, while
an automatic information reporting solution has the capacity to develop into a global
regime. Information reporting regimes could conceivably grow to serve a wide range of
states, whereas anonymous withholding regimes will, at best, only serve the interests of
the wealthiest states with the most influential financial centers. Despite the superiority of
information reporting, if a crucial subset of major financial centers accepts anonymous
withholding, the suboptimal result represented by anonymous withholding for a limited
number of countries may become a stable equilibrium. This dynamic makes the
outcomes of the current evolutionary moment crucial to the development of cross-border
administrative assistance.
Both carrots and sticks are key to global compliance – Swiss model lacks coercion
because it does not seek to solve globally
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Advocates of anonymous withholding often suggest that anonymous withholding is more
administrable and less costly than information reporting by comparing the Swiss model to
FATCA and noting that anonymous withholding does not require withholding on any
entity, or on passthru payments, as does FATCA. These arguments are specious. The
withholding imposed by FATCA on financial institutions for noncompliance is not a cost
of the information reporting system. Rather, it is simply the stick chosen by the United
States to try to encourage global compliance. The United States could equally have
chosen to use FATCA’s withholding rules to instead impose an anonymous withholding
regime. Any system with global aspirations needs a combination of carrots and sticks if
it is to drive the vast majority of institutions and governments into the system. FATCA
attempts to create a global regime to improve cross-border administrative assistance in
the face of resistance from certain foreign sovereigns and financial institutions. It
therefore requires means of coercion without which various financial institutions and
sovereigns would not comply. Swiss anonymous withholding, in contrast, is intentionally
characterized by contracting. It requires no coercive measures, because Switzerland is
not attempting to globalize the regime. Indeed, Switzerland would prefer to establish
anonymous withholding with only as few countries as is necessary to stop the spread of
automatic information reporting. Coercion inevitably imposes greater compliance and
political costs than contracting, even if the results from coercion are justified.146
Even if anonymous withholding were adopted globally, it would still fail – doesn’t apply to
principal contributions, limits information exchange, and misses suggestive patterns
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Understanding the prevalence of concerns regarding the fraudulent use of offshore
structures to evade domestic business income tax is imperative to a cogent evaluation of
anonymous withholding. Even if an anonymous withholding system were adopted by all
countries, it would not address or deter the use of offshore structures and specious
transactions to evade domestic taxation. Withholding in any anonymous withholding
system only applies to investment income, not contributions to principal. Thus, the Swiss
agreements use a one-time charge as a proxy to acknowledge past untaxed principal, but
have no mechanism to help address the evasion of domestic business income tax through
offshore accounts on a forward-going basis. Furthermore, anonymous withholding exists
to limit exchange of information, and thus such a regime runs counter to the extensive
cross-border administrative assistance necessary to ferret out tax evasion on principal.
Conversely, an appropriately structured system of information exchange can call
attention to the existence of assets of a domestic taxpayer that may be funded from
income, profits, or gains that evaded taxation. The U.S. FATCA regime, for instance,
requires annual asset reporting as well as income reporting, including assets held by shell
entities. This reporting attempts to deter and identify patterns suggestive of the use of
offshore accounts to evade tax on domestic income earned by closely held businesses.
Swiss approach does not solve globally - it is designed to protect wealthy people in developing
countries
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Switzerland, which manages approximately 30% of the world’s
offshore wealth, has generally rejected automatic information exchange.8 In
a rearguard action to prevent automatic information exchange from
becoming a global standard, the Swiss have offered anonymous withholding
to a few—and only a few—large developed economies, on a bilateral basis.
Under this regime, Swiss banks collect tax from non-resident
accountholders and remit the total amounts to the resident countries without
identifying the accountholders. One important goal of this Swiss policy
appears to be to help Swiss banks continue to offer bank secrecy for the
wealthy in emerging and developing economies, even as they cooperate
with a few large, developed financial centers to address their offshore tax
evasion concerns.
AEI is substantially easier to administer – anonymous withholding requires keeping track of tax
rates and rate changes for every country in the world
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Another argument made in favor of anonymous withholding is that even if automatic
information reporting is a substantively preferable system, anonymous withholding is less
costly and more administrable. This claim is grossly overstated. Anonymous
withholding and automatic information reporting share almost all of the same operational
challenges. A multilateral anonymous withholding system along the lines of the Swiss
model must (1) determine how to identify taxpayers’ country of residence, (2) collect
information about amounts of interest, dividends, capital gains, and other income in order
to impose the right withholding rates, (3) determine which financial institutions are
included in the withholding system, (4) ensure financial institutions comply with the
requirements to identify taxpayers with a country of residence and withhold appropriate
amounts on identified types of income, (5) determine how to route payments to residence
country governments,139 and (6) determine how to encourage widespread multilateral
participation. The only important aspect of information reporting that is more
burdensome than anonymous withholding is its requirement for taxpayer identification
numbers (TINs). On the other hand, an anonymous withholding system is more
burdensome than information reporting along other dimensions. In an anonymous
withholding system a financial institution must keep track of tax rates and rate changes in
different categories of income for every country in the world for which it applies
withholding and then must in fact withhold, instead of simply tracking income and
reporting it.
