Defense and Security

Transnational Crime

  • Transnational Crime
    The Global Regime for Transnational Crime
    This page is part of the Global Governance Monitor. Scope of the Challenge Over the past two decades, as the world economy has globalized, so has its illicit counterpart. The global impact of transnational crime has risen to unprecedented levels. Criminal groups have appropriated new technologies, adapted horizontal network structures that are difficult to trace and stop, and diversified their activities. The result has been an unparalleled scale of international crime. As many as fifty-two activities fall under the umbrella of transnational crime, from arms smuggling to human trafficking to environmental crime. These crimes undermine states' abilities to provide citizens with basic services, fuel violent conflicts, and subject people to intolerable suffering. The cost of transnational organized crime is estimated to be roughly 3.6 percent [PDF] of the global economy. Money laundering alone costs at least 2 percent of global gross domestic product every year according to UN reports. Drug traffickers have destabilized entire areas of the Western Hemisphere, leading to the deaths of at least fifty thousand people in Mexico alone in the past six years. Counterfeit medicines further sicken ill patients and contribute to the emergence of drug-resistant strains of viruses. Environmental crime—including illegal logging, waste dumping, and harvesting of endangered species—both destroy fragile ecosystems and endanger innocent civilians. Between twelve and twenty-seven million people toil in forced labor—more than at the peak of the African slave trade. For many reasons, global transnational crime presents nations with a unique and particularly challenging task. To begin with, by definition, transnational crime crosses borders. But the law enforcement institutions that have developed over centuries were constructed to maintain order primarily within national boundaries. In addition, transnational crime affects nations in diverse ways. In many states, political institutions have strong links to transnational crime, and citizens in numerous communities across the world rely on international criminal groups to provide basic services or livelihoods. Finally, the international community requires solid data to gauge the challenge and effectiveness of responses, but data on transnational organized crime is notoriously difficult to gather and is often politicized. Strengths and Weaknesses Overall Assessment: Archaic system needs reframing International efforts to address transnational organized crime (TOC) are too weak to address the threat. Strategies focus too little on combating corruption and addressing the increasing interplay of TOC and political power. On balance, multilateral initiatives to fight crime are sector specific and attempt to prosecute TOC without effectively addressing the market that underpins transnational crime globally. The central legal instrument for fighting transnational organized crime is the UN Convention on Transnational Organized Crime (UNTOC). Finalized in 2000 in Palermo, Italy, the convention is the first to address transnational crime as an activity that cannot be adequately curtailed by treaties tailored to one commercial sector. It defines a TOC group as a structured organization with three or more members and establishes legislative standards for nations to implement domestically. However, the convention's ability to inform [PDF] and influence operational practices is limited. UNTOC does not adequately account for the increasingly activity-based, horizontal structure of criminal syndicates or the growing nexus between organized crime and terrorism, corruption, conflict, public health, global finance, and modern technology. The struggle to implement the convention reflects a certain dearth of global political will to do so. In a number of major world powers, the state itself is captured—or partly captured—by organized crime. The governments of Russia and other Eurasian countries are known to benefit from ties between TOC and energy exports as well as from cybercrime; the Chinese economy earns high profits from counterfeits sold internationally; and many Latin American and West African politicians either are coerced by narcotrafficking groups, or maintain close ties with them. Most important, the treaty lacks an implementation mechanism that would allow assistance to countries not capable of adhering to the convention's guidelines. The UN Office on Drugs and Crime (UNODC) is charged with helping implement UNTOC on the ground, but its former executive director, Antonio Maria Costa, has rebuked UN member states for neglecting their responsibilities. At a 2010 conference of parties, countries acknowledged the need to revise the convention to be more effective and stressed the importance of implementation. A working group is currently reviewing implementation, which might ultimately lead to a monitoring or capacity-building provision. UNODC also provides technical assistance and training in constructing legal frameworks and enhancing national enforcement capacity. It serves as a hub for disseminating best practices and data collection on criminal activities. All estimates of the magnitude of TOC, however, are necessarily approximations; criminals obviously do not report their annual earnings or scope of activities, and published estimates are often politicized or rely on shaky data [PDF]. Furthermore, UNODC is 91 percent funded by voluntary contributions and suffers from chronic funding shortages and understaffing. These resource constraints continue to limit the agency's effectiveness. Beyond UNODC, a succession of UN Security Council (UNSC) open debates, and presidential statements, have slowly and steadily expanded that body's repertoire on TOC. For example, UNSC presidential statement 2009/32 urged the institution to prioritize the TOC threat to benefit peace and security in Africa. In 2010, the UNSC agreed to a presidential statement 2010/4 committing member states and the UN to fight transnational crime. Although the UN General Assembly has also issued many resolutions to fight TOC, most have been vague and irrelevant. The broader UN system has also tackled the issue of transnational crime through specialized agencies, programs, commissions, working groups, campaigns, and even a research institute. The UN Commission on Crime Prevention and Criminal Justice (CCPCJ), for example, reviews UN standards and norms to combat TOC as well as their implementation by member states. The UN's Economic and Social Council (ECOSOC) funds the CCPCJ and guides its work. ECOSOC has also issued a number of important resolutions on the subject, which still guide UNODC's work on crime prevention. For example, a 1995 resolution [PDF] outlined strategies like strengthening community resilience. Overall, however, the UN's work on TOC remains piecemeal. Units address the issue only within the context of their agency, departmental, or program mandate and bureaucracy, which impedes policy coherence and effective action. To rectify this, in early 2011, the UN secretary-general established a task force on transnational organized crime and drug trafficking with the aim of creating a system-wide strategy to fight international crime and enhance coordination. The taskforce clearly demonstrates that the UN is aware of the lack of internal cohesion and is increasingly viewing transnational crime as a political and strategic issue. National policing and border control is also critical to stopping organized crime. In an era of globalization, Interpol is the world's intermediary for police cooperation. Founded in 1923, Interpol has 190 members, each with a national central bureau staffed by local officials. The agency's priority is to secure communication among law enforcement agencies, to manage international criminal databases, to provide operational support during crises, and to train police forces. However, with a budget of roughly $75 million in 2010, the agency is grossly underfunded. It also holds no authority to conduct investigations independently or to arrest suspects, and is therefore only as strong as the host country's police force. The World Bank and the International Monetary Fund are also engaged in the fight against TOC, namely, in conducting assessments of anti–money laundering provisions in countries. To date, the institutions have conducted some seventy assessments, but a recent report [PDF] suggests that they are largely uneven because they did not focus on areas that present greater risk. The World Bank also carries out anticorruption efforts, and in 2011 pledged $1.5 billion to fight TOC over the next few years, recognizing its corrosive impact on development. Regional cooperation, particularly at borders, is generally weak despite initiatives, such as Europol's annual organized crime threat assessment, the European Union's prioritization of anti-TOC efforts in Bulgaria and Romania, and comparable efforts under the Stability Pact for Southeastern Europe. The Financial Action Task Force (FATF), an initiative of the Organization for Economic Cooperation and Development (OECD), has adopted a successful policy of "naming and shaming" noncooperating jurisdictions, and has enlisted countries to craft legislative frameworks to combat money laundering. Eight regional initiatives modeled on FATF have since been established to replicate its work, and have been widely hailed [PDF] as successful. However, more broadly, regional efforts have been weak. For instance, the initiative of the Economic Community of West African States to adopt a moratorium on the import and export of light weapons has had little impact. Various major donor countries fund projects in partner nations to enhance security. The United States, for instance, supports four regional International Law Enforcement Academies designed to provide countries with technical support. In general, however, bilateral donor initiatives on TOC are modest. While programs like Plan Colombia and the Mérida Initiative have significant funds, the aid is overwhelmingly military, and funding for more comprehensive solutions has consistently decreased [PDF] year after year. Imposing economic sanctions against criminal groups is a new strategy being tested by the United States. In July 2011, the Obama administration issued sanctions against four TOC groups in Mexico, Japan, Italy, and eastern Europe. The order froze their assets and criminalized aid to the groups. Such provisions have often been used, with measured success, to target other nonstate actors—namely, terrorists. Overall, the TOC regime faces three sweeping challenges. First, political will is too often lacking at national, regional, and global levels. More than a few states are crippled by corruption, and when political leaders or elites benefit from organized crime, implementation of international frameworks is not feasible. Second, the current regime suffers from critical normative gaps, and sensible strategies where norms exist. The international community has yet to agree to an operational definition of TOC. As a result, monitoring and enforcement of counter-TOC agreements is weak, many countries have not signed onto important treaties, and national legislation is unevenly implemented. Finally, the dearth of data—and impracticality of properly measuring international criminal activity—hinders every attempt to devise adequate strategies to combat TOC. Building Norms: Progressing but still stovepiped and vaguely defined To construct effective strategies to fight transnational organized crime (TOC), the international community has attempted to build normative consensus. The UN Convention on Transnational Organized Crime (UNTOC) provided the definition of a TOC group, but it will take years before the convention is fully integrated into national judicial systems. Although some international norms are already strong—such as those for drug trafficking and money laundering—the world is struggling to design instruments that respond effectively to the groups that engage in many forms of crime. At the same time, current norms do not consider the range of political motivations and alliances between powerful political or business leaders and criminals. Still, one important normative shift is already occurring. Traditionally, global and national standards have aimed primarily to detect and diminish the supply, transport, and sale of illicit commodities. But nations and international institutions are increasingly recognizing the need for a more comprehensive strategy. They are slowly integrating public health, development, and community-based practices to decrease not only the supply but also the demand for illicit commodities. In parallel, development institutions, such as the World Bank, are recognizing [PDF] that anti-TOC funding and programs are imperative for economic growth, democracy, and governance. Globalization has facilitated an explosive growth in transnational organized crime since the early 1990s. The international community has sought to respond with stronger and more comprehensive measures. In 1994, at the World Ministerial Conference on Organized Transnational Crime in Naples, Italy, countries took an important step and called for a multi-sector treaty that addressed the whole spectrum of TOC. Previously, international treaties had targeted one type of illicit activity—with drug trafficking treaties being the most potent—but failed to address the diverse activities of TOC groups. The result was UNTOC, also known as the Palermo Convention, which was finalized in 2000 and came into force in 2003. Today, UNTOC stands as the core treaty addressing transnational crime as an overarching problem—and the only comprehensive tool the world has. However, the world still lacks an operational definition for transnational crime, and norms for law enforcement and judicial cooperation remain weak, vague, or nonexistent. UNTOC defined groups that engage in TOC but "excluded single, ad hoc operations," which are responsible for much of TOC today. Furthermore, to effectively track and prosecute international crime, nations must agree to robust policing cooperation and to assist developing countries. Prosecutions for international crime may require evidence from authorities of multiple nations. Pursuing suspects requires intelligence sharing, extradition, and cross-border police cooperation. Identifying perpetrators also requires capable domestic institutions. However, transnational law enforcement cooperation can be exceedingly controversial. Joint investigations are often undermined when foreign investigations must rely on support from corrupt countries that do not wish to fight crime or whose systems are crippled by corruption. Nations jealously guard judicial and policing authorities as sovereign authorities. Accordingly, these topics have barely been mentioned in international conventions. Countries are also generally reluctant to release domestic intelligence to other nations or to a collective intergovernmental or supranational authority. Finally, many experts have long called for the world to reorient the fight against crime away from law enforcement and instead address transnational crime as a market activity. As long as incentives for participating in international crime remain so high, they argue, success against one group, or in one area, will merely create a scramble by other groups to usurp the former group's profit. For example, norms to combat narcotrafficking are very strong, but some argue that they are misguided, because "successes" in one area may only displace the problem elsewhere. The high-profile, well-resourced, and internationally exported U.S.-led war on drugs has long prioritized law enforcement over market-based policies. This approach is so entrenched that retooling international norms to incorporate market-based strategies is an uphill battle. The United States has recently been more candid [PDF] about demand in the developed world fueling international crime, as well as about the need for prevention and treatment, but international action remains strongly focused on supply-side measures. Some critics believe that the global regime needs to shift entirely toward a public health model designed to reduce demand rather than stamp out supply. When it comes to other criminal sectors, anti–money laundering (AML) norms are among the strongest. In the 1980s, the developed world began to forge international AML instruments, which resulted in the Financial Action Task Force's (FATF) forty recommendations for domestic AML regimes. The FATF also identified certain "noncooperating jurisdictions" that could be subject to international naming and shaming. September 11 inspired additional recommendations to combat terrorist financing, and FATF norms have since become the global yardstick for counter–terrorist financing efforts. The need to "follow the money" to root out nonstate actors has become firmly embedded in international normative frameworks. Global norms against human trafficking and illicit weapons smuggling have also developed significantly in the past decade as nations accede to the relevant protocols to UNTOC: the Protocol to Prevent, Suppress, and Punish Trafficking in Persons, Especially Women and Children; the Protocol Against the Smuggling of Migrants by Land, Sea, and Air, and the Protocol Against the Illicit Manufacturing of and Trafficking in Firearms, their Parts and Components and Ammunition. Much remains to be done, however. Labor trafficking and the dangers of migrant smuggling receive far too little attention in comparison with sexual trafficking. In terms of weapons smuggling, recognition of its contribution to armed conflict, particularly in Africa and Latin America, is growing, but the world still lacks a strong, enforceable treaty that governs illicit trafficking in small arms and light weapons. Given the weakness of global normative frameworks, certain regions have endeavored to address transnational crime on their own. This approach has some merit, inasmuch as regions often face drastically different realities, and more focused local multilateral institutions may be better suited to combat the threat. On the other hand, some worry that separate regional approaches might undermine common global standards—or help push criminal activities to more vulnerable regions. To date, regional norms remain weakly developed except in Europe, where the integration of the European Union (EU) has allowed more law enforcement and judicial cooperation. Still, even EU states have been unable to agree to an operational definition of TOC. As organized crime surged in West Africa over the past