Paul Collier, laws and codes for the 'resource curse'.(reply to article in this issue, p. 9)

I. INTRODUCTION

Paul Collier's proposition that current commodity booms are the single most important issue for the bottom billion is compelling. His framework for a regime of international law and codes to govern commodity booms is worthy of careful consideration by the international community, a community in a season of change in leadership, vision, and potentially direction. With leadership change and transition at the World Bank and the United Nations, and in the United Kingdom, Europe, and the United States, Collier's examination of the potential to use commodity booms to transform the developing world is instructive and persuasive in guiding us to look to the past for lessons and to the future with a vision embracing greater roles for international law and voluntary codes.

Paul Collier's Laws and Codes for the "Resource Curse" argues that, in the face of current commodity booms, the international community should look to international codes and legal mechanisms to raise standards of economic governance and capture the economic potential of these booms. Collier's analysis is persuasive in terms of making voluntary codes and international mores central to dealing with the resource curse. Indeed, voluntary codes have been effective in other high-stakes realms, including the Basel banking standards (1) and the Kimberley Process (2) for diamonds. (3) It is difficult, however, to see how these examples of effective voluntary codes are perfectly analogous to other commodity markets. Oil producers, in particular, do not have the same incentives that banks have to reduce uncertainty and risk in the financial system. Nor do oil manufacturers face the discriminating tastes of diamond consumers, many of whom are now refusing to purchase "blood" or "conflict" diamonds. (4) Gas consumers are most interested in price at the pump and are typically unaware of where their oil comes from and what conditions and transactions are involved in the process of getting the gas from the ground to their cars.

Getting oil companies and exporters to abide by voluntary codes seems to be more of an uphill battle than Collier suggests. The key is to find a way to make the experience of successful voluntary codes relevant to the oil commodity market, and to ensure that state economies are given the freedom to make local decisions about their oil markets that fit their country-specific employment needs and context while complying with international standards. There also needs to be sharper enforcement mechanisms and bolder anticorruption and governance strategies to create an environment in which the voluntary codes Collier suggests have a greater chance of mitigating the resource curse and allowing countries to capture the potential of resource booms. This response identifies why voluntary codes have worked in other instances, and how those instances are similar to or different from the situations in various other natural resource markets, particularly the oil industry. I then suggest other possible legal remedies which are useful in dealing with resource curse problems, with a particular focus on anti-corruption and governance efforts, and the burgeoning international regime on anti-money laundering, which could well be instructive for the legal regulation of oil and mining.

II. COLLIER'S VOLUNTARY CODE RECOMMENDATIONS

Collier's recommendations for intervention of voluntary codes have the potential to benefit oil-producing states and the citizens of those states. Collier suggests that, as in the banking industry where voluntary international standards are already well developed, international voluntary codes can play a key role in addressing the resource curse and harnessing commodity booms. (5) Just as the Basel Standards, generated under the auspices of the Bank for International Settlements and periodically revised by agreement, guide the international banking industry as to prudential standards, international voluntary codes can in the resource curse crisis help with problems of coordination and with providing a norm for coordination of external pressure. (6) "Perhaps most importantly," Collier notes, "codes separate the sheep from the goats." (7) Codes help to reveal those governments that are willing to comply with a set of standards and those that are not. The codes serve an informational function, and also help create norms.

The codes, Collier suggests, would cover design and conduct of auctions; the specification of the time horizon of any extraction rights and some parameters for the tax regimes; the savings rate out of resource revenues; and the procedures for public investment. Collier argues that what is needed is guidance rather than legislation and mandate and, further, that countries need a place to go for resources and wisdom about how to respond to their commodity booms. The voluntary codes could well answer to the misalignments that Collier identifies and contribute to good governance, but difficulties and questions remain. How are these codes codified? Will there be any enforcement mechanisms? What about problems of implementation?