AT Developing Countries Can’t Comply
Multilateral AEI standards will create compliance benchmarks for emerging countries
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
Furthermore, international standards for participation in an
automatic information exchange system might create benchmarks to which
domestic tax authorities in less sophisticated countries might aspire. So
automatic information exchange on offshore accounts may have longerterm compliance benefits even for countries with insurmountable mediumterm limitations to participation in a multilateral system.
G-20 will provide technical assistance to emerging countries
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
G-20 countries could support emerging countries by creating
meaningful technical assistance programs intended to facilitate usage of a
multilateral information-reporting architecture. The IMF, OECD, United
Nations, and the World Bank all recommend that G-20 countries act in
concert with or on behalf of developing countries in parallel to their own
actions to address offshore tax evasion.175 G-20 technical assistance
programs could provide an information-technology (“IT”) architecture for
utilizing the automatic information reporting provided by financial
institutions, training on how to use that IT architecture, training on how to
integrate cross-border automatic information exchange with existing IT
systems, or advice on policy changes that might be considered given the
availability of automatic information exchange.176 At the very least,
technical assistance could allow jurisdictions to use information received
through uniform automatic information for risk assessment purposes.
Indeed, that could be a practical output of the “tax inspectors without
borders” proposal being studied by the OECD’s Development Assistance
Committee. Any of these programs is more likely to be useful to the extent
that the compliance architecture for a multilateral automatic information
exchange system is uniform across jurisdictions and financial institutions.
AT Alt C – General
Inability to collect taxes undermines tax morale as well as the authority and effectiveness of the
state
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Nor are emerging economies’ concerns with offshore tax evasion limited to revenue loss.
As in the developed world, an inability to collect tax on income and wealth held through
offshore accounts and entities may undermine tax morale and threaten the broader
administration of the domestic tax system. Moreover, in administrative regimes
characterized by limited competence, widespread awareness of evasion through offshore
accounts by the wealthy or privileged may undermine the authority and effectiveness of
the state. The Indian Supreme Court, which handled a series of cases associated with
corruption and tax evasion in recent years, described the problem:
Unaccounted monies, especially large sums held by nationals and entities
with a legal presence in the nation, in banks abroad…would also indicate a
substantial weakness in the capacity of the State in collection of taxes on
incomes generated by individuals and other legal entities within the
country. The generation of such revenues is essential for the State to
undertake the various public goods and services that it is constitutionally
mandated, and normatively expected by its citizenry, to provide. A
substantial degree of incapacity, in the above respect, would be an indicia
of the degree of failure of the State; and beyond a particular point, the
State may spin into a vicious cycle of declining moral authority, thereby
causing the incidence of unlawful activities in which wealth is sought to
be generated, as well as instances of tax evasion, to increase in volume and in intensity.43
Trade Transparency Units
Increasing TTUs provides an inexpensive solution to IFFs
U.S. Senate Caucus on International Narcotics Control, 13 (“The Buck Stops Here:
Improving U.S. Anti-Money Laundering Practices,”
(April, p. 7, http://www.feinstein.senate.gov/public/index.cfm/files/serve/?File_id=311e974afeb6-48e6-b302-0769f16185ee)
Finding: Trade based money laundering is defined as “the process of
disguising the proceeds of crime and moving value through the use of trade
transactions in an attempt to legitimize their illicit origin.”4
Given the volume of international trade and the prevalence of trade based
money laundering schemes, too little attention is paid to customs
inspections. Since the creation of the Department of Homeland Security
(DHS), insufficient resources have been allocated to DHS’s customs
mission. Specifically, the hiring of customs inspections officers has not kept
pace with both legitimate and illegitimate trade demands. While the number
of Border Patrol Agents patrolling the Southwest border in between official
ports of entry has nearly doubled since 2004 (from 11,684 to 23,306), the
number of customs inspectors has risen by only about 12 percent in the same
time (from 19,525 to 21,893). This negatively impacts both our competitive
edge in the trade arena and our ability to combat trade fraud and money
laundering operations.
The Department of Homeland Security’s Trade Transparency Units are an
important tool in combating trade based money laundering. Trade
Transparency Units provide important links between the United States and
its foreign partners to identify suspicious trade patterns and prevent money
laundering and smuggling activities. At a cost of about $200,000, Trade
Transparency Units are also relatively inexpensive to establish, requiring
only the cost of computer equipment and training. The recent expansion of
these to nine nations with two more in progress is encouraging as is the
move towards regional Trade Transpargiven area share trade information.