decade, the Economic Community of West African States did attempt to build regional mechanisms to stem the tide, but fighting organized crime remains a fairly low priority across most of the continent. The Organization of American States' Hemispheric Action Plan, meanwhile, has endorsed UNTOC and stressed the need for states to implement it—but it has not dented the growth of transnational crime in Latin America. In Asia, the Pacific Islands Forum has made important strides through a capacity-building framework with Australia, and the Association of Southeast Asian Nations has agreed to some important transnational crime norms, but the region remains plagued by TOC. Overall, as criminal organizations grow stronger, the world lags in its efforts to devise adequate mechanisms to fight them. In part this reflects a structural problem—the ease with which illicit networks can hopscotch across sovereign borders, leaving national governments behind. In sum, "even as crime is transnationalized, crime control remains largely corralled behind national borders." Corruption: Normative and institutional progress, spotty implementation Corruption fosters the ideal environment for transnational organized crime (TOC). Corruption supports a wide range of illicit markets, from drugs and arms trafficking to environmental crime and counterfeit markets. The same motives that attract TOC to corrupt states also prevent the state from establishing rule of law and a functional judicial system, as corrupt officials benefit from the lack of transparent and accountable systems. Corruption is also notoriously difficult to eradicate in countries where it is deeply embedded in political culture. Many high-level politicians profit from organized crime, hindering anti-TOC efforts. Indeed, in many Eurasian, Latin American, and West African states, criminal syndicates have deeply penetrated executive bodies, legislatures, the police, and courts. Where states consider organized crime an ally in domestic governance, they inevitably will be reluctant to support the development of more robust international governance capacities. Despite some efforts, the international community has been unable to mobilize an effective method to combat corruption. Over the past decade, anticorruption efforts have picked up steam, but progress is halting. After two protracted years of negotiations, the United Nations Convention against Corruption (UNCAC) entered into force in December 2005 and established an overarching international framework. As the first legally binding international anticorruption agreement, UNCAC provides a comprehensive set of measures to be implemented by state parties to prevent, combat, and prosecute corruption. Significantly, UNCAC does not define corruption, but does require states to criminalize a wide range of corrupt acts, including bribery, kickbacks, money laundering, embezzlement, and obstructing justice. In an important breakthrough after long-standing disagreement among states, asset recovery is also listed as a fundamental provision of the convention. Emphasizing the need for international cooperation, UNCAC requires state parties to return ill-gotten gains to the country of origin. It also calls for enhanced transparency and accountability, based on the argument that more knowledge raises the costs of illicit activity and therefore reduces corruption. The convention initially received broad support and has nearly global coverage with 159 state parties. However, countries known for endemic corruption—such as Afghanistan, Honduras, and Russia—are parties to the convention, undermining its legitimacy and exposing its weaknesses. Although UNCAC successfully builds anticorruption norms, it does not provide for monitoring, implementation, or enforcement. The first session of the Conference of State Parties to UNCAC, held in 2006, attempted to address this criticism by committing to establish a mechanism to monitor corruption. But subsequent sessions have failed to reach an agreement. Regional organizations have also made significant normative progress by developing comprehensive anticorruption instruments, although implementation and effectiveness have been patchy. The first regional convention to address corruption was the Inter-American Convention against Corruption, which was adopted by state parties to the Organization of American States and entered into force in March 1997. The Council of Europe passed the Criminal Law Convention on Corruption in January 2002, with an additional protocol authorizing the creation of a monitoring mechanism, the Group of States Against Corruption. In July 2003, the African Union Convention on Preventing and Combating Corruption was enacted in an attempt to address widespread corruption on the African continent. One of the most successful—albeit controversial—regional initiatives is the International Commission Against Impunity in Guatemala (CICIG). At the request of the Guatemalan government, the UN created CICIG in 2007 to reinforce the rule of law by strengthening institutions, investigating corruption, and training officials. By 2010, CICIG helped to oust thousands of corrupt policemen, ten prosecutors, three supreme court justices, and an attorney general. The commission has also supported the trials and convictions [PDF] of more than 130 criminals, including a former president and foreign minister. Some critics have questioned CICIG's sustainability, arguing that it is not fulfilling its mandate to transfer technical capacities to Guatemalan counterparts and interfering in cases beyond its remit. At the same time, CICIG must request to join criminal cases as a complementary prosecutor and the Guatemalan justice system can deny it jurisdiction to participate—decreasing the commission's independence and potential impact. Nevertheless, the commission is an important model for anticorruption efforts. Together, UNCAC and regional conventions provide a solid foundation of international norms, standards, and measures to combat corruption. However, they fall short of the integration and coordination required of a global anticorruption strategy and have not significantly affected change on the ground in most countries. To fill the void, other international and civil society organizations that focus primarily on economic and sustainable development have taken up the mantle of anticorruption work. The World Bank, Interpol, the Group of Twenty (G20), the International Monetary Fund, and the Organization for Economic Cooperation and Development have attempted to raise awareness of the issue by addressing the consequences of corruption. The World Bank has spearheaded efforts to combat corruption through a partnership with the UN Office on Drugs and Crime (UNODC), called the Stolen Asset Recovery Initiative (StAR). Established in 2007, StAR provides assistance and training to developing countries to prevent money laundering and recover stolen assets. The initiative has worked with over five hundred officials in forty countries around the world and is expanding its country partnerships, although no assets have been recovered thus far. StAR is further hindered by the fact that it cannot legally investigate or prosecute cases of stolen assets. As part of the StAR initiative, the World Bank cooperates with numerous global bodies, such as INTERPOL and the international center for asset recovery, to help seize and return stolen funds. In addition, the G20 formed the Anti-Corruption Working Group in June 2010 to develop and recommend anticorruption business practices. Nongovernmental organizations and academic institutions play a critical role in pioneering innovative solutions to increase transparency in corrupt governments. The Program on Liberation Technology, for example, at Stanford University is researching the use of mobile phones to text individuals facts on government spending (per public record), so as to empower local communities with the knowledge of what they should receive and what they do receive. These efforts are complicated by the fact that there is no existing method of measuring corruption. This is partly because it is largely conducted in secret, and partly because corruption can sometimes appear legitimate. Transparency International, a civil society organization, publishes the annual Corruption Perceptions Index, which ranks countries according to perceptions of public-sector corruption. Although it is not a perfect science, it does provide a comprehensive assessment of individual countries and regions. In 2011, Somalia, North Korea, Myanmar, and Afghanistan led the list as the most corrupt countries in the world. A recent survey [PDF] conducted by the UN Office on Drugs and Crime (UNODC) estimated that Afghan officials paid $2.5 billion in bribes and related payments in 2009. When undertaken, national anticorruption strategies to end impunity and promote capacity building have also produced some success. In 2008, the Mexican government launched Operación Limpieza (Operation Clean), with the goal of purging the law enforcement of corruption. Thus far, the interim commissioner of the federal police, head of the counternarcotics division, and thirty other officials have been arrested. Following the Money: Increasingly legislated, uneven implementation Money laundering is the life blood of transnational organized crime. Since the late 1980s, the world has been straining to manage illicit flows of cash among the massive sums that flow across borders every day. A meta-analysis [PDF] conducted by the United Nations Office on Drugs and Crime (UNODC) in 2011 concluded that globally, criminal proceeds amount to around 3.6 percent (or between 2.3 and 5.5 percent) of the world's gross domestic products combined—roughly $2.1 trillion annually—and costs between 2 and 5 percent of global gross domestic product ever year according to the UN. Nations have prioritized "following the money" to identify criminals and deter citizens from turning to crime, but the world is floundering [PDF] in its efforts. "Ultimately, anti–money laundering tools, which were designed to combat organized crime, have been ineffective," according to a ten-year review of the Palermo Convention [PDF]. The UNODC reports that less than 1 percent [PDF] of illicit financial flows around the world are seized and frozen. This saps nations of needed resources and allows criminals to profit illegally and remain at large. The Financial Action Task Force (FATF), founded in 1989 by the Organization for Economic Cooperation and Development, is celebrated as one of the greatest anti–money laundering (AML) successes. FATF's forty recommended measures, published in 1990, and nine counterterrorist financing measures, lay out steps national governments can take to improve AML capabilities. In 2012, FATF also revised its recommendations based on feedback from the financial sector, businesses, nongovernmental organizations, and individuals, and combined the terrorism and money laundering recommendations. All member countries both carry out a self assessment and submit to peer review of their implementation of recommendations. In 2000 FATF also published an associated list of noncooperative countries and territories [PDF] (NCCT). Fearful of losing investment or international standing, all twenty-three of the countries first included on the FATF list subsequently enacted AML legislative frameworks and many more passed similar laws in order to avoid landing on the list. Twelve binding UN Security Council resolutions between 2001 and 2010 also mandated UN member states to improve financial monitoring systems, and the FATF recommendations became the yardstick for compliance. Experts therefore credit the FATF NCCT list with coercing "between a quarter and a third of the world's sovereign states… to adopt the standard AML policy" by 2006. However, despite putting laws on the books, the majority of these countries are incapable or unwilling to strictly enforce them. To date, eight regional groups modeled on FATF have emerged across the world, that is, FATF-style regional bodies (FSRBs). With a deeper understanding of the local context, the FSRBs evaluate state systems in the region, and recommend ways to improve AML regimes. FSRBs also provide training for law enforcement officials and help countries develop financial intelligence units (FIUs) in coordination with UNODC, which track suspicious financial activity. FIUs are essential because they can participate in an international information sharing initiative that builds a network of FIUs, known as theEgmont Group. As internationally monitored initiatives, FSRBs add meat to various other regional efforts, ranging from the Organization of American States AML standards to an action group against money laundering of the Economic Community of West African States. More broadly, countries have incrementally forged important AML norms. Originally, the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances first criminalized laundering the profits of drug trafficking. This was later expanded to apply to all money laundering in 1998 by a UN General Assembly political declaration. Then, the UN Convention Against Transnational Organized Crime(UNTOC or Palermo Convention) and the UN Convention Against Corruption(UNCAC), which entered into force in 2003 and 2005 respectively, further entrenched necessary AML standards. Interpol supports these efforts by processing investigative requests between nations, but because Interpol lacks its own jurisdiction, it primarily urges nations to implement these norms rather than enforces them itself. The Palermo Convention clarifies several AML steps for signatories to take. State parties must criminalize money laundering and any conscious facilitation of it, as well as "institute a comprehensive domestic regulatory and supervisory regime… in order to deter and detect all forms of money laundering." These include stipulations regarding customer identification, record keeping and the reporting of suspicious transactions, as well as shoring up law enforcement, regulatory, and administrative regimes with the necessary resources to cooperate with national and international AML investigations. However, these obligations have been unevenly implemented by states. Equally important, UNCAC mandates that states "take such civil and administrative measures" to prevent government corruption from the highest levels to lower-level border officials, policeman, and bankers. Since their complicity is necessary for transnational crimes ranging from weapons smuggling to money laundering, these measures are crucial. But implementation has lagged across many member states. To help states meet these standards, the UN Global Program Against Money Laundering, Proceeds of Crime and the Financing of Terrorism (GPML) provides technical assistance in various forms such as legislative advice or training justice officials to investigate and prosecute financial crime. GPML also supports countries that wish to update [PDF] their domestic AML frameworks, and its mentor program "is one of the most successfulknown activities in AML/CTF technical and training assistance." In a 2011 review by an independent panel of experts, GPML was deemed "successful" and "highly relevant." In 2000, the International Monetary Fund (IMF) also responded to the growing challenge of money laundering, emphasizing that it not only facilitates crime, but also threatens members' economies by undermining the stability of financial institutions, increasing the volatility of capital flows, and having a "dampening effect on foreign direct investment." In response, the IMF now conducts assessments, provides technical assistance, and drafts policy recommendations for the global AML effort. As an international body focused on global finance with universal membership, the IMF was able to expand the scope of AML efforts beyond the global North. Still, the IMF is not ideally suited to root out criminal profits because AML efforts require law enforcement and judicial prosecution. Despite these initiatives, corruption, corporate and bank secrecy, and informal money transfer systems like hawala continue to complicate AML efforts. Financial havens such as Nauru or the Cayman Islands provide opportunities for illicit monetary transfers no matter how robust domestic or regional frameworks are. Many banks also provide offshore operations for clients seeking broader secrecy. Swiss banks, for example, have transferred many operations to Liechtenstein, the Cayman Islands, or Isle of Jersey. In some cases, banks collude with criminal organizations—even in developed nations as evidenced by one U.S. bank's cooperation with Mexican cartels. Therefore, strong regulatory policies are crucial and need to be closely monitored. A growing trend, for instance, requires private banks or firms to take responsibility for AML. In response, banks increasingly publish their own AML policies [PDF], pledge to enact "know your customer" rules, cooperate with law enforcement, and even recruit former financial investigator police officers. In one instance, for example, U.S. banks detected certain money laundering tactics like mirror accounts of drug cartels. Still, numerous studies have concluded that banks generally believe that AML regulations are not cost effective and impose an enormous burden on them. The 2008 financial crisis inspired calls for broader regulations and the U.S. government has recently begun to revisit AML regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act, but implementation of the countless stipulations is far off, if not impossible. Another new strategy with great potential is the use of national sanctions to combat transnational crime. Between July 2011 and February 2012, the U.S. Treasury imposed sanctions on five criminal syndicates in Mexico, Italy, eastern Europe, and Japan. The department stated that the effort aimed to prevent the groups from using billions in annual profits. Experts noted that sanctions have been effective against nonstate actors like al-Qaeda, and thus might aid in combating criminal groups. Though promising, the move's impact has yet to be demonstrated, and it does not portend to replace multilateral AML cooperation. Narcotrafficking: Stuck in criminalization paradigm Narcotrafficking is arguably the most legislated and enforced sector of transnational crime, but the effectiveness of the regime is increasingly questioned. Pressing international issues often suffer from underfunding and lack of high-profile attention, but narcotrafficking is an exception. Heavily backed by U.S. resources and enormous U.S. political attention, countries have sought to enforce an array of treaties that regulate production, distribution, and transport of nonmedical drugs. But trafficking groups easily change location, adapt network-style structures, and diversify their activities to evade law enforcement efforts. As a result, experts stress the need to understand narcotrafficking as a market. In 2011, the UN Global Commission on Drug Policy recommended a paradigm shift to public health rather than criminalization, noting that despite $2.5 trillion spent since the 1970s, the U.S.