Donald Trump signs a law repealing a disclosure rule for oil companies

By C.K.

ON FEBRUARY 13th, Donald Trump signed his first major piece of legislation—“a big signing” as he put it. The law repealed a Securities and Exchange Commission (SEC) regulation that oil and mining companies should disclose their payments to foreign governments. Kevin McCarthy, the House majority leader, had argued that the rule added “an unreasonable compliance burden on American energy companies that isn’t applied to their foreign competitors”, which would “put American businesses at a competitive disadvantage.” Sean Spicer, Mr Trump's press secretary, suggested that, “misguided federal regulations such as the SEC rule ... inflict real cost on the American people and put our businesses, especially small businesses, at a significant disadvantage.”

It is not the first time Mr Trump and his administration have shown a willingness to sacrifice the freedom of information for other goals. The president ignored the tradition of releasing tax returns during the election, and has since suggested that they will never be released. In the first weeks of the administration, the Environmental Protection Agency removed information regarding climate change and the White House took down all open data on its website—both despite laws mandating federal agencies give public notice before removing online government information.

But the repeal of the disclosure regulation around extractives is noteworthy for its international impact. The original law that mandated the regulation—the Dodd-Frank Act—had ignited global transparency reforms including in Europe and Canada. By 2014, 38 of the world͛’s 100 largest oil and gas companies were subject to public disclosure mandates. Had America's regulation stood, it would have been 84 of the top 100. The major beneficiaries of the rollback—Mr Spicer’s "small businesses"—include Chevron and Exxon Mobil. The reversal puts them behind Russian firms Rosneft and Gazprom, which must file disclosures.

The freedom to hide payments will be most valuable in countries where government disclosure of revenues is weak. The Extractive Industry Transparency Initiative (EITI) sets standards that require the level of disclosure mandated by the SEC regulation for mining and drilling projects. Fifty-one countries worldwide have already signed up to enforce those standards for projects under their jurisdiction. But that leaves countries including Zimbabwe and Russia as locations where America-listed firms may benefit from their capacity to be opaque. It is the citizens of those countries that have the most to lose from the new law.

And it is an unfortunate moment for the United States to stall progress towards greater openness, because the transparency initiatives were beginning to demonstrate results. There is mounting evidence that information release supports greater competition around government contracting and that being an EITI signatory leads to greater inflows of both aid and foreign direct investment. Again, the International Monetary Fund is about to issue research suggesting that greater transparency around economic and government data leads to a reduction in the spreads on emerging market sovereign bonds.

Transparency regulation on extractives in America remains in a legal limbo—the latest version of the regulation and anything of substantially the same form is barred by the new law, but the original Dodd-Frank legislation, still in force, requires the SEC to craft a rule on publication of payments. If the regulatory officers at the Commission find a way to preserve that mandate, it would sustain a valuable legal requirement that was American first.