Recommendation: Within current budgetary constraints, DHS should
increase the focus given to the customs aspect of its mission and ensure
sufficient resources are devoted to its customs work. Targeted customs
inspections and investigations are crucial in disrupting trade based
laundering systems. Recognizing that disrupting the financial operations of
transnational criminal organizations is critical to combating their illegal
activities, DHS should make greater efforts to detect trade based money
laundering at all ports of entry into the United States. As part of this effort,
the number of Trade Transparency Units should be increased, particularly in
countries where money laundering is prevalent. These units are a relatively
low cost tool that can effectively detect suspicious trade based money
laundering schemes. DHS should continue to train willing foreign partners
and move towards regional Trade Transparency Unit models where
appropriate.
Risk-based price profiling solves IFFs between the U.S. and Mexico – provides a model for
Mexico
Kar, 12- Lead Economist at Global Financial Integrity, Former Economist at IMF
(Dev, Global Financial Integrity, Mexico: Illicit Financial Flows, Macroeconomic Imbalances,
and the Underground Economy, January 2012, http://mexico.gfintegrity.org/en/)
b. Risk-based price profiling
Money is moved out of a country by under-invoicing exports or over-invoicing imports. The
International Price Profiling System (IPPS) is based on export and import transactions of the
United States with the rest of the world.16 The bilateral trade data (broken down by specific
commodities) are collected by U.S. Customs and reported by the U.S. Department of Commerce.
The IPPS is a risk-based analysis system that evaluates the risk characteristics of prices related to
international trade transactions. It may be employed to evaluate transactions that have a risk of
being related to money laundering, terrorist financing, income tax evasion, and import duty fraud.
The statistical filters are calculated from 12 months of international trade transaction data as
reported by the United States Department of Commerce. The IPPS analysis evaluates an
international trade price and produces a “Risk Index” that may range between “-4” and “+4”. A
negative “Risk Index” would reflect the potential of money being moved out of the United States
into Mexico while a positive “Risk Index” reflects the potential of money being moved into the
United States from Mexico. The magnitude of the “Risk Index” reflects the probability or
likelihood that a price is overvalued or undervalued. The IPPS has the unique advantage that the
prices of transactions are derived solely from the customs invoice declaration of a value and a
quantity involving the merchandise good being traded. As the system deals with specific
transactions, it avoids the problem of aggregating prices of disparate commodities that vary in
quality or underlying characteristics. The computed price is then compared to the world “norm”
price for a specific commodity, taken as the arms-length price prevailing in free markets. An
important limitation of the IPPS system is that trade mispricing estimates are derived based on
world trade with the United States. Now, although the United States is the most important trading
partner for many countries, the assumption that trade mispricing implied in U.S. trade can be
proportionally applied to other regions and the world is not only bold but introduces a downward
bias relative to the DOTS-based estimates. This is because governance, recording, enforcement,
and control procedures are much stronger in the United States than in most developing countries,
so that traders are likely to be much more careful in mispricing trade with respect to the United
States than with the rest of the developing world. Nevertheless, as the United States is the most
important trading partner of Mexico, the IPPS trade mispricing model can provide a useful tool
for Mexican customs to monitor and curtail trade mispricing involved in the bulk of its trade with
the world.
TTUs empirically solve trade mispricing and provide net revenue
U.S. Senate Caucus on International Narcotics Control, 13 (“The Buck Stops Here:
Improving U.S. Anti-Money Laundering Practices,”
(April, p. 7, http://www.feinstein.senate.gov/public/index.cfm/files/serve/?File_id=311e974afeb6-48e6-b302-0769f16185ee)
ICE has successfully established TTUs with nine partner nations across the
globe.35 In exchange for the computer systems and necessary personnel training,
these units share customs data to identify suspicious trade between the U.S. and
their respective countries to coordinate actions against money launderers and
criminal networks. ICE has informed Caucus staff that they are moving towards a
regional TTU model in Latin America so that all countries involved can share data
rather than sharing it solely on a bilateral basis with the United States.36 The
Caucus welcomes this effort and recommends replicating the program in countries
where it would be most effective. These units are net revenue raisers when
operated properly.37
Off-Case
Politics
No link/nonunique – Bipartisan group just introduced a bill aimed at decreasing U.S.-based tax
evasion and money laundering – Obama is pushing
HSGAC Permanent Subcomittee on Government Affairs, 8/1/13, (“Levin, Grassley,
Feinstein, Harkin Introduce Bill to Combat U.S. Corporations With Hidden Owners,”
http://www.hsgac.senate.gov/subcommittees/investigations/media/levin-grassley-feinsteinharkin-introduce-bill-to-combat-us-corporations-with-hidden-owners)
WASHINGTON – Sen. Carl Levin, D-Mich., chairman of the Permanent Subcommittee on
Investigations, and Sen. Chuck Grassley, R-Iowa, ranking member of the Senate Judiciary
Committee, together with Senators Dianne Feinstein, D-Calif., and Tom Harkin, D-Iowa, are
introducing the Incorporation Transparency and Law Enforcement Assistance Act today to
combat acts of terrorism, money laundering, tax evasion, and other wrongdoing facilitated by U.S.
corporations with hidden owners. The bill would end the practice of the 50 states forming
corporations for unidentified persons, and instead require the states to obtain the identities of the
persons behind the corporations formed under their laws.