-led global war on drugs has failed, primarily because of its focus on law enforcement. Slowly, some countries and international institutions are attempting to incorporate public health and economic programs into the fight against narcotrafficking, but much remains to be done. The Commission on Narcotic Drugs is the main international body that oversees the implementation of global anti-narcotrafficking efforts by deciding which drugs belong to which schedules (or risk levels) of the drug control treaties and advising other bodies. The UN Office on Drugs and Crime (UNODC) is the primary agency to help countries implement UN treaties and initiatives on the ground. Highly respected, UNODC operates around the world, conducting evaluations of the illegal drug market, helping states implement awareness programs, and providing treatment support. In addition, the UNODC Justice Section [PDF] helps states establish or improve judicial frameworks and works to empower law enforcement agencies to investigate and prosecute drug traffickers. For example, a joint program [PDF] with the World Customs Organization that operates in eleven countries helps those nations regulate the contents of shipping containers in which drugs often cross borders. UNODC also conducts a wide array of other operations related to international crime that are critical to anti-narcotrafficking efforts, including anticorruption and alternative livelihood development, among others. Its resources, however, are limited. The core narcotrafficking accords that still serve as the basis for the international anti-narcotrafficking regime emerged between 1960 and 1990. In 1961, the Single Convention on Narcotic Drugs (Single Convention) synthesized the mandates of nine drug-related treaties dating back to the 1912 International Opium Convention. The Single Convention also established a list of prohibited substances and limits on the possession, distribution, manufacture and production of prohibited drugs—as well as set up the International Narcotics Control Board, a precursor to UNODC. A decade later, the 1971 Convention on Psychotropic Substances incorporated manufactured drugs such as methamphetamines and lysergic acid diethylamide (LSD)—though it did not criminalize them as harshly as organic illegal drugs. In 1988, the Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances built on the previous two treaties, obliging states to criminalize possession, purchase, and cultivation of illegal drugs. It also set down rules for extradition cooperation, created provisions of mutual legal assistance to investigate and prosecute suspects, and criminalized money laundering of narcotrafficking profits. Still in force, these three conventions represent the backbone of the international war on drugs. Notably, during negotiations for the 1961 Single Convention, nations coalesced into various blocs in a manner that affected the drug regime for the next decades. Powerful nations that were primary importers of illegal organic drugs, such as the United States and West Germany, successfully lobbied for a strict control regime on the supply side, rather than requiring states with high addiction rates to attempt to mitigate demand through health-based policies at home. As a result, today's anti-narcotrafficking instruments continue to identify the illegal drug trade primarily as a criminal activity, and therefore charge nations to control the problem through law enforcement. More recently, the 2000 UN Convention on Transnational Organized Crime did incorporate more comprehensive strategies to fight drug-related offenses. Article 30 of that treaty requires "other measures" to fight crime "through economic development" and Article 31, stipulates that states "shall endeavor to develop" appropriate preventive strategies. Although an important normative development, the directives remain vague and underemphasized. Regional organizations have joined the fight against narcotrafficking, with mixed results. The Organization of American States has launched some innovative programs that aim to decrease demand for illegal drugs, but the region still faces an enormous challenge. Latin American leaders are using the forum to pressure the world—and especially the United States—to reevaluate existing prohibition regimes, but any progress will take years. The European Union is endowed with broader powers than other regional initiatives, and therefore has been able to impose more consistent legislation across the union and support capacity-building initiatives in eastern Europe, but European drug use and rates of human trafficking continue to climb. The Economic Community of West African States has taken initial steps to fight drug trafficking, but governance gaps in the region continue to leave it vulnerable. The Association of Southeast Asian Nations (ASEAN) has conferred high-level political attention on narcotrafficking, committing to a "Drug-Free ASEAN", but the realities of governance gaps and economic development challenges have impeded [PDF] these efforts. A number of bilateral capacity-building endeavors have also had a major impact on narcotrafficking norms around the world. Plan Colombia, (now called the Andean Counterdrug Initiative) for example, is an $8.5 billion program initiated in 1999 in which the United States provides expertise and financial resources to the Colombian military and administrative and judicial sectors to help Colombia fight narcotraffickers. Though the policy has managed to curb the Colombian drug problem to some extent (though not without controversy), in 2010, the UNODC reported that the lion's share of drug cultivation had merely been displaced to neighboring Peru. The United States has also devoted $1.5 billion since 2008 to the Mérida Initiative to help Mexico suppress cartels there, but as Mexico tames the drug trade in one area it reappears elsewhere and violence is increasing. Mexico's drug trade has also contributed to surging violence in Central America. Experts stress that these outcomes demonstrate the need to prioritize comprehensive strategies rather than rely too heavily on law enforcement. New methods are slowly being pioneered to fight demand at the national level, but they remain the exception rather than the rule. A domestic program within the United States has pioneered drug courts, which supervise drug addicts during treatment rather than imprisoning them. In the first twenty years, drug courts were reported to be 75 percent more successful at preventing recidivism than incarceration and to reduce crime by as much as 35 percent. Similarly, Brazil has devised a strategy of placing permanent "pacifying police units" in the violent favelas, rather than attack narcotrafficking gangs with military police—an approach that has led to a "drastic change," in the words of a Brazilian police captain. Furthermore, some U.S. districts are experimenting with drug market intervention [PDF]—where known drug dealers are invited to meet with community leaders who convince them of the harm they are inflicting on friends and family, rather than arrested and imprisoned—with remarkable success. Although such initiatives are small, they provide a promising model. The War on Illicit Weapons: Rising awareness, limited scope Smuggling weapons or their integral components fuels conflict among and within states as well as empowers pernicious nonstate actors such as gangs, pirates, and terrorists. Weapons smuggling can include the illicit transfer or diversion of materials, technology, and components related to weapons of mass destruction (WMD) as well as the trafficking and theft of conventional weapons. Awareness has spread about the overall threat from this form of transnational crime, but institutions to counteract the illicit transfer of weapons remain limited in scope. The threat from illicit WMD transfers is primarily that a terrorist group would create a radiological dirty bomb or assemble a nuclear device. Although the Nuclear Nonproliferation Treaty, which was agreed to in 1968, attempted to prevent the unchecked proliferation of nuclear weapons, many find the treaty and its enforcement body, the International Atomic Energy Agency, ill equipped to counter threats posed by so-called rogue states and dangerous nonstate actors. The possibility of al-Qaeda or another group independently building a nuclear bomb is relatively small, but the consequences would be devastating. As evidenced by the discovery of the Abdul Qadeer Khan network in Pakistan, modern smuggling can involve intricate transnational channels supporting the transfer of sensitive technology. Stockpiles of nuclear warheads and material are also at risk for theft or illicit transfers, especially within the territory of the former Soviet Union. In 2004, the passage of UN Security Council Resolution 1540 (UNSCR) marked a watershed moment for efforts to stem the proliferation of weapons of mass destruction. Binding on all UN member states, UNSCR 1540 called on countries to implement domestic legislation to prevent proliferation, as well as established the 1540 Committee to monitor implementation of the resolution. Regardless, as of 2011, more than fifty [PDF] UN members had not formally reported their efforts to prevent nuclear proliferation to the 1540 Committee. Other challenges related to the implementation of UNSCR 1540 include difficulties in coordinating global nonproliferation capacity-building efforts and addressing the concerns of some developing states that claim to lack the necessary technical expertise and resources to implement the resolution's provisions. In addition, many developing countries simply do not prioritize the threat of nuclear weapons as highly as other issues. The relatively recent emergence of multilateral arrangements like the Proliferation Security Initiative, Global Initiative to Combat Nuclear Terrorism, and the UN Convention for the Suppression of Acts of Nuclear Terrorism have been critical tools for norm-building and sustaining global attention on the threat posed by the proliferation of weapons of mass destruction. Nevertheless, potential candidates for illicit transfers—whether state or nonstate—can simply opt not to cooperate or participate in these accords. Similarly, although the 2010 Nuclear Security Summit in Washington, attended by nearly fifty heads of state or government, pledged to secure vulnerable fissile nuclear material by 2014, the pledge was not legally binding, nor did it cover threats posed by the proliferation of specific nuclear weapons related components. A binding Fissile Material Cutoff Treaty also has yet to be drafted. Conventional weapons, whether small arms and light weapons (SALW) or more advanced weapons systems, are substantially more likely to be smuggled or involved in illicit transfers. The UN's Register for Conventional Arms was created for states to report all exports and imports related to seven categories of armaments considered to be the most dangerous, including small arms. However, compliance by countries is voluntary and reporting has declined in recent years. The illegal trafficking of SALW, an estimated $1 billion annual industry, has received significant global attention. The UN's Program of Action to Prevent, Combat, and Eradicate the Illicit Trade in SALW in all its Aspects (PoA) is its most comprehensive effort in this area. Adopted by all UN member states in 2001, the PoA requires countries to develop national bodies that review legislation and cooperate internationally to stem illicit trade of SALW. Despite setting important normative foundations on licensing, tracing, and international cooperation, the PoA is a voluntary agreement and does not address [PDF] important issues including ammunitions, state-to-state transfer, and transfer to nonstate actors. A review conference scheduled for 2012 will examine the implementation of its recommendations by member states, but analysts have already reported significant gaps in implementation for a variety of reasons. To begin with, some states do not clearly understand their obligations [PDF], even when the PoA is unambiguous, and for many nations SALW trafficking is not a high priority. In addition, the PoA lacks [PDF] clear benchmarks and a mechanism for sharing best practices to support implementation. The only legally binding treaty on SALW is the Firearms Protocol, a complementary instrument to the UN Convention on Transnational Organized Crime, that requires states to bolster control measures against illicit firearms and their ammunition. However, this agreement also does not regulate state-to-state transfers and has had only some success in helping countries keep a tab on illicit weapons, despite licensing, marking, and tracing provisions. For example, in 2007, in violation of international sanctions, a Ukrainian ship transported thirty-three T-72 tanks, rocket-propelled grenades, and anti-aircraft guns to South Sudan via Kenya. The International Tracing Instrument (ITI), an offshoot of the PoA, was created to fill this vacuum. The ITI aims to identify and trace weapons' paths from source to destination. However, an April 2011 report on small arms by the UN secretary-general notes that, in many cases, ground-level officials do not understand tracking related markings on weapons, or do not have the records needed to link weapons with arms manufacturers. Often, serial numbers are simply ground off weapons. The United Nations has resumed talks to negotiate a potentially comprehensive and legally binding arms trade treaty. Prospects for a breakthrough are dim, however. Contentious topics will require tough compromises from states such as China, France, Russia, the United Kingdom, and the United States—top arms exporters. U.S. constitutional protections to possess personal firearms significantly complicate negotiations. The agenda includes establishing a monitoring provision for SALW ammunition exports, determining responsibility for illegal state-to-state SALW sales, and enforcing such an accord. Still, the number of civil society groups dedicated to promoting stronger and more inclusive cross-border regulations of small arms and light weapons has exploded. Established in 1998, the International Action Network on Small Arms, for instance, combines the work of numerous international groups seeking to stop all trafficking of SALW. Persistent lobbying from international nongovernmental organizations may have also played a central role accelerating UN and other regional negotiations to prevent the smuggling of conventional weapons. Regionally, robust accords to prevent the trafficking of arms are the exception rather than the rule. One of the most far reaching is the binding Economic Community of Western African States Convention on Small Arms and Light Weapons, which entered into force in 2009. Some posit that the convention, which was drafted with support from leading SALW civil society groups and banned arms transfers to nonstate actors, could be a model for other regions and even work toward a global arms trade treaty. The moratorium, however, has been "routinely flouted" [PDF] and has little impact. Illicit markets: Lacks comprehensive framework, international agreement Global efforts to curtail these markets tend to be sector-specific responses, despite the fact that many criminal groups have diversified their activities into multiple markets. Collectively, global conventions, multilateral initiatives, and international institutions provide normative standards of protection, target the movement of illegal goods, and criminalize illicit activities—with varying degrees of effectiveness. Where norms exist, enforcement tends to be uneven. Nongovernmental organizations and private-sector entities have called for a global monitoring mechanism to track violations and seizures to expand knowledge of trends and developments. Statistics point to oceans as a major channel for illicit markets, given that nearly 90 percent [PDF] of global manufactured goods are transported by container. Several International Maritime Organization (IMO) conventions address the safety of container shipping, including the International Convention on Safe Containers, which establishes uniform regulations for shipping containers. The conventions, however, do not address comprehensive security solutions, and illegal goods are secretly stashed in containers en route to their destinations. In 1992, the IMO enacted the Convention for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation, which created a legal framework to interdict, detain, and prosecute terrorists, pirates, and other criminals. The U.S. government attempts to address this vulnerability in part through the Container Security Initiative (CSI), which aims to prescreen the majority of containers destined for the United States by isolating those that contain illegal goods before transit. The initiative, which operates in fifty-eight foreign ports, covers more than 80 percent of container cargo en route to the United States. Several international partners and organizations, including the European Union, Group of Eight, and WCO, have expressed interest in modeling security measures for containerized cargo based on the CSI model, though such expansion is years away. Despite these efforts, experts estimate that only 2 percent of containers destined for U.S. ports are actually inspected. Trade in Counterfeit Products The World Trade Organization (WTO), the main international institution dealing with trade issues, has led international efforts to combat illicit markets, specifically trade in counterfeit goods. The landmark Agreement of Trade-Related Aspects of Intellectual Property Rights (TRIPS), passed in 1995, applies to all 153 WTO members and establishes minimum standards for intellectual property rights, including trademarks, copyrights, and patents, to be enforced by member states. Covering a broad range of sectors and goods—such as electronics, knock-off designer apparel, and art—TRIPS is the most comprehensive multilateral agreement addressing counterfeit goods to date. The UN's World Intellectual Property Organization helps the WTO implement TRIPS by managing an international registry of patents, providing translations and notifications of national regulations, and supporting international technical cooperation. Specifically, the Madrid Agreement Concerning the International Registration of Marks along with its protocol allows countries to register trademarks in multiple countries through a single application that broadens coverage, but also lacks an enforcement mechanism. At the same time, TRIPS relies on UN member states to enforce intellectual property laws, which has led to serious gaps due to lack of political will or capability. Recent efforts to strengthen enforcement mechanisms have met stiff resistance. Signed by thirty-one state parties—including Australia, Canada, Japan, the United States, and the European Union—the 2011 Anti-Counterfeiting Trade Agreement (ACTA) attempts to establish an international legal framework to address violations of intellectual property rights. However, ACTA has been criticized for violating freedom of expression and privacy, as well as excluding civil society organizations and developing countries from negotiations. In response to a petition signed by more than two million Europeans, the European Commission referred ACTA to the European Court of Justice to determine whether the agreement violates individual rights. Private-sector groups affected by illicit markets have also formed industry-specific trade associations, which have pushed for anti-counterfeiting legislation. Among the most active and influential of these organizations are the Motion Picture Association of America, Business Software Alliance, Recording Industry Association of America,Pharmaceutical Research and Manufacturers of America, and the Council of Fashion Designers of America. They lobby for anti-counterfeiting legislation and enforcement, publish data and reports, run public advocacy and education campaigns, and help their members investigate and prosecute violations. However, rights groups have criticized such organizations for wielding undue influence and pushing legislation that disproportionately benefits businesses at the expense of consumers. Counterfeit Medicines TRIPS coverage also extends to pharmaceutical patents. Although TRIPS requires all countries to adopt minimum standards, it does allow for some flexibility for developing countries through compulsory licensing agreements, a provision recently applied for the first time in India to produce a generic cancer drug. In 2001, the WTO Ministerial Conference adopted the Doha Declaration, affirming that TRIPS "does not and should not prevent members from taking measures to protect public health" by promoting access to affordable drugs. Despite these advances, the definition of counterfeit medicine remains unclear.Disagreement is widespread over the working definition of counterfeit drugs provided by the World Health Organization (WHO). Developing countries maintain that generic versions of brand-name drugs should not be considered counterfeit as they are essential to affordable health care. Many nations do not yet have legislation targeting counterfeit drugs, although there are signs of progress. In 2011, China and Nigeria agreed to a new bilateral initiative allowing regulators to jointly combat counterfeit drugs. Multilateral and regional organizations have taken steps to enforce anti–counterfeit medicine agreements. In 2006, the WHO launched the International Medical Products Anti-Counterfeiting Taskforce, the goal of which is to develop international and regional networks to facilitate information sharing on the counterfeit drug market, although it has yet to make a global impact due to resistance from several important developing countries. Interpol has also implemented several regional initiatives to combat counterfeit drugs and arrest traffickers: Operation Storm in southeast Asia, Operation Mamba in eastern Africa, and Operation Cobra in western Africa. Between January 2010 and October 2011, Interpol and local partners seized millions of pills and made hundreds of arrests, underscoring the need for continued multilateral intervention. Finally, in December 2010, the Council of Europe adopted the Convention on the Counterfeiting of Medical Products and Similar Crimes Involving Threats to Public Health, which criminalized the manufacturing and trade of counterfeit drugs. Experts have criticized the convention, however, for its vague definition of generic medicine—and have instead advocated for a legally binding treaty led by the WHO. Without an international treaty criminalizing counterfeit drugs, progress will be limited, because each region or country continues to operate on various definitions of what constitutes counterfeit medicine. The WHO executive board adopted a voluntary resolution on counterfeit medicine in February 2012, but a comprehensive and adequate treaty is still far off. Environmental Crime To fight environmental crime, the principal international treaty is the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). CITES is the strongest existing measure to protect the environment from exploitation; it proscribestrade in more than nine hundred animal and plant species in danger of extinction, and restricts trade in more than twenty-nine thousand additional species. Although it has created an important framework for efforts against environmental crime, CITES covers such a wide range of plant and animal species that it is virtually impossible to focus attention and enforce trade restrictions on all of them at once. The UN Environment Program (UNEP), the primary UN body for global environmental issues, supports CITES and related programmatic initiatives, but has a limited budget for these efforts. CITES is also supplemented by more than five hundred global and regional multilateral environmental treaties that deal with specific issue areas, including biodiversity, wildlife, pollution, use of chemicals, and waste disposal. The UN Convention Against Transnational Organized Crime, supported by the UN Office on Drugs and Crime(UNODC), also serves as a legal framework for combating illicit resource trafficking, although it is primarily limited to crimes committed by organized groups and does not specifically mention the environment. Laws to regulate illegal resource harvesting have not kept pace with environmental crime. A number of tree species are protected under CITES, but there is no existing comprehensive international agreement that regulates illegal logging. Experts argue[PDF] that CITES could be broadened to more adequately address illegal logging. The Forest Law Enforcement and Governance regional initiative, which convened producer and consumer countries in Asia, Africa, and Europe, attempted to raise awareness of illegal logging, but little progress has been made. Despite two other UN agreements to combat illegal fishing—the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks (Fish Stocks Agreement) and the Agreement on Port State Measures to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing—serious gaps in enforcement remain (see Global Governance Monitor: Oceans for an in-depth discussion). International efforts to combat pollution and toxic waste dumping, on the other hand, have achieved marked success. The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, and the Stockholm Convention on Persistent Organic Pollutantstogether provide an international framework to regulate the movements and dumping of waste, as well as the use of specific chemicals. Maritime pollution is regulated by theInternational Convention for the Prevention of Pollution from Ships (MARPOL). States are responsible for implementing and enforcing MARPOL to curb the most destructive forms of maritime pollution, including oil spills, particulate matter such as sulfur oxide and nitrous oxide, and greenhouse gas emissions. In response to the proliferation of environmental crime and limited enforcement, five international groups—CITES, Interpol, UNODC, the World Customs Organization, and the World Bank—formed the International Consortium on Combating Wildlife Crime(ICCW), which became operational in March 2011. ICCW hopes to mount a coordinated global effort against environmental crime by supporting national law enforcement and facilitating information sharing, but it is too early to judge progress. Organ Trafficking Organ trafficking has also become a serious problem. And while the Protocol to Prevent, Suppress, and Punish Trafficking in Persons (TIP protocol) identifies "the removal of organs" as a crime, many national governments have legal loopholes and outliers that allow for the activity to continue unchecked. In Iran, for example, kidney sales are legal and regulated; in India, the law outlaws all organ sales except for kidneys; and in China, it is illegal to buy or sell organs, although the government is allowed to harvest the organs of executed prisoners. A joint UN-Council of Europe study in 2009 called for [PDF] a new international treaty that would specifically address organ trafficking, including human trafficking for the removal of organs, which is a subset of a broader and more pervasive issue. Combating cyber crime: Advancing from anarchy, but constant challenges Cyber crime, which is estimated to cost the global economy between $114 billion and $1 trillion annually, comprises myriad illegal activities, including cyberattacks on governments or businesses, identity theft, and illegal hacking. As societies increasingly rely on the Internet, the need for robust measures to address cyber crime is clear. However, some experts believe that establishing a comprehensive, binding cyber crime convention may be impossible given fundamental differences in opinions between countries about the Internet. Other challenges include defining cyber crime and assigning responsibility for attacks orchestrated from within a country's territory. Even in existing initiatives, the definition of cyber crime and stipulations to fight it are not consistent, and too often cyber crime is conflated with cyberterrorism, cyber espionage, or cyber warfare. The most robust international accord that addresses cyber crime is the Council of Europe Convention on Cyber Crime. With thirty-two parties and fifteen signatories, it is the only international legally binding accord that governs the issue. Importantly, it defines cyber crime offenses such as data interference, child pornography, and illegal interception. The accord also includes a yearly consultation process for parties carried out through the Convention Committee on Cyber Crime. Testifying to the need for strong international cyber crime governance, the United States and a number of other countries outside the region have ratified the treaty; more nations are considering doing so. The convention is also the basis for other international standards on cyber crime. TheUnited Nations (UN) [PDF], Interpol [PDF], and various regional organizations have encouraged countries to model national legislation on the articles of the Council of Europe Convention on Cyber Crime and have supported acceding to it. Numerous countries, including hotbeds of cyber crime such as Nigeria, have updated [PDF] national legislation to conform to the treaty. However, many underdeveloped states do not have the institutional capacity to fulfill requirements, complicating efforts to harmonize domestic legislation. The convention on cyber crime also includes an additional protocol, which attempts to counter the use of the Internet as a medium to spread xenophobia and racism. Although the United Nations examined cyber crime and related issues in 2010, member states were unable to reach a consensus on whether to expand the Council of Europe Convention on Cyber Crime or to create a new global treaty. In many instances, calls for firmer global institutions and agreements to fight cyber crime are met with skepticism from online users and policymakers, who worry that cyber crime laws might limit freedom of speech and private-sector Internet use. Both the UN General Assembly and the Economic and Social Council (ECOSOC)—responsible for development issues—have introduced several resolutions on cyber crime, but the issue is low on their agenda. In this regard, the UN Commission on Crime Prevention and Criminal Justice has been important in bringing cyber crime to the attention of member states. Created in 1992 at the request of ECOSOC, the commission has increasingly raised the issue of cyber crime with other parts of the UN system. In 2011 it spearheaded a draft resolution urging countries to provide capacity-building assistance to fight cyber crime. One specialized agency in the UN, the International Telecommunication Union (ITU), has led [PDF] international information and communication technologies policy since 1865 (the body became a specialized UN agency in 1947). The ITU addresses the gamut of cyber crime problems, but its work on cyber crime has focused on data collection, research, and recommendations on building and harmonizing effective national legislation. The ITU also suffers from some important procedural weaknesses. Only UN plenary assemblies and world conferences can form ITU study groups to discuss relevant problems, but they meet only once every four years. Despite its flaws, the agency has launched some ambitious projects. One of its flagship projects, Child Online Protection, aims to protect children from malicious attacks in cyberspace. More recently, ITU joined forces with the UN Office on Drugs and Crime to assess specific countries' institutional capacities, review legislation, provide technical assistance, and offer training opportunities. Although it is still too early to determine its success, the collaboration paves the way for more partnerships within the UN, where work on cyber crime is often fragmented and lacks prioritization. Informal organizations and multilateral arrangements have established frameworks to facilitate the sharing of best practices and intelligence related to cyber crime. Interpol, along with its 190 member countries, relies on its I-24/7 worldwide communication system as well as its National Central Reference Points [PDF] network—a specialized group of investigators—to combat cyber crime. But even with these initiatives, many countries do not have adequate funding, enough cyber crime laws, or the institutional capacity to prevent, investigate, or prosecute cyber criminals. Furthermore, working in different jurisdictions to obtain evidence tends to be inefficient and slow. Numerous regional initiatives as well as nongovernmental organizations have also been established with the specific mission of preventing the exploitation of children through the Internet. Enforcement, though, remains limited by the inherent difficulties in tracing perpetrators of cyber crime, especially when occurring across borders and contrasting legal jurisdictions. One major multilateral initiative, the Lyon Group, was created by the Group of Eight(G8) in 1996. The Lyon Group gathers senior experts to discuss international crime issues and has a dedicated subgroup that addresses high-tech crime with the aim of helping law enforcement agencies enhance their strategies to prevent, investigate, and prosecute cyber crime. The G8 has also adopted forty operative recommendations to combat transnational organized crime, and all members are required to set up a 24/7 network of point of contacts to address computer crimes and requests. Still, current technologies do not have the capacity to fully track cyber crime, which hinders the subgroup's effectiveness. At the regional level, organizations and ad hoc groups have attempted to tackle cyber crime. For instance, the Organization of American States (OAS) established a working group on cyber crime, which spearheaded a compilation of existing cyber crime legislation in OAS member states. The working group, backed by a recommendation from all OAS attorney generals and ministers of justice, has also requested that OAS member states consider applying the principles of the Council of Europe's Convention on Cyber Crime. Similarly, the Asia Pacific Economic Cooperation group has taken on the issue, with an action plan [PDF] to combat cyber crime that includes personal information protections, cybersecurity capacity building, and raising awareness against cyber crime. Nevertheless, cyber crime rates continue to climb in every region around the world. Combating human trafficking and migrant smuggling: Record progress, but inadequate enforcement Human trafficking is the only illicit activity classified as a crime against humanity. Although it manifests itself in many forms, forced labor and sexual exploitation are the primary types. Migrant smuggling is considered distinct from human trafficking, both legally and conceptually. In practice, however, it is difficult to differentiate between the acts of migrant smuggling and trafficking. Both target the poor and deceive or violently abuse victims. Some migrants become victims of trafficking, and smugglers may also serve as traffickers. Global governance efforts and tools to combat human trafficking and migrant smuggling are generally uncoordinated, underresourced, and lacking in the political will to exert meaningful change. To date, no permanent mechanism for collecting and evaluating comprehensive data on human trafficking or migrant smuggling has been established, which presents a significant hurdle for international organizations and national governments to devise effective policies and strategies. Until recently, no international agreement defined human trafficking or laid out a strategy to address it. Heightened international attention in the 1990s, however, paved the way in the United Nations (UN) for the Protocol to Prevent, Suppress, and Punish Trafficking in Persons (TIP protocol) to the UN Convention Against Transnational Organized Crime(UNTOC), which entered into force in December 2003. To date, 142 countries have ratified the TIP protocol and 128 countries have passed laws prohibiting human trafficking. The TIP protocol broadly defined human trafficking under international law as the "recruitment, transportation, harboring, or receipt of persons, by means of… forms of coercion… for the purpose of exploitation." Its ultimate goal was to harmonize domestic legislation to criminalize the phenomenon. Similarly, "migrant smuggling" was also undefined until the Protocol Against the Smuggling of Migrants by Land, Sea, and Air (Smuggling of Migrants protocol) to the UNTOC entered into force in January 2004. It identifies the crime as the "procurement, in order to obtain… financial or other material benefit, of the illegal entry of a person into a state." Ratified by 129 member states, the protocol does not aim to curb illegal immigration, but instead to undermine organized smugglers. Some experts have argued[PDF], however, that the protocol does not go far enough to