“Today, it takes more information to obtain a driver’s license or open a U.S. bank account than it does to form a U.S. corporation,”
said Levin. “Our states don’t require anyone to name the owners of the corporations being formed under their laws, and the United
States is currently one of the world’s biggest offenders in terms of creating corporations with hidden owners. In June, President
Obama stood with other international leaders at a G8 summit to condemn corporations with hidden owners who commit crimes, tax
evasion, and other wrongdoing. The G8 leaders made a joint commitment to combat that problem. If the United States wants to
maintain its leadership and credibility on ending tax avoidance and corporate secrecy in tax havens, we need to get our own house in
order. We also need to listen to the law enforcement community that supports this legislation and has been urging us for years to put
an end to corporate secrecy used to hide criminal conduct.”
“Prosecutors of financial crimes follow the money,” Senator Grassley said. “It’s hard for them to do that when the owners of shell
corporations are able to hide their identities so easily. Setting consequences for submitting false ownership information would help
law enforcement by imposing a hardship on the Ponzi schemers, money launderers and tax cheats who use shell corporations to
conceal their fraud.”
Senator Feinstein said, “It is far too easy for criminals and drug traffickers to hide behind anonymous shell corporations. To make a
real dent in combating money laundering, it is essential that law enforcement know the identity of the actual owners of corporations.
This bill is an important tool in starving criminal organizations of illicit profits.”
“This long-overdue requirement will shine the light on who actually owns corporations incorporated in the United States,” said
Senator Harkin. "This simple, common-sense legislation will bring much needed transparency into the system so that law enforcement
can better prevent tax evasion, money laundering, terrorist financing, and other criminal activities conducted through currently
untraceable businesses and bring perpetrators of these activities to justice.” The United States forms almost two million
corporations and limited liability companies (LLCs) each year, more than the rest of the world combined, and does so without asking
for the identity of the owners. The Levin-Grassley-Feinstein-Harkin bill would require the states to add a single question to their
existing incorporation forms requesting the names of the natural persons -- the beneficial owners – behind the corporations being
formed. States would not be required to verify the information, but penalties would apply to persons who submit false information.
Law enforcement would be given access to the information upon presentation of a subpoena or summons. Corporations bidding on
federal contracts would have to provide the same beneficial ownership information to the federal government to ensure the United
States knows with whom it is doing business. Regulated corporations whose ownership is already known, including publicly traded
corporations, banks, and securities firms, would be exempt from the disclosure requirement.
The bill is supported by law enforcement groups including the Federal Law Enforcement Officers Association, Fraternal Order of
Police, Society of Former Special Agents of the Federal Bureau of Investigation, and National Association of Assistant United States
Attorneys, as well as by Manhattan District Attorney Cyrus Vance. In addition, it is endorsed by business and public interest groups,
including the Main Street Alliance, American Sustainable Business Council, National Money Transmitters Association, AFL-CIO,
SEIU, Global Financial Integrity, Global Witness, U.S. Public Interest Research Group, Transparency International, Public Citizen,
Project on Government Oversight, Jubilee USA Network, Tax Justice Network USA, Human Rights Watch, Friends of the Earth,
Open Society Policy Center, Revenue Watch Institute, the FACT Coalition, and more.
This is the fourth Congress in which the bill has been introduced. When the bill was introduced the first time in 2008, and he was a
member of the U.S. Senate, President Obama was an original cosponsor. The passage of the bill has gained new
urgency since the June G8 summit when the G8 leaders made this issue a top priority, and
President Obama issued an action plan committing to tackle the problem this year.
Plan is preferable – cross apply from the 1AC that an international tax regime is inevitable - AEI
is substantially easier to administer – anonymous withholding requires keeping track of tax rates
and rate changes for every country in the world
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
Another argument made in favor of anonymous withholding is that even if automatic
information reporting is a substantively preferable system, anonymous withholding is less
costly and more administrable. This claim is grossly overstated. Anonymous
withholding and automatic information reporting share almost all of the same operational
challenges. A multilateral anonymous withholding system along the lines of the Swiss
model must (1) determine how to identify taxpayers’ country of residence, (2) collect
information about amounts of interest, dividends, capital gains, and other income in order
to impose the right withholding rates, (3) determine which financial institutions are
included in the withholding system, (4) ensure financial institutions comply with the
requirements to identify taxpayers with a country of residence and withhold appropriate
amounts on identified types of income, (5) determine how to route payments to residence
country governments,139 and (6) determine how to encourage widespread multilateral
participation. The only important aspect of information reporting that is more
burdensome than anonymous withholding is its requirement for taxpayer identification
numbers (TINs). On the other hand, an anonymous withholding system is more
burdensome than information reporting along other dimensions. In an anonymous
withholding system a financial institution must keep track of tax rates and rate changes in
different categories of income for every country in the world for which it applies
withholding and then must in fact withhold, instead of simply tracking income and
reporting it.