protect the rights of migrants. The protocols are the strongest measures to date on human trafficking and migrant smuggling. In particular, passage of the TIP protocol prompted the proliferation of regional conventions decrying human trafficking. The European Union ratified the Brussels Declaration on Preventing and Combating Trafficking in Human Beings in 2002; the Association of Southeast Nations (ASEAN) passed the Declaration Against Trafficking in Persons, Particularly Women and Children in 2004; and the African Unionfollowed suit in 2006 and enacted the Ouagadougou Action Plan to Combat Trafficking in Human Beings, Especially Women and Children; among others. Many of these regional conventions, however, are not legally binding on member states, and have thus proved unable to effect significant change on the ground. Regional action on migrant smuggling has been mostly limited to extending general protections to migrants. For example, the Organization of American States' Inter-American Program for the Promotion and Protection of the Human Rights of Migrants, Including Migrant Workers and their Families and the ASEAN Declaration on the Protection and Promotion of the Rights of Migrant Workers focus on the basic rights of migrant workers, with sporadic references to the issue of migrant smuggling. Despite halting normative progress among regional organizations, enforcement has floundered at the national level. Many countries only recently passed laws codifying human trafficking as a crime, and in some countries such legislation is wholly absent. Definitions of the crime vary widely; many national laws are confined to trafficking of women, or only recognize sexual exploitation of trafficking victims and do not address other forms such as labor trafficking. Even if states have enacted requisite legislation, 40 percent [PDF] of these countries did not produce a single conviction between 2003 and 2008. Many states have recently criminalized [PDF] migrant smuggling activities, but struggle to enforce the statutes. Of the few governments that try to combat migrant smuggling, resources are often directed to border controls rather than long-term measures. Many states do not see smuggled migrants as victims, but rather as illegal immigrants. The United States plays a major role in global efforts to combat human trafficking. The U.S. Congress passed the Victims of Trafficking and Violence Protection Act (TVPA) in October 2000, which provided resources to monitor and reduce human trafficking. However, the TVPA expired at the end of 2011 and is yet to be reauthorized due to partisan deadlock over budget allocations. The U.S. State Department also produces[PDF] an annual trafficking report ranking 184 governments—including itself—on its actions against trafficking. Although somewhat politicized, the reports are a useful means of tracking implementation of international norms. Other organizations, such as the UN Educational, Scientific, and Cultural Organization and International Organization for Migration are also working to compile accurate data. In one high-profile initiative, the UN Global Initiative to Fight Human Trafficking and nongovernmental organizations (NGOs) partnered with other UN agencies to aggregate data. Though moderately successful, the project ended in 2009 and the information will soon be outdated. The UN Office on Drugs and Crime (UNODC) is charged with monitoring and implementing the UNTOC protocols, which it does by assisting countries with drafting legislation and creating national antitrafficking strategies. Its work is supplemented by the UN Office of the High Commissioner for Human Rights' (OHCHR) special rapporteur on trafficking in persons, special rapporteur on contemporary forms of slavery, and the special rapporteur on the human rights of migrants, who undertake country visits, monitor activities, and produce annual reports on their issue areas. In October 2011, the UNODC and the OHCHR joined forces to enhance cooperation, showing progress in efforts to streamline interagency work. Countless international, regional, and local NGOs are dedicated to raising awareness of human trafficking. Amnesty International, Mercy Corps, and Human Rights Watch often publish country reports on trafficking, and the Global Alliance Against Traffic in Womenhas a broad membership of more than one hundred affiliated NGOs. Many of the NGOs focus attention on women and sexual slavery, often at the expense of labor trafficking issues. Child trafficking, of course, remains sensitive and controversial. Although covered in the TIP protocol, some experts have argued that child trafficking deserves a separate accord. International instruments addressing the issue of child labor include the Worst Forms of Child Labor Convention, which defines "worst forms" as the sale and trafficking of children, forced labor, and recruitment for use in armed conflict. In addition, the Optional Protocol to the Convention on the Rights of the Child on the Involvement of Children in Armed Conflict specifically addresses the recruitment and exploitation of child soldiers. Despite these landmark measures, efforts to coordinate child labor and trafficking efforts more broadly remain inadequate. U.S. and International Transnational Organized Crime Policy Issues Should the international community shift its focus to a broader, health-based approach to cut demand for illegal drugs? Yes: Proponents [PDF] of a dramatic reset to fight narcotrafficking worldwide argue that attacking producers, suppliers, and transporters of illegal drugs unfairly burdens developing countries, increases the profitability of selling illicit drugs, and also severely raises the levels of violence associated with the trade. In 2011, the United Nations Global Commission on Drug Policy concluded that the U.S.-led war on drugs had failed, despite $2.5 trillion spent over forty years, precisely because the strategy focuses too heavily on criminalizing illegal drugs. It recommends a shift away from strict prohibition regimes in favor of public health policies to decrease demand, prevent drug abuse, and treat addiction. Ultimately, attempting to eradicate production of drug crops like coca leaf or opium poppy only displaces the threat and leaves impoverished farmers with poorly implemented alternative livelihood strategies. Furthermore, methamphetamine use has skyrocketed in the past five years, which may account for much of the reduction in use of opiates and cocaine. Given resource constraints, law enforcement agencies must also target drug traffickers consecutively, which creates a feeding frenzy as groups fight to replace the arrested group and leads to exponential violence without decreasing the threat to the community. Finally, by illegalizing supply without devoting equal resources to cutting demand, the current strategy provides an extraordinary incentive to traffickers and producers to provide the drugs to users who are willing to pay high prices because the drugs are hard to come by. No: Opponents of legalization argue that the greatest costs of drug use are not caused by prohibition regimes, but rather by the drugs themselves. Reducing demand is not possible without limiting drug availability. "When illegal drugs are readily available, the likelihood increases that they will be abused," explains the U.S. Office of National Drug Control Policy. When China was not able to regulate the supply of opium in 1900, for example, fully 25 percent of China's population was addicted to opium. Aggregated estimates demonstrate [PDF] that the current strategy of strictly punishing the production or transport of opiates, cocaine, and amphetamine-type stimulants has decreased instances of their abuse by 40 percent over the past century—implying that prohibition regimes have markedly decreased drug use around the world. Furthermore, opponents say that relaxing controls on supply and use of drugs will not reduce violence because criminality stems from the need to earn quick, large profits outside the law rather than the nature of the illicit product being sold. Drug traffickers "would simply find another commodity to export." In addition, any relaxation of drug controls would still leave the drugs more heavily taxed or illegal—and therefore not disincentivize illicit trade in them, but only make them more readily available. Finally, theories that the government would benefit from taxing less dangerous drugs like marijuana, and shifting to prevention strategies instead, overlook the concerns that governments might be motivated to disregard the damage of addiction since higher levels of addiction would earn them more money. Should the United States sign the Firearms Protocol? Yes: The UN Protocol Against the Illicit Manufacturing of and Trafficking in Firearms, Their Parts and Components and Ammunition (Firearms Protocol) to the UN Convention Against Transnational Organized Crime requires countries to adopt responsible legislation to prevent criminals from obtaining guns and implement controls to be able to trace firearms after they are manufactured. The United States helped draft the Firearms Protocol, but has not yet become a party to it. Doing so would not threaten the legal sale and purchase of guns in the United States, nor threaten Second Amendment constitutional rights to bear arms because it seeks only to decrease illicit trade in firearms through marking weapons, maintaining records on gun purchases, and improving licensing systems to prevent known criminals from purchasing weapons. Licit trade would thus not be curtailed. It would, however, significantly decrease the illegal sale of weapons bought in the United States and then sold to cartels that are wreaking havoc in Mexico and Central America—as well as decrease the illicit flows from Central Europe that fuel African civil wars. No: Opponents to the Firearms Protocol believe that the language is vague, and could be progressively interpreted to curtail individual rights to own guns in the United States. In addition, the protocol does not regulate state-to-state transfers of weapons, which significantly contribute to weapon flows fuelling intrastate conflicts. Opponents of the protocol therefore perceive that the ultimate goal of the protocol is to restrict civilian ownership of firearms. Some have even argued that the right to protect oneself by purchasing a personal firearm is a human right, and should therefore not be limited, no matter how well-intentioned the Firearms Protocol may be. Should the United States increase the use of unilateral sanctions on transnational organized crime groups? Yes: The use of economic sanctions against transnational organized crime (TOC) groups are an important recognition of the need to employ innovative strategies to target nonstate actors. Although terrorist groups and TOC groups do not possess similar goals, the structural similarities of these fluid networks imply that analogous mechanisms will be useful to fight both. The executive order freezes the assets in the United States of any individuals that are listed on the order's annex, as well as freezes the assets of U.S. persons(citizen, resident, or person physically located in the United States) who conduct financial transactions with a designated group. The sanctions will impose a much-needed limit on the financial gains of TOC groups, argue supporters of the move. The sanctions also bear weight because violators can be fined up to $1 million or sentenced to twenty years in prison, or both. Furthermore, under the executive order, the U.S. secretary of the treasury is granted the power to impose sanctions on other groups, facilitating an adaptive process of punishing groups that emerge. No: Though economic sanctions appear to be a sharp tool against organized crime groups, in reality, the groups earn billions from trafficking in weapons and people, and other crimes. As a result, sanctions will not significantly cripple their operations or deter people from engaging in criminal behavior. Furthermore, foreign governments may lack the capacity or will to cooperate with U.S. efforts. For example, Japan reacted to the recent U.S. sanctions on Japanese yakuza with "shock and shame," which will decrease the impact of U.S. economic sanctions on the group. It will also hinder the United States' ability to identify further criminals on whom to impose sanctions because they rely on Japanese government intelligence. In addition, the targeted groups are "large and amorphous," and will further burden U.S. and international businesses with cumbersome due diligence responsibilities. Moreover, the strategy aims to root out illicit networks with law enforcement, rather than cut demand for their illicit services or use more comprehensive strategies to fight them. Any success in debilitating one criminal group, will only lead another to take its place. Should the United States pursue a binding international convention related to cyber crime? Yes: Proponents of a worldwide binding cyber crime convention claim that country-specific mandates will not address the threat because it is a quintessential transnational threat that requires global cooperation . The Internet is an open network and crimes can be perpetrated from within any country. More so than other crimes, the perpetrators of cyber crime directly and instantaneously attack people in foreign jurisdictions, and often target people in multiple countries at once. Cyber criminals can also act with extraordinary speed, increasing the need for swift judicial cooperation among multiple countries to identify criminals and shut down operations in a timely matter. Extensive and integrated global cooperation is imperative to combat the threat. Bilateral arrangements between law enforcement or judicial agencies cannot keep up with cyber criminals, who operate without the impediment of national borders. A global convention would provide regulatory guidelines, a clearer definition of what constitutes cyber crime, and provide mechanisms for much-needed capacity building to help poor nations confront cyber crime. In addition, supporters believe a binding global treaty is feasible. The Council of Europe Convention on Cyber Crime, has been ratified and signed by countries outside of the European continent, for example. No: Opponents of a binding international cyber crime convention argue that the inherent difficulty of investigating cyber crime would render enforcement of a potential convention nearly impossible. Many cyber crime attacks are never detected [PDF], and cyber criminals are able to mask their identity with relative ease. Moreover, monitoring nations' compliance with a global cyber crime convention is unrealistic as the technology used to conduct cyber crime—such as computer viruses, worms, denial of service attacks, scripts—changes [PDF] so rapidly. In addition, efforts to control cyber crime threaten freedom of speech and open the door to invasions of private citizens' privacy, as well as impose limits on the sharing of information via the internet. Enforcement of anti–cyber crime regulations would almost certainly impose [PDF] heavy burdens on the private sector, and opponents of a global accord argue that independent businesses and citizens are better placed to regulate cyber crime themselves. For example, banks have the motivation and funds to invest in protecting their systems and international regulations would do little to improve on their efforts. Should the International Commission Against Impunity in Guatemala (CICIG) model be expanded for broader anticorruption efforts? Yes: Supporters of CICIG argue that it is one of the most successful anticorruption initiatives, and should be replicated outside Guatemala or expanded into a regional model. CICIG was first initiated [PDF] by the Guatemalan human rights ombudsman and subsequently earned support from the Guatemalan "government, civil society, institutions for the defense of human rights, UN agencies in Guatemala, and the churches" [PDF]. Because of this local support, CICIG has been better integrated [PDF] into the domestic judicial system. UN support for CICIG, and its hybrid structure that includes international investigators and prosecutors, are also innovative mechanisms that increased its effectiveness and legitimacy. By 2010, CICIG cooperation with Guatemalan prosecutors and investigators had led to the arrest of a former president for embezzlement, two former national police chiefs for drug connections, former defense officials for fraud, as well as ousted thousands of policemen, ten prosecutors, three supreme court justices, and an attorney general. Advocates of CICIG have lauded the program for its aggressive anticorruption efforts and for raising public awareness of organized crime. In 2010, Honduras and El Salvador consulted with the United States to tentatively establish country-specific models based on CICIG. Although the proposal has yet to come to fruition, supporters argue that it is the most effective method for combating corruption to date, and should be expanded to the region. No: Critics argue that the CICIG model is fundamentally flawed and unsustainable for several reasons. First, CICIG was formed at the request of the Guatemalan government; it is unlikely that other countries known for similarly high levels of corruption would voluntarily invite the UN to encroach on their national sovereignty. Second, the model is predicated on strong cooperation between the UN and the national government, but CICIG faced significant domestic resistance in Guatemala. The former head of CICIG resigned in 2010, arguing that the Guatemalan government had not fulfilled promises to reform the justice system, particularly its failure to adopt stronger anticrime and anticorruption legislation. The Commission suffered from poor oversight, and has conducted investigations in cases where "it has no business." The program has also been accused of interfering with Guatemala's justice agenda rather than helping bolster it and has not managed to get anticorruption legislation through the Guatemalan legislature. In addition, some contend that the body has disproportionately focused on high-profile arrests and prosecutions, skirting its mandate to transfer technical capacities to Guatemalan officials, which is critical to long-term sustainability and future progress. As a result of these serious flaws, CICIG was less popular than the corrupt Guatemalan attorney-general's office in October 2011 polls. Recent Developments January 2014: UNODC launches anti-counterfeit campaign The United Nations Office on Drugs and Crime (UNODC) launched a global campaign to educate consumers about the highly lucrative trade of counterfeit goods. The campaign, titled "Don't Buy Into