Stopping tax evasion empirically has strong bipartisan support – offshore tax loophole bill proves
Smith, 13 (Dan, U.S. PIRG Tax and Budget Press Release, “Senate Budget Debate Shows
Bipartisan Support Closing Offshore Tax Loopholes,” March 25, 2013
http://www.njpirg.org/news/njp/senate-budget-debate-shows-bipartisan-support-closing-offshoretax-loopholes)
A bipartisan group of senators agree that closing offshore tax loopholes, which allow large
profitable companies to dodge billions in taxes, needs to be part of the budget. We applaud Sens.
Levin (D-MI), McCain (R-AZ), and Whitehouse (D-RI) for proposing an amendment to the
budget resolution that gives budget writers the authority to ‘end offshore tax abuses used by large
corporations.’ Sens. Brown (D-OH) and Sanders (D-VT) each offered similar amendments.
“These amendments demonstrate strong bipartisan support for closing loopholes that let
companies avoid taxes by shifting their profits to tax havens. While these stronger measures were
on the table, the Senate ultimately passed a weaker amendment by voice vote that gives budget
writers the option of clamping down on offshore tax haven abuse as part of broader tax reform.
Bad publicity and public hearings have changed the banks’ tune – now interested in better
internal processes
Parish-Flannery, 12 (Nathaniel, July 7, 2012, “How Much Will Mexico Money Laundering
Cost HSBC?” http://www.forbes.com/sites/nathanielparishflannery/2012/07/17/how-much-willmexico-money-laundering-cost-hsbc/2/)
In the U.S., regulators are starting to pay more attention to the financial side of the operation. In
total, HSBC is now subject to investigations from the U.S. Justice Department, the district
attorney’s office in Manhattan, the U.S. Federal Reserve, and two separate departments of the
U.S. Treasury.
The Senate hearing is a follow up to a U.S. Senate Panel’s special investigation into the bank’s
dealings in Mexico. In January, 2012, after the investigation was made public, a representative
for HSBC said told reporters that the bank will “support US efforts to strengthen anti-money
laundering defences and protect the integrity of the financial system” and promised to implement
“rigorous new internal processes.”
In a January, 2012 blog post, Shannon O’Neil, a Mexico expert from New York City’s Council
on Foreign Relations, a think tank, explained that “The United States also has a role to play in
helping Mexico combat money laundering. As the number one destination of illicit funds from
Mexico, U.S. banks could make it a lot harder to move money north by improving transparency
and reporting more regularly on private deposits.”
Soon thereafter, faced with increasing public scrutiny, HSBC appointed Stuart Levey, a former
top U.S. Treasury Department official, as its chief legal officer. Levey worked in the Treasury
Department’s anti terrorism financing operations until last year.
Anti-money laundering laws have bipartisan support – recent Congressional report proves
Feinstein Press Release, 13 (April 25, Feinstein, Grassley Report on Strengthening AntiMoney Laundering Practices,”
http://www.feinstein.senate.gov/public/index.cfm/press-releases?ID=a1b53c48-9aa4-4afc-9c83d221b6b39bc8)
Washington—U.S. Senators Dianne Feinstein (D-Calif.) and Chuck Grassley (R-Iowa), co-chairs
of the Senate Caucus on International Narcotics Control, today released a bipartisan report
entitled The Buck Stops Here: Improving U.S. Anti-Money Laundering Practices that provides
recommendations for Congress and the Obama Administration to strengthen anti-money
laundering laws and regulations in the United States.
“Drug traffickers are motivated by one thing: money. The illicit proceeds from their crimes are
blood money, and blood money has no place in our financial system.” said Senator Feinstein.
“Money laundering—very often through U.S. businesses and financial institutions—must be
stopped if we are to make real progress in curtailing the drug trade. Improving our anti-money
laundering laws will help better combat transnational organized crime and return revenue to the
U.S. Treasury.”
Anti-tax evasion policies are bipartisan - Public outcry and austerity measures have changed
politicians’ minds
Sachs, 13 – Director of Earth Institute at Columbia University (Jeffrey, “Time to End the Tax
Havens,” May 8, 2013, http://www.huffingtonpost.com/jeffrey-sachs/time-to-end-the-taxhaven_b_3241900.html
In recent weeks, citizens in many countries suffering from government budget cutbacks have
been learning more and more about one of the biggest and most dangerous scams in the world:
the global web of tax havens that U.S. and European politicians and bankers have nurtured over
the years. The only real purpose of these havens is to facilitate tax evasion, money laundering,
bribery, and lack of accountability for environmental and social calamities inflicted by
international companies.
Now, a new analysis by a group of international organizations throws this system into sharp relief.