Organized Crime," aims to raise awareness about the economic, social, and environmental impact of the illicit counterfeit goods trade and the transnational organized crime that such goods may fund. UNODC estimates that the counterfeit business amounts to $250 billion each year. A report [PDF] released by the campaign highlights the connections between counterfeit goods, corruption, and organized criminal groups, such as the Triads and Yakuza in Asia. January 2014: China crushes six tons of confiscated elephant ivory In a show of its commitment to international efforts to combat the illegal trade of ivory, China held a public ceremony to destroy six tons of ivory seized by Chinese authorities. The event came on the heels of a similar event in the United States, where U.S. officials crushed six tons of ivory in November 2013. Although the ivory trade was banned by the UN Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) in 1989, the illicit trade of ivory persists: according to a 2013 United Nations report [PDF], elephant poaching and ivory trafficking have increased in recent years. Some experts have criticized the destruction of ivory stockpiles, noting that these symbolic acts do little to combat the ivory trade and may in fact have the unintended consequence of increasing demand. January 2014: Marijuana legalized in Colorado On January 1, 2014, a Colorado state law legalizing the recreational use of marijuana went into effect. The first of its kind in the United States, the law permits state-licensed marijuana retailers to sell up to one ounce of marijuana to residents of Colorado who are 21 or older. Although cannabis remains illegal under U.S. federal law, the Obama administration has indicated that states will be given the freedom to determine their own laws on recreational and marijuana. Similar developments are taking place in Washington state, where retailers will be authorized to sell marijuana for recreational use later in 2014. Some experts contend that the legalization of marijuana in the United States will undercut Mexican drug cartels' profits, while others doubt that Colorado's statute will have any significant impact on transnational drug trafficking. June 2013: Microsoft and FBI hack back In its effort to disrupt cybercrime, Microsoft took part in "Operation Citadel" to disrupt more than a thousand botnets."Botnet" is a term that refers to a network of computers that have been targeted by malicious software (malware) that allows criminals to commit crimes—e.g., spread viruses, attack other computers, commit fraud—over the internet without the users' awareness. The botnets in question are allegedly responsible for $500 million in losses to financial institutions, banks, and consumers and are composed of over five million personal computers. Operation Citadel was supported by the FBI and other government agencies. April 2013: Wildlife crime and illegal forestry A United Nations conference in Vienna suggested that wildlife crime and illegal forestry has become the fourth-largest transnational crime in the world behind illicit trade in drugs, arms, and human beings, respectively. While the World Wildlife Fund estimates that the global trade is worth $17 billion annually, the United Nations Office on Drugs and Crime suggests that the illegal trade in wildlife and wood-based products in the Asia-Pacific region alone is worth $19.5 billion. April 2013: Sudanese ammunition linked to Ivorian civil war According to a United Nations report, army forces under the command of former Ivorian president Laurent Gbagbo used ammunition rounds produced in the Sudan during the four-month long civil war in the country. The United Nations Operation in Cote d'Ivoire (UNOCI) contends that these rounds were likely trafficked into the country following French and UN intervention on the side of newly installed president Outtara. If proven, the trafficking of the weapons would represent a breach of the arms embargo first imposed in 2004 on the Ivory Coast. April 2013: Transnational crime in East Asia The United Nations Office on Drugs and Crime completed its first comprehensive studyon transnational organized crime threats in East Asia and the Pacific in April 2013. The report, which studies twelve selected contraband markets including trafficking in humans, narcotics, stolen goods, and environmental products, found that these markets are worth $90 billion each year. A third of this value stems from drug trafficking with sixty-five metric tons of heroin worth $16.3 billion flowing through the region in 2011. The report also highlights the growing threat posed by fraudulent medicines and environmental crime related to extractive industries. Options for Strengthening the Global Regime Against Transnational Crime Introduction U.S. and international action are needed to manage the threat of transnational organized crime. These recommendations reflect the views of Stewart M. Patrick, director of the International Institutions and Global Governance program, and James Cockayne, codirector of the Center on Global Counterterrorism Cooperation. In the near term, the United States and its partners should pursue the following initiatives to bolster global anticrime efforts. Improve data with a trust fund for independent research The United States and its partners require more reliable data on transnational crime to appropriately allocate resources where they will achieve maximum impact—and reduce spending on ineffective programs. To accomplish this, the United States should work with likeminded governments to establish a United Nations Office on Drugs and Crime(UNODC) trust fund to improve data collection on a range of transnational criminal issues. UNODC currently compiles global statistics on drugs, human trafficking, and corruption, but the mechanisms are flawed due to limited in-country resources,manipulation of data, and low levels of participation from local institutions. The trust fund can be used to build the technical expertise of local staff that collect and analyze the data, and create a mechanism for ongoing training as noted in a report [PDF] by the United Nations Commission on Narcotic Drugs. An effective example for data analysis that could serve as a model is the "crime observatories [PDF]" program, managed by the International Center for the Prevention of Crime, which aim to improve the analysis on criminal data. Draw on lessons from counterterrorism efforts The U.S. experience fighting global terrorist networks since 9/11 can provide important lessons on how to weaken transnational organized crime groups. The United States should press to apply to transnational crime successful initiatives from the counterterrorism regime, such as the systems of joint threat analysis and international and public-private relationships, that the United States built to tackle the threat of terrorism. The U.S. government has already recognized how some counterterror strategies can apply to anticrime efforts, like the use of sanctions against criminal networks that resembled sanctions on al-Qaeda. It should push for broader international cooperation to reinforce their impact. In addition, the Financial Action Task Force recently combined its standards for money laundering and terrorist financing, which will effectively require states to improve general anti–money laundering regulations in order to comply with UN Security Council resolutions on counterterrorist financing. The United States should both revise domestic frameworks to comply with the updated standards, and insist that other nations follow suit. Finally, the United States should elevate the importance of combating international criminal networks in diplomatic relationships with existing allies in the "global war on terror," noting that the two are increasingly interconnected, as both sets of illicit actors increasingly form tactical alliances and appropriate one another's methodologies. Bolster anti–money laundering regulations The International Monetary Fund and World Bank estimate that between $2 and $3 trillion is laundered each year. But worldwide, only $170 million is detected and stopped annually. There are a number of areas where the U.S. government could work more closely with the financial sector to crack down on money laundering and address its intertwining with politics. Positive steps would include closer scrutiny of banking practices of public officials globally, as well as partnerships to develop more effective supervision of informal remittance networks and money transfer systems. Furthermore, current anti–money laundering standards in the United States require banks to know their customers. But evidence of significant illicit transactions suggests that these regulations need to be implemented more faithfully. The United States should also work more assiduously with international partners to clamp down on the use of offshore tax havens by U.S. corporations or individuals, since such havens are often used to launder the proceeds of illicit trade. In the longer term, the United States and its international partners should consider the following steps: Streamline U.S. government anticrime capacity building The United States should streamline existing capacity-building efforts, which are currently scattered across numerous domestic and international agencies. Currently, the U.S. Department of State bureaus of international narcotics and law andcounterterrorism, the Drug Enforcement Administration, the U.S. Agency for International Development, the National Institute for Justice, and Department of Defense—in addition to an array of international programs—all conduct operations to bolster the ability of developing countries to fight transnational crime. Building on the 2011 Strategy to Combat Transnational Organized Crime, the U.S. government should compile a database mapping its efforts to counter transnational crime across regions and issue areas, and use the results to improve coordination and reduce duplication of efforts. Support evidence-based drug policy The United States should support an evidence-based approach to tackling illicit drugs—and end its inflexible commitment to prohibition regimes that prioritize supply reduction over analysis of pricing incentives, strategies for cutting demand, and harm reduction programs. For example, heroin substitution programs have "led [PDF] to an overall reduction in the number of people addicted…[and] reduced levels of other criminal activity associated with the market." Generally speaking, global prohibition regimes perversely inflate the price of illegal drugs, creating tremendous market incentives for people to produce and transport these forbidden commodities. Studies [PDF] of alternative anti-drug policies have often proved not only successful in tempering incentives to sell illicit drugs, but have also not resulted in increased drug use. At times, these policies have actually decreased violence more than law enforcement interventions. These were the conclusions of the Global Commission on Drug Policy, whose nineteen members included a former U.S. secretary of state and former U.S. chairman of the Federal Reserve, and four former heads of state. The U.S. government must engage in a more open debate about policies to manage drug abuse. Combat criminal impunity In countries with fractured judicial systems, weak rule of law, or widespread corruption, violent criminal organizations can operate with impunity. The United States and its international partners should explore the possibility of setting up a complementary, international judicial framework that could prosecute criminals if local judicial systems are deemed incapable of holding a fair trial. The United Nations should revisit relevant early debates about the International Criminal Court (ICC), which some originally proposed should also try drug traffickers. Even as human trafficking has been labeled a crime against humanity, and as the number of people murdered by criminal organizations surges in parts of the world, many criminal groups operate with impunity [PDF]. In these instances, the United States should consider an international alternative to local courts. This might include prosecuting egregious violent crime under the mandate of the ICC, establishing a distinct body to try such cases, or setting up hybrid international-national courts.
    Report by International Institutions and Global Governance Program June 25, 2013 International Institutions and Global Governance Program
  • Regional Organizations
    Winds of Change in the War on Drugs: An OAS Report That Won’t Gather Dust
    It was half a century ago that UK Prime Minister Harold McMillan famously noted the “winds of change” buffeting the British Empire. Old verities were crumbling and Great Britain would need to adapt to a new political reality. Something analogous is happening today in the Western Hemisphere, where Latin American governments are rethinking their participation in Washington’s decades-long war on drugs. The latest evidence is a ground-breaking Report on the Drug Problem in the Americas, released May 17 by the Organization of American States (OAS). For the first time, the multilateral body is calling for a sober reassessment of the prohibition strategies the United States has backed since the Nixon administration. Most international reports simply gather dust. This one won’t. It offers the basis for a long-overdue conversation among the thirty-five members of the OAS. Produced at a cost of $2.2 million, the report was commissioned at last year’s contentious Summit of the Americas in Cartagena, Colombia. As I argued at the time, the April 2012 meeting revealed fissures in hemispheric attitudes. A new generation of Latin leaders was appealing for new approaches to combating the drug trade, ranging from demilitarization to decriminalization to legalization. Among the most outspoken was Otto Perez Molina of gang-ravaged Guatemala, who warned that he might abandon the anti-drug struggle to save his country from violence. But he was hardly alone. A plea for greater flexibility also came from Juan Manuel Santos of Colombia, whose country has received much of the $20 billion the United States has spent in hemispheric counterdrug efforts this past decade. Alas, President Obama, facing a November election against Mitt Romney, rebuffed efforts to discuss the range of potential options between current counterdrug policies and full legalization. The United States will no longer have the luxury of avoiding honest dialogue. In two weeks an OAS assembly convenes in Guatemala to discuss the 400-page report, which OAS Secretary-General José Miguel Insulza presented to Santos last Friday. The document actually has two parts. The first is an “analytical report” describing the scope of drug production, trafficking and consumption in the hemisphere, and the often devastating impact that addiction and drug-related crime and violence can have on the social fabric, economic fortunes, and political stability of OAS member states. The second is a “scenarios report” setting out four possible trajectories for the hemisphere, depending on national drug policy choices and coordination among them. The strengths of the report are its clear-eyed description of the current hemispheric drug problem and its willingness to set out policy alternatives, without endorsing any particular model. As Santos stated on May 17, “Let it be clear that no one here is defending any position, neither legalization, nor regulation, nor war at any cost.” The document’s objective is to provide “the basis for a long-postponed discussion.” Another intellectual breakthrough is explicit recognition that divergent national circumstances warrant “differentiated approaches,” tailored to local contexts and “individual concerns.” This echoes the finding of a 2011 report by the Global Commission on Drug Policy: Namely, it’s crazy to ask all countries to apply “the same rigid approach to drug policy—the same laws, and the same tough approach to their enforcement,” regardless of context. The report also firmly endorses a “public health” approach to the hemispheric drug problem, calling for a greater focus on treatment rather than incarceration of addicts. Predictably, media coverage has focusing overwhelmingly on just one possibility the report raises: the decriminalization and legalization of drugs, “starting with cannabis.” That’s a pity, for the document outlines a wide range of legal and regulatory alternatives, based on what is actually going on in OAS member states (as well as in individual U.S. states)—and the costs and benefits associated with these various strategies. The authors’ most creative decision was to offer four distinct scenarios describing what the hemispheric drug problem might look like in 2025, depending on the choices OAS member states make. They provide these alternative futures as thought experiments, labeling them as follows: “Together”: Under this scenario, OAS members understand the drug problem as a symptom of broader insecurity. They thus work to reform and reinforce state institutions so that governments can “control organized crime and the violence and corruption it generates.” “Pathways”: Believing that prohibition regimes and criminal sanctions are causing more harm than good, OAS states under this scenario experiment with “alternative legal and regulatory regimes, starting with cannabis,” and reallocate resources “from controlling drugs and drug users to preventing and treating problematic use.” “Resilience”: In this scenario, OAS members treat the drug problem as “a manifestation and a magnifier of underlying social and economic dysfunctions that lead to violence and addiction.” Their policy response is to focus on “strengthening communities and improving public safety, health, education and employment through bottom-up programs.” “Disruption”: In this fourth and darkest scenario, producer and transit countries conclude that they are “suffering unbearable and unfair costs” from the war on drugs. In response, they unilaterally defect from hemispheric cooperation, “abandoning the fight” or even “reaching an accommodation” with the cartels. These possibilities show how divergent understandings of the nature of the drug problem could encourage different responses, creating opportunities but also new policy challenges. The bleak “Disruption” scenario, the authors warn, “alerts us to what could happen if we are incapable in the short run of reaching a shared vision that allows us to join forces to address the problem, while respecting diversity in our approaches to it.” Going forward, the price of hemispheric cooperation on illegal drugs is likely to be greater tolerance —not least from Washington—for national experimentation.