Figures from the Enough Food for Everyone IF campaign -- supported by almost 200
organizations including Actionaid, Christian Aid, Oxfam, and Save the Children -- are revealing
more about the extent of these havens. There are trillions of dollars tied up in the tax havens, with
massive worldwide evasion of tax payments that undermines the budgets of rich and poor
countries alike. The IF campaign makes a basic point: poverty can be fought, and austerity
overcome, IF taxes are properly paid by those who owe them. Ending the tax havens and their
financial secrecy is therefore urgent.
The IF Campaign is taking place just in time for this week's meeting of the finance ministers of
the G7 nations -- the world's financial superpowers, and the greatest promoters of this corrupted
system. They need to take action. Their deliberations feed into the June meeting of the G8
countries (consisting of the G7, plus Russia), where the potential for action to end these abuses
lies.
During the boom years, the rich and powerful kept the public distracted from the tax haven reality.
Yet now with budget austerity, the public is having a close look at tax evasion by the rich and
powerful. As a result, the veil over the tax havens has started to slip, and the sight is not lovely.
Mitt Romney ran for U.S. president with vast wealth in the Cayman Islands, and was never
willing to account for that wealth. The French budget minister, and then the Socialist campaign
finance manager, got caught with their own offshore accounts. Another leading French politician,
the recent treasurer of the Hollande campaign, has also acknowledged secret offshore accounts.
Rich Greeks with secret accounts abroad are on lists provided by the International Monetary Fund.
Spanish officials have been caught receiving stipends from secret offshore accounts. And this is
only the tip of the iceberg. The International Consortium of Investigative Journalists has recently
begun to release the names of rich and powerful offshore banking customers.
The recent banking crisis in Cyprus has also exposed the macroeconomic risks of this nefarious
system. Everybody knew that Cyprus was a tax-and-secrecy haven, especially for Russian funds,
but few anticipated that the euro would almost die in a blow-up of Cypriot banks. But why
shouldn't they have known? This is par for the course when a country is home to bank assets and
liabilities many times larger than the country's national income. The banks had no backstopping.
How many times must we learn the lesson?
Thanks to eye-opening (indeed eye-popping) books such as Treasure Islands by Nicholas
Shaxson, we also have come to appreciate better that the havens are not the un-pluggable gaps of
a well-regulated global economy, but are actually part of the core design of the global financial
system. Switzerland and the United Kingdom essentially invented much of the system during the
early to mid-20th century; the United States became its great champion more recently. The
Caribbean havens -- Bermuda, the British Virgin Islands and the Caymans -- are British overseas
territories. The United States is itself increasingly a haven for foreign investors, especially in
Delaware, and it is also the great proponent of the Caribbean haven system.
And how absurd and dangerous this system has become. The Caymans' 56,000 people host
92,000 companies. The hedge fund industry, managing trillions of dollars, is largely domiciled
there. The Bank of International Settlements, which collects data on cross-border banking assets,
estimates that $1.4 trillion in bank assets and liabilities are there, around $25 million per person!
This is a time bomb, not a financial system. Not surprisingly, the so-called "boards" of these
companies, which are supposed to "govern" them, are routinely filled with individuals who sit on
dozens, or even hundreds of boards. The situation is absurd, dangerous and out of control.
The politicians of rich nations who protect the exorbitant privileges of bankers and hedge-fund
managers, who wink at mega-tax evasion by billionaires, and who tolerate unpardonable games
played by major companies, are playing with fire. We are now all sharing austerity. The havens
represent unacceptable privilege and abuse, not fair sharing.
Developing countries too are saying that enough is enough. For decades they've been on the
receiving end of hypocritical lectures about good governance. For them, the tax havens have
served the purpose of paying bribes to potentates, and providing easy ways for elites to keep their
money safe from tax collectors. Yet it is the rich countries that have fostered that system.
The world's most powerful countries have a unique responsibility. They created this destructive
system. It's now their job to end it. Taxes worldwide need to be paid. Offshore accounts need to
be reported back to the national authorities of the account holders. Banks, hedge funds and nonfinancial companies need to be domiciled where they can be properly overseen and regulated -not on small islands that can't possibly oversee these businesses. The politicians need to
understand that the public is now on to the game. There is no more time to delay.
TTUs PIC
Trade mispricing accounts for three-fourths of IFFs
Kar, 12- Lead Economist at Global Financial Integrity, Former Economist at IMF
(Dev, Global Financial Integrity, Mexico: Illicit Financial Flows, Macroeconomic Imbalances,
and the Underground Economy, January 2012, http://mexico.gfintegrity.org/en/)
First, it is clear that almost three-quarters of total illicit flows over the period 1970-2010 were
generated through trade mispricing (Appendix Table 6). Moreover, model simulations indicate
that increasing trade openness since 1994 when NAFTA was implemented led to more trade
mispricing (see Section III, Table 3 on Structural Equation Estimates, and Box 1). This would
strongly suggest that policy should be focused on curtailing trade mispricing. We will point out
three policy measures that can go a long way in curbing related illicit outflows. As part of
customs reform (which is an on-going World Bank project; reference footnote 15), we propose
the implementation of a risk-based price profiling system to curtail the risk of export and import
transactions being mispriced in order to transfer illicit capital out of the country. Furthermore, to
reduce the risk of willful trade mispricing, we propose that all customs invoices be accompanied
by a legal undertaking by exporters and importers as to pricing accuracy. Finally, we propose that
multinationals be subject to financial and accounting reporting requirements in order to curtail
abusive transfer pricing (ATP).