    Blog Post by Stewart M. Patrick May 22, 2013 The Internationalist
  • International Law
    “Smuggler Nation”: America’s Illicit History Exposed
    Smuggling may not be the world’s oldest profession, but it must rank a close second. For as long as political authorities have sought to control borders, criminal networks have tried to circumvent them, evading customs duties and trafficking in illicit goods. Indeed, as Peter Andreas shows in his spectacular new book, Smuggler Nation: How Illicit Trade Made America, smuggling has been an enduring feature of the American experience since colonial times. It has been as important in shaping the development and global trajectory of the United States as the factors historians usually invoke—such as the liberal political principles of the nation’s Founders, the legacy of the frontier, the doctrine of American exceptionalism, the country’s geographic position, or its abundant natural resources. Once you read his fascinating account, you will never look at U.S. history the same way again. Andreas, a professor at Brown University, has been a prolific writer on transnational crime since the late 1980s. But unlike many political scientists—to say nothing of policymakers—he has a deep interest in and knowledge of history. This grounding, he writes, left him skeptical of much official and expert commentary on the contemporary challenge of cross-border criminality. According to this now conventional wisdom (and here I plead guilty too), accelerating globalization has created unprecedented opportunities for illicit trafficking. This leaves sovereign nation-states at the mercy of criminal networks. Andreas’ book is an invaluable corrective to such “presentism” when discussing transnational crime. As he makes clear, the arms race between states and criminals is a venerable one. There was never a time when states had total control of their borders. This is particularly true of the United States, Andreas’ chosen topic. Smuggling was omnipresent within the Thirteen Colonies. In fact, black market commerce in West Indian molasses, needed to distill rum, was integral to the transatlantic “triangle trade” involving African slaves as well as a means for the colonies to balance their current account deficit with the British Empire. It was Great Britain’s belated effort to crack down on illicit trade—which involved prominent New England merchants like John Hancock—that helped foment rebellion in the colonies. During the American Revolution, smuggling provided George Washington’s threadbare army with vital provisions it needed to defeat the world’s most powerful empire—just as illicit trade in cotton by Confederate blockade runners would prolong the Civil War more than eight decades later. One of Smuggler Nation’s most jarring insights is that the very process of smuggling—and official responses to it—have been integral to the process of state formation and state-building in the United States and around the world. Andreas offers a clever twist on the historian Charles Tilly’s famous formulation that “the state makes war and war makes the state”, writing: “states make smuggling and smuggling makes the state.” What he means is that state authorities “make” smuggling by defining what is (and is not) illegal and, so doing, force market activity for illicit goods into the shadows. As governments seek to tax cross-border commerce or to prohibit imports of particular items, smugglers adopted evasive strategies. These strategies led state authorities to build up new border enforcement and interdiction capabilities. This raised profit margins for risk-takers, creating even greater incentives for criminals to adapt—and so on, in a never-ending spiral of action and reaction. Thus the rise of smuggling and the rise of the state go hand-in-hand, even as the official definition of what constitutes illicit contraband evolves—from untaxed molasses in colonial days to illegally imported slaves during the early nineteenth century or from black market alcohol during Prohibition to trafficking in narcotics and migrant laborers today. Andreas also reveals that the relationship between the U.S. government and smugglers has been far more complicated than the common image of a beleaguered country gallantly defending its borders and citizens from vices. He provides numerous colorful examples in which senior U.S. officials have turned a blind eye to or manipulated smuggling—not only for private gain through corruption, but also for reasons of state, whether in commissioning privateers during the Revolutionary War, collaborating with Louisiana pirates (particularly the brothers Lafitte) during the War of 1812, or encouraging the Afghan mujahideen to profit from the opium trade following the Soviet invasion of 1979. He also reveals how some of the most successful individuals in American history made their fortunes from ill-gotten gains. These include America’s first millionaire, the fur baron John Jacob Astor, who gained his riches by trading alcohol to Indian tribes in violation of federal law. They also include prominent Rhode Island merchant John Brown—eponymous founder of the University that employs Andreas—who was the first American tried and indicted for violating the 1794 Slave Trade Act. Smuggler Nation reveals how official U.S. attitudes toward illicit trafficking changed with America’s rise to world power. In the first decades after independence, the United States not only turned a blind eye to intellectual property theft, it actively encouraged it. To aid the country’s development, U.S. officials encouraged Americans to evade British prohibitions on sharing industrial secrets and exporting advanced manufacturing machinery. Samuel Slater, lauded as “the father of the American industrial revolution,” arrived in the United States having smuggled himself out Britain, in violation of that country’s strict emigration laws. Given this history, it is ironic that the United States, which subsequently became a global economic powerhouse, is now the world’s chief defender of intellectual property rights (IPR), routinely lambasting China and other emerging countries for violating U.S. patents and counterfeiting U.S. goods. Today’s China, he suggests, is merely stealing a page from Alexander Hamilton’s Report on Manufactures, which can be read as endorsing “state-sponsored theft and smuggling.” Today, the United States is both the world’s leading market for smuggled goods and also the premier exponent of global prohibition regimes—as well as “source control” approaches that tend to focus on the supply side of the problem. Andreas shows the Sisyphean futility of attempting to enforce such prohibition regimes, particularly when it comes to drugs, since most eradication and interdiction efforts simply lead traffickers to shift production locations and transit routes without tackling the real problems of domestic demand. And he exposes the hypocrisy and selectivity of U.S. enforcement of many illicit flows, with the crackdown on illegal migrant labor from Mexico being a case in point. Smuggler Nation is an eleganty written book that injects invaluable historical perspective into contemporary policy debates. And yet I was left with at least three lingering questions. First, what impact has the globalization of finance—which permits instantaneous financial transactions around the globe and the development of offshore financial havens—had on the arms race between states and criminals? Second, it is often claimed that today’s criminals are more adept than their predecessors at diversifying product lines, adopting horizontal networks rather than hierarchical organizational structures, and making temporary alliances with other illicit groups—in sum, that they are more fluid and nimble. Is this accurate? Finally, what are we to make of arguments that today’s smugglers pose an existential threat to U.S. national security, given the growing “nexus” among terrorists, criminals, and WMD traffickers? Does such “threat convergence” present dangers of a different magnitude?  
    Blog Post by Stewart M. Patrick February 7, 2013 The Internationalist
  • International Organizations
    Collateral Damage: How Libyan Weapons Fueled Mali’s Violence
    Coauthored with Isabella Bennett, program coordinator in the International Institutions and Global Governance program. The violence that has plagued once-stable Mali since late 2011 should have come as no surprise to Western governments, for it is a direct function of NATO’s Libyan intervention. By adopting a “light footprint” approach in Libya, the alliance unwittingly contributed to a security vacuum that allowed countless weapons  to stream out of Libya and fuel insurgency, extremism, and crime in neighboring countries. One of these countries was Mali, where the flood of weapons from Libya helped a rebel coalition topple the democratically elected government in Bamako in May 2012 and—until the recent French intervention—allow a jihadist alliance to gain control over the country’s entire northeast. The relevant policy question is why neither the United States nor its international partners did anything to  staunch or mitigate the flow of Libyan weapons south. After all, Western policymakers were hardly ignorant of the danger. A surge in the illegal arms trade is common in postconflict scenarios, and policymakers were well-aware of the threat that Libyan weapons posed in a volatile region of fragile states unable (and a times unwilling) to police their frontiers. The U.S. intelligence community knew that Colonel Muammar al-Qaddafi, the deposed Libyan leader, had filled “well over a thousand” arms depots. The collapse of his regime left behind “miles of unsecured warehouses filled with rockets, machine guns, ammunition, and antiaircraft systems.”  Time magazine reported that within hours after Qaddafi’s death on October 20, 2011, Tuareg fighters from Mali that had served as his mercenaries were speeding home with pickup trucks full of weapons from the dictator’s warehouses. By January 2012, a United Nations report warned that governments in the Sahel were struggling to address a “spike in weapons proliferation, organized crime, and terrorism.” Three months later, militants armed with the weapons flowing out of Libya orchestrated a coup in Mali. That was only the beginning of the turmoil, however. Taking advantage of the national political chaos, the weak reach of the central government, and their new access to arms, an alliance between jihadists—including the terrorist group al-Qaeda in the Islamic Maghreb (AQIM) and Ansar Dine—with separatist Tuareg rebels, began to carve out a proto-state in the country’s northeast, imposing a draconian version of sharia law. By the end of 2012, these heavily armed elements were within striking distance of Bamako. Alarmed at the prospect of Mali becoming a permanent jihadist haven—and frustrated at delays in getting a UN-authorized force of African troops into the country–France launched an intervention on January 11, 2013. If observers were so conscious of the danger posed by Qaddafi’s weapons stockpiles, the question is: What could have been done to keep them out of the hands of militants and terrorists, and why wasn’t it done? From the outset, the Obama administration made it clear that the campaign in Libya would proceed with a “light footprint.” The international coalition would enforce a no-fly zone and conduct airstrikes to weaken Qaddafi’s forces, but let the Libyan rebels take responsibility for ground operations. As the air campaign wound down in August 2011, NATO issued a statement that the alliance would not deploy any troops to the country to help the Libyan National Transition Council (NTC) preserve law and order, stating that “It is a classic case for blue helmets.” Ian Martin, then the special representative of the UN secretary-general and head of the UN Support Mission in Libya, drafted a plan to help stabilize Libya in August 2011. It proposed “up to two hundred unarmed military observers plus an ‘interim protection force’ for the observers.” However, Martin soon informed the UN Security Council that the NTC had “rejected the idea of deploying any kind of international military force.” This resistance to a peacekeeping force was understandable: having come to power so recently, the victorious rebels were loathe to cede authority—and perceived sovereignty—to the United Nations. Unfortunately, the victorious Libyan rebels were also in no position, given their internal rivalries, to provide the basic security and rule of law that the country desperately needed. Implementing thorough security sector reform—including disarming militias, training new police and security forces, and establishing a functioning and accountable judiciary—would be the task of months and years. In such a context, controlling Libya’s arms depots and borders appears to have been an afterthought. To be sure, U.S. and NATO officials spoke with NTC leaders about securing Libya’s weapons stockpiles, and (according to an anonymous CNN interview with a NATO source) deployed intelligence officers to help the new authorities do so. But these discussions and operations appear to have focused overwhelmingly on securing Libya’s mustard gas and surface-to-air missiles (SAMs), rather than its massive stores of conventional arms. The Obama administration also provided a Swiss and a British nongovernmental organization with $1.5 million to prevent the proliferation of SAMs. (Both foundations had been working in the country to clear mines in Libya before the revolution.) Keeping chemical weapons and SAMs out of the hands of terrorists is of course crucial. But if there is a clear lesson of the Libyan experience for future military interventions, it is that such efforts cannot come at the expense of securing small arms and light weapons—which in this case undermined stability through the Middle East and North Africa. Moving forward, the United States should work with international partners and the United Nations to develop a new postconflict framework for securing weapons stockpiles—including but not limited to chemical weapons. It should also prioritize border control as a core task in reforming the security sectors of war-torn states. The United Nations should be in a position to offer such niche services and deploy trained personnel to accomplish these tasks, including where new authorities resist a fully-fledged outside peacekeeping force. More generally, the United States should work more assertively with international partners to control the illicit arms trade and associated criminal activities, that continue to destabilize states around the world. The French intervention in Mali may eliminate terrorist havens there, for example, but it is unlikely to eliminate the many regional pipelines, spanning West and North Africa, that transnational criminals have established to traffic in illicit weapons, as well as drugs and people. Clamping down on these established trafficking networks will require much better situational awareness, through a combination of remote sensing, investments in human intelligence, and information sharing among national governments. In one controversial proposal, U.S. Africa Command (AFRICOM) hopes to establish a drone base in the region to improve surveillance of illicit activities. But the United States should not ignore potential multilateral options, like having the the  UN Security Council direct the UN and its agencies (like the UN Office on Drugs and Crime) to monitor illicit arms flows in greater detail. According to Baffour Amoa, the president of the West African Action Network on Small Arms, third party assessments of legal weapons’ transfers in Niger could have identified stolen weapons from Libya and stopped them from falling into the hands of Malian rebels. Unfortunately, international proposals to tighten monitoring of the legal weapons trade—including through a new UN Arms Trade Treaty—have  failed in the face of ambivalence from China, Russia, and the United States. Finally, the spillover consequences of the Libyan intervention cast a pall over the “light footprint” model, suggesting that would-be intervenors should prepare themselves for regional blowback. Especially given the fiscal crises in NATO countries, leaders should invest in border control and control of weapons stockpiles to prevent the need for future, more costly interventions elsewhere. In the case of Mali, here’s hoping that the French mission includes attention to securing the country’s borders and its arms caches—and that the planned follow-on force of UN-mandated African peacekeepers, with U.S. and broader Western help, prioritizes the same tasks.