U.N. CP
G20’s Global Forum is the best monitoring body for AEI – peer-review mechanisms and
regulatory framework already in place
Grinberg, 13 - Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Public Law and Legal Theory Research Paper No.
13-031, “Will FATCA Open the Door to Taxing Capital Income in Emerging Countries,” June 20,
2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256587)
The current Global Forum is an appropriate monitoring body for
automatic information exchange, too.165 In just a few years, it established
itself as the largest international tax grouping in the world, with over 110
member jurisdictions. It has already developed an extensive peer-review
mechanism for information exchange upon request that is rivaled in its
sophistication only by the FATF, which may have the world’s most lauded
peer review mechanism.166 “Phase I” peer reviews of Global Forum
members examined whether legal and regulatory regimes were in
compliance with current international standards for tax information
exchange upon request.167 As a result of that work, many jurisdictions
improved their legal and regulatory infrastructure for transparency and
exchange of information in tax matters, and others are in the process of
doing so.
AT Development K
Turn: Stopping IFFs is key to a post-aid-dependent world
Gascolgne, 12 (Clark, “GFI Calls on G8 to Tackle Illicit Financial Flows at Camp David
Summit), May 17, 2012, http://www.gfintegrity.org/content/view/510/70/)
WASHINGTON, DC – Global Financial Integrity (GFI) today called on leaders of the G8 to
concretely tackle the issue of illicit financial flows and end tax haven secrecy when they meet this
weekend at Camp David. Illegal capital flight costs the developing world roughly $1 trillion per
year, according to GFI research.
“A major focus of this weekend’s summit is the issue of food security in the developing world,”
said GFI Director Raymond W. Baker. “What better way to ensure food security than to
guarantee that developing countries have the finances necessary to invest in agriculture and
nutrition programs? We cannot reach a post-aid-dependent world without curtailing illicit
financial flows.”
Leaders of developing countries recognize that IFFs are a global problem that only international
cooperation can solve
U.N. Commission for Africa, 6/19/13 (“The High Level Panel on Illicit Financial Flows
Meets in Lusaka,”http://www.uneca.org/media-centre/stories/high-level-panel-illicit-financialflows-meets-lusaka#.UfvM2M3B-jQ)
The meeting which brought together over 60 delegates comprising key stakeholders from East
and Southern Africa is part of a continental wide consultative process aimed at sensitizing and
building a coalition on illicit financial flows which are grossly hurting the continent. It is
estimated that Africa loses USD$50 billion a year in illicit financial flows that find their way to
developed countries draining the continent of the much needed resources.
The Panel led by former President Mbeki also held separate meetings with H.E. President of
Zambia, Mr. Michael Sata, as well as Vice President Guy Scott. Speaking during the meeting
with the Zambian Head of State, Mr. Mbeki called for a stronger African voice on illicit financial
flows which he said was the single economic issue hampering Africa’s development.
H.E. Mbeki told President Sata that illegal financial flows was a complex and global problem
which Africa could not solve on its own without other players such as the G8 countries. “What
we are saying is that what role can we play ourselves as Africans where these flows originate and
what role can the G8 play as a major destination for these illegal flows? We are in
communication with the G8 and we will be watching closely the outcome of their summit.”
Former President Mbeki said on behalf of the Panel.
Multilateral AEI helps emerging countries substantially more than developed ones – substantially
more of their wealth is held offshore
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
The best available data suggests that compliance concerns over tax evasion through
offshore accounts are likely to be greater for emerging economies than for developed
economies. Meanwhile, the emerging economies’ lower administrative capacity reduces
the efficacy of information exchange upon request as a tool with which they can combat
offshore tax evasion. They often lack the audit and investigative skills to determine
which country to ask about which resident taxpayer.
Offshore wealth represents 6.4% of the more than $120 trillion of global wealth.36
However, the extent to which taxpayers’ assets are managed offshore is not uniform
across regions of the world. BCG estimates that less than 2% of North American wealth
and less than 8% of European wealth is held offshore.37 In contrast, more than 25% of all
Latin American household wealth, representing $900 billion, and almost 33% of all
Middle Eastern and African wealth, representing $1.4 trillion, is held offshore.38
Households outside the major developed economies hold approximately 25% of global
wealth (including $21.7 trillion in wealth for households in Asia-Pacific ex-Japan).39
Wealth is also much more concentrated40 and growing at a significantly faster rate
outside North America, Japan, and Western Europe, with experts expecting that trend to
continue.41 Thus, the taxation of offshore wealth should be of greater relative importance
to Latin America, the Middle East, and Africa, than to the United States and Canada or the major
European economies. Data on actual revenues lost by developing countries and
emerging economies overall from offshore tax evasion is unreliable. However, OECD
estimates put such losses, only a portion of which are attributed to the use of offshore
accounts by resident individuals, at a magnitude that approximates all official
development assistance worldwide (totaling $120 billion per year).42
AT Cap K
Turn: stopping IFFs solves the worst excesses globalization and financialization
Reuter, 12 – Professor in the School of Public Policy and the Department of Criminology,
University of Maryland, Senior Researcher at RAND, PhD in Economics from Yale University
(Peter, Draining Development: Controlling Flows of Illicit Funds From Developing Countries,
World Bank, pp. 461-2,
https://openknowledge.worldbank.org/handle/10986/2242)
Financialization
Understood broadly, financialization refers to the increasing influence of
financial markets, financial actors, and fi nancial institutions in the operation of domestic and international economies. More specifically, it
includes the increasing dominance of the fi nance industry in the sum
total of economic activity, of fi nancial controllers in the management of
corporations, of fi nancial assets among total assets, of marketized securities and, particularly, equities among financial assets, of the stock market
as a market for corporate control in determining corporate strategies,
and of fluctuations in the stock market as a determinant of business
cycles (Dore 2000). Braudel’s concept of disembedded capitalism points
in the same direction: capitalism is “a series of layers built on top of the
everyday market economy of onions and wood, plumbing and cooking.
These layers, local, regional, national and global, are characterized by ever
greater abstraction, until at the top sits disembodied finance, seeking
returns anywhere, uncommitted to any particular place or industry, and
commodifying anything and everything” (Mulgan 2009, 10–11). There is
a wide consensus that financialization has been a dominant feature of
late 20th-century globalization. The volume of transnational capital
movements has expanded exponentially since the 1970s, having long ago
ceased to refl ect trade fi nancing requirements, despite the fast growth of
international trade (Cohen 1996). As the forest of legitimate transnational capital movements has blossomed and thickened, the opportunities to hide illegal or illicit capital assets within it have multiplied.2
Multilateral AEI helps emerging countries substantially more than developed ones – substantially
more of their wealth is held offshore
Grinberg, 12 – Associate Professor at Georgetown University Law Center, former attorney at
the Office of International Tax Counsel at the U.S. Dept. of Treasury, where he worked on
FATCA from its inception (Itai, Georgetown Law: The Scholarly Commons, “Beyond FATCA: An Evolutionary Moment
for the International Tax System,” January 27, 2012,
http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1162&context=fwps_papers&seiredir=1&referer=http%3A%2F%2
Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Deconomist%2520automatic%2520exchange%2520tax%26source%3D
web%26cd%3D40%26ved%3D0CGsQFjAJOB4%26url%3Dhttp%253A%252F%252Fscholarship.law.georgetown.edu%252Fcgi%25
2Fviewcontent.cgi%253Farticle%253D1162%2526context%253Dfwps_papers%26ei%3DoR7xUcbIIYXVqAHo3YCQCw%26usg%
3DAFQjCNFxQNj6scIncBgqKuT1xDxPA7bOrQ%26sig2%3D1NeWwQFotuiB8rpri_Wtnw%26bvm%3Dbv.49784469%2Cd.eWU#s
earch=%22economist%20automatic%20exchange%20tax%22).
The best available data suggests that compliance concerns over tax evasion through
offshore accounts are likely to be greater for emerging economies than for developed
economies. Meanwhile, the emerging economies’ lower administrative capacity reduces
the efficacy of information exchange upon request as a tool with which they can combat
offshore tax evasion. They often lack the audit and investigative skills to determine
which country to ask about which resident taxpayer.
Offshore wealth represents 6.4% of the more than $120 trillion of global wealth.36
However, the extent to which taxpayers’ assets are managed offshore is not uniform
across regions of the world. BCG estimates that less than 2% of North American wealth
and less than 8% of European wealth is held offshore.37 In contrast, more than 25% of all
Latin American household wealth, representing $900 billion, and almost 33% of all
Middle Eastern and African wealth, representing $1.4 trillion, is held offshore.38
Households outside the major developed economies hold approximately 25% of global
wealth (including $21.7 trillion in wealth for households in Asia-Pacific ex-Japan).39
Wealth is also much more concentrated40 and growing at a significantly faster rate
outside North America, Japan, and Western Europe, with experts expecting that trend to
continue.41 Thus, the taxation of offshore wealth should be of greater relative importance
to Latin America, the Middle East, and Africa, than to the United States and Canada or the major
European economies. Data on actual revenues lost by developing countries and
emerging economies overall from offshore tax evasion is unreliable. However, OECD
estimates put such losses, only a portion of which are attributed to the use of offshore
accounts by resident individuals, at a magnitude that approximates all official
development assistance worldwide (totaling $120 billion per year).42