    Blog Post by Stewart M. Patrick January 29, 2013 The Internationalist
  • Security Alliances
    Refocusing U.S.-Mexico Security Cooperation
    U.S.-Mexico security cooperation, led by the Merida Initiative, is vital and must continue. But with Enrique Pena Nieto's inauguration, Mexico's political landscape is now changing, and the United States must adjust its strategy and support accordingly. Building on the lessons of the past five years, the United States should work with Mexico to implement the nonmilitary programs envisioned in the current Merida framework, in particular supporting and prioritizing Mexico's ongoing judicial reform, training police officers at the state and local levels, modernizing the U.S.-Mexico border, and investing in local community and youth-oriented programs. The Merida Initiative After Five Years The Merida Initiative was launched in 2007 under the George W. Bush administration, which promised $1.4 billion over three years to "support Mexico's law enforcement in the fight against organized crime." The Obama administration revised and expanded Merida's mission, moving from a heavy emphasis on military equipment to a more comprehensive bilateral strategy that seeks to reduce the role and influence of organized crime. The initiative now encompasses four priorities (called pillars): disrupting the operational capacity of organized crime, institutionalizing the rule of law, creating a twenty-first-century border to speed the flow of legal commerce and stop that of illegal goods, and building strong and resilient communities that can stand up to criminal intrusions. The main problem today is not Merida's design but its uneven implementation, with the gains in some areas offset by minimal progress in others. The United States and Mexico have been most successful in removing drug kingpins. Since 2009, Mexican authorities have captured or killed twenty-five of the thirty-seven most-wanted drug traffickers and substantially disrupted the operations of Mexico's best-known criminal networks. Many of these high-profile arrests resulted from bilateral intelligence and operational cooperation. Advances have been made as well in strengthening the rule of law, most notably the expansion and professionalization of the federal police. But progress has been slight beyond this particular law enforcement body, which represents just 10 percent of Mexico's police forces. Little discernible change has occurred within the justice system. Though a set of 2008 constitutional and legislative reforms set in motion a fundamental transformation of Mexico's court systems, the implementation of these changes has been exceedingly slow, so much so that the shift may not occur by the 2016 deadline, leaving Mexico's judicial future uncertain. On a practical level, rising crime and violence have exposed the weak capacity of the current justice system. With only one or two crimes out of every hundred resulting in a conviction, impunity reigns, providing no effective legal deterrent to a life of crime. Initiatives to modernize the border and build resilient communities (pillars three and four of the Merida Initiative) are even further behind. Though some innovative border management programs, such as the Customs Trade Partnership Against Terrorism—which helps trusted businesses avoid extensive border checks—have improved efficiency, the overall tenor of U.S. policy has been to increase barriers, slowing flows of legal commerce. Financially, investment in border crossings and infrastructure has not matched the exponential increase in trade crossing the border each year. Investment has lagged not only for new construction, but also for basic maintenance on existing infrastructure, leading to overwhelmed and at times downright dangerous facilities (a border crossing roof collapsed in 2011, injuring seventeen people). Stressed infrastructure has also led to traffic jams lasting up to eight hours, and has cost billions of dollars in trade losses, without drastically discouraging or disrupting illegal flows. The building of "resilient communities" too has largely been forgotten. The pillar's ambitious objectives of addressing the underlying socioeconomic and community factors behind rising crime rates have not yet moved beyond a few pilot programs in Ciudad Juárez. Finally, though talking often of co-responsibility in the drug war, the United States has done little to address the domestic factors that affect security in Mexico. The illegal flow of weapons and money southward continues unabated, and U.S. drug consumption remains high. (The 2010 National Survey on Drug Use and Health finds that 9 percent of Americans over the age of twelve used illegal drugs in the past month.) Changing Realities on the Ground As the U.S.-Mexico security cooperation strategy has evolved, so too have the realities on the ground. The most drastic shift is the rise in violence. When the Merida Initiative was signed in 2007, there were just over two thousand drug-related homicides annually; by 2011, the official number escalated to more than sixteen thousand. Violence also spread from roughly 46 municipalities (mostly along the border and in Sinaloa) to some 225 municipalities throughout Mexico, including the once-safe industrial center of Monterrey and major cities such as Acapulco, Durango, and Guadalajara. This increase in violence is not just the direct result of drug trafficking. Criminal organizations have diversified into numerous illicit businesses, including kidnapping, robbery, human trafficking, extortion, and retail drug sales, and as a result prey more directly on the local population. In some places the violence is as much the work of local gangs concerned with rivalries and honor as it is of drug transit. Prioritizing Civilian Institutions and Communities The need to adapt to the changing realities in Mexico coincides with political change. On December 1, 2012, Enrique Pena Nieto became president. During his campaign, he promised to shift the country's current security strategy away from combating drug trafficking toward reducing violence. The United States has an opportunity with this new administration and legislative branch to push past the current limits on security cooperation and implementation. The U.S. government should continue to provide between $250 million and $300 million a year in Merida money. These funds, which are managed by the State Department's Bureau of International Narcotics and Law Enforcement (INL), should prioritize civilian (versus military) law enforcement institutions, and fund training programs and other efforts to professionalize Mexico's police forces and transform its justice system. Long-term sustainable security will only exist when Mexico has a strong civilian-based rule of law, able to take on and punish all types of criminal activity. In addition, U.S. and Mexican joint efforts should concentrate on realizing the other so-far-neglected pillars of the Merida Initiative, particularly modernizing the border and engaging citizens and communities. On the border, the United States should upgrade its roads, bridges, and FAST lanes (express lanes for trusted drivers), as well as increase the number of U.S. customs officers, agricultural specialists, and support staff to help facilitate legal trade and identify and keep out illicit goods. To finance the multibillion dollar cost of modernizing the border, the U.S. Congress should pass the NADBank Enhancement Act (H.R. 2216) or similar legislation, to allow the North American Development Bank to support infrastructure projects in the border regions; currently the bank is limited primarily to environmental initiatives. And it should also reauthorize and refund the Coordinated Border Infrastructure Program, which managed federal funds dedicated for border area roads and infrastructure. In terms of reinforcing local communities, this involves not just particular programs but reorienting U.S. resources and programs in Mexico to focus on state and local law enforcement and justice institutions, where violence and insecurity are most concentrated and devastating. This will mean millions more in funds for the U.S. Agency for International Development's (USAID) community projects and youth programs, as well as INL's training of state and municipal police (as opposed to just federal-level officers). A shift to the local level would also enable policymakers and U.S.-supported programs to recognize and address the varying nature of the violence. In cities such as Ciudad Juárez, local gangs today are perhaps as threatening as transnational drug cartels. USAID should share models developed and implemented in U.S. cities to deal with gang problems, such as those in Boston and Los Angeles and Chicago's Operation Ceasefire initiatives. In addition, it should share the United States' experiences with community policing strategies, alongside basic training and vetting programs that cultivate a close working relationship between law enforcement officers and those they protect. The United States should also move its drug policies away from eradication and interdiction abroad and incarceration at home to greater funding for prevention and rehabilitation, in order to reduce the demand supplied by organized crime. Under the direction of the White House Office on National Drug Control Policy and the U.S. Departments of Health and Human Services, Education, and Justice, new policies should include the expansion of promising pilot programs that deal with addiction, such as Hawaii's Opportunity Probation with Enforcement (HOPE) program, which by swiftly punishing parolees who test positive for drugs has successfully lowered recidivism among a heavy-drug-use population. Though some will prefer to continue an eradication and interdiction–focused international drug control regime, the tens of billions of dollars spent during the now over forty-year war on drugs in Mexico and Latin America suggest the need for a revised policy approach. The outlined initiatives have a greater chance of reducing violence (if not drug flows) in Mexico by strengthening police forces, court systems, and communities. The border improvements, moreover, will likely benefit both the U.S. and Mexican economies, which can have indirect positive effects by providing greater legal opportunities to young people. In the end, Mexico's security will depend on the actions and decisions of Mexico. But there is much the United States can do to help or hinder the process. A transition to a demilitarized justice and a community-focused approach to U.S. security assistance will help Mexico establish more effective and long-lasting tools for combating crime and violence.
    Policy Innovation Memorandum by Shannon K. O'Neil December 5, 2012 Latin America Studies Program
  • Transnational Crime
    Are Criminals, Terrorists, and Bolivarians Teaming Up Against the United States?
    On August 16, Doug Farah, a senior fellow at the International Assessment and Strategy Center, published Transnational Organized Crime, Terrorism, and Criminalized States in Latin America: An Emerging Tier-One National Security Priority. The monograph contributes in a major way to our understanding of the increasingly complex relationships that exist among criminal networks, terrorists, and sovereign states. One of its most original contributions is to get away from the tired conventional wisdom about “failed states”—which suggests that it is the world’s basket cases that present the greatest opportunities for exploitation by illicit actors. In Weak Links , I’ve also suggested that the most dysfunctional, chaotic, or even collapsed states, do not provide conducive environments for most forms of crime (or for transnational terrorists, for that matter), since they provide little operational security from interdiction and are often too far removed from the sinews of global commerce. Farah’s monograph takes that critique to another level, showing how variable the relationship between transnational criminals and states can be. He usefully distinguishes among three “ideal types” of states that facilitate TOC: Shell states: This category encompasses weak and failing states that are legally sovereign but possess anemic institutions and unprotected borders, and alternatively governed regions in which illicit actors can operate with impunity. Such weak states—Farah calls them “shell states”—are easily captured or taken hostage. For example, tiny Guinea-Bissau, a country with miles of unpoliced coastline and dozens of clandestine airstrips, has become a major throughfare for Andean cocaine headed to Europe. Another sub-category here might be the breakaway republics or statelets like Transnistria, which some have called the “Walmart” of illicit activity. Fragile states: This intermediate category includes fragile states that are slightly stronger but still have intense levels of corruption that transnational criminals can exploit. They also tend to have geographic areas that are essentially outside the control of the national government and national law enforcement where illicit nonstate actors can substitute their own form of governance, and even provide social services in some cases. Many of these take the form of “Swiss Cheese” states; there are pockets of functionality alongside institutions that have been subverted for criminal purposes. In the Central American states of Honduras and Guatemala, for example, nonstate groups effectively control swaths of land and portions of cities—and law enforcement has little ability (and sometimes little inclination) to disrupt pipelines of illicit goods, people, and money. Functional criminalized states: Then there are the states that Farah considers truly dangerous—and which have gotten rather little attention. These are “stronger” functional states, but criminalized ones in which the institutions of sovereignty have been suborned—where the government participates directly, indeed sponsors, criminal activity as an element of statecraft, diverting and deploying the very emblems and accoutrements of state sovereignty—shipping registries, civil aviation, passports, diplomatic immunity, etc.—to facilitate and (not least) protect criminal activity. The state, in this scenario, becomes a fully-functioning criminal enterprise, like Charles Taylor’s Liberia in the past (which was only “failed” in aspects that Taylor did not care about) or like today’s North Korea, the classic “Soprano State.” An argument could be made that Hun Sen’s Cambodia (where the ruling family has exploited illegal logging) or the military regime in Burma (involved in numerous criminal activities) also fit. Within the Western Hemisphere, Farah places in this category Hugo Chavez’s Venezuela and the rest of the Bolivarian alliance. A fundamental point that Farah’s analysis underlines is that we often pay too much attention to the baseline capacity of a state to combat transnational crime, without focusing on the more basic question of its commitment. That is, does the state have any intention to suppress crime? If we accept the logic of Farah’s argument, it becomes clear that the wave of transnational organized crime that the world—and particularly the Western Hemisphere—has been experiencing, and which has led the Obama administration last year to issue its Transnational Organized Crime Strategy, is not simply a function of globalization and reduction of barriers. It is a function of conscious decisions by sovereign governments. To be sure, this typology (and I tried to create one in Weak Links), is artificial, inasmuch as the categories bleed into one another and real-life cases may straddle the boundaries. But in the same way that criminologists distinguish among source, transit, and destination countries for illicit commodities, it might be illuminating to create a global map that apportions countries of the world into these three categories. This method could then capture the distinctive “functions” or “services” performed by each class of state within the global criminal economy—as well as ask whether certain types of states are more or less associated with particular sectors of transnational crime (e.g. narcotics, money laundering, intellectual property theft). The paper’s second major contention—and this is one that has been controversial over the past decade—is that the connections between transnational criminals and transnational terrorists are growing. In the past, it has been commonplace to describe these relationships as at best episodic and tactical. In Phil Williams’ words, the two groups might appropriate each other’s methodologies—so that criminals engage in terror to intimidate citizens, authorities, or rivals, while terrorists sometimes turn to traffic in drugs and other illicit goods to raise funds, as in Afghanistan or the Sahel. But ultimately, the argument held, these groups had different objectives—financial, in the case of criminals, political or religious, in the case of terrorists. Farah seeks to explode that argument, pointing to the growing presence of Hezbollah in the Hemisphere and documenting its links to major criminal organizations, to insurgent groups, and indeed to governments. Some of this is persuasive, such as his description of fluid alliances, and “recombinant networks” that could exploit existing criminal pipelines to traffic in various kinds of commodities and channel illicit profits. But I was not always persuaded these were more than alliances of convenience, at least when it came to the relationship between Latin American transnational organized crime groups and terrorists from outside the region. Nor do I think that the threat of WMD trafficking through such networks was as acute as he seems to suggest. To begin with—involvement in WMD trafficking—at least when it comes to nuclear trafficking—would presumably need to occur with the connivance of state authorities in possession of fissile material or weapons themselves. And it is hard to believe, particularly given WMD forensics, that a government—say Iran—would transfer those weapons or WMD materials to a nonstate actor whose behavior it, in the final analysis, cannot control. That would be a tremendous existential risk to assume. Farah’s third major argument is that we must take the ideological, political and security challenge posed by the Bolivarian states seriously. Although it is tempting to dismiss Chavez as a buffoon, Venezuela under his leadership has formed what he considers an alliance of criminalized states with Correa’s Ecuador, Morales’ Bolivia, and Ortega’s Nicaragua. As is well known, all four countries share an anti-American agenda, seeking to reduce the dominance of the United States in hemispheric affairs, while advancing their own populist goals. The real significance of the Bolivarian bloc, Farah suggests, is in the mutual diplomatic support it offers its members in their parallel criminal activities, their support for the FARC and other leftist insurgencies, their growing alignment with Hezbollah and other transnational terrorists, and their increasingly deep enmeshment with extra-hemispheric powers unfriendly to the United States—most notably Iran, which has been quietly expanding its political, military, intelligence and economic presence and ties in the region. In the end, I wasn’t entirely convinced that the Iran-Bolivarian alliance represents a true Tier One security threat to the United States, as opposed to (in the title of a recent book) an “Axis of Annoyance”. To be sure, both sides share a mutual antipathy toward the United States. But the manuscript may overestimate the depth of Iranian-Bolivarian solidarity, as well as the staying power of the Bolivarian regimes themselves. Whether these populist regimes continue to wield influence or prove to be a sideshow would seem to be hugely dependent on the continued presence of Hugo Chavez and the high price Venezuela can command for its oil.  Furthermore, the growing presence of China and Russian in the Bolivarian countries—about which Farah frets—could very well be just another result of globalization, and hold benign implications for U.S. national security.
    Blog Post by Stewart M. Patrick September 10, 2012 The Internationalist
  • International Law
    Guest Post: No Slaves Were Used in the Writing of This Blog Post
    Below, my colleague Isabella Bennett, a research associate at the Council on Foreign Relations, offers an assessment of how to reduce human trafficking. The latest estimates by the International Labor Organization state that nearly 21 million people are victims of forced labor—and a significant amount of this suffering is fueled by every day products available on American shelves. In Bloomberg Business Week, E. Benjamin Skinner documents how fish caught by slaves made their way onto plates in the United States. The path is convoluted: Indonesian recruiters deceived desperate men looking for work. Ship captains on the Korean Melilla 203 ship abused the laborers—forcing them to toil for as long as thirty consecutive hours, subjecting them to sexual abuse, and refusing to properly compensate them. New Zealand companies purchased the fish (and New Zealand environmental inspectors reportedly overlooked the slavery and responded to a plea for help by saying, “Not my job”). Finally, U.S. distributors bought the catch, which wound up on American dinner tables. By ratifying the Trafficking in Persons protocol to the UN Convention on Transnational Organized Crime (TIP protocol), 151 countries around the world have agreed to criminalize human trafficking within their borders. Article 10 of the protocol also commits states to exchange information with foreign authorities and cooperate with foreign law enforcement agencies to prevent and detect human trafficking. Meanwhile, at sea, the vast majority of major economies engaged in global trade have ratified the UN Convention on the Law of the Sea (UNCLOS). (The United States stands as an important exception and is not party to UNCLOS, but has ratified the TIP Protocol.) Part VII, Article 99 of that accord requires states “to take effective measures to prevent and punish the transport of slaves in ships authorized to fly its flag.” And yet, these international frameworks are loosely monitored and do not foster enough cooperation among international law enforcement agencies. In particular, this case underscores one of globalization’s major challenges: the number of sovereign jurisdictions involved in one crime. Indonesian authorities were either not aware of the crime, or chose to overlook it. Korean authorities, under whose flag the ship sailed, did not investigate the labor standards onboard Melilla 203 (South Korea has not ratified the TIP protocol, but did neglect its treaty obligations under the UNCLOS, which it has ratified). And New Zealand authorities failed to identify the slave labor on ships docked in their harbor. Human trafficking is notoriously difficult to investigate and prosecute due to its clandestine nature, corruption of local authorities, mobility of traffickers, and underreporting because victims fear for their safety or that of their families. However, challenges are compounded when only one country oversees a single link in the chain.  Separate law enforcement agencies charged with investigating and prosecuting crimes are constrained by national boundaries, while the illicit actors permeate borders with ease. The regime is wildly vulnerable to exploitation. In theory, Interpol coordinates among sovereign jurisdictions, but with an annual budget of $78 million (59 million euros) in 2010, the organization hardly makes a dent in human trafficking worldwide. Indeed, in all of 2011, Interpol reports only one operation on its website. In that operation, Interpol agents assisted Ghanaian police to rescue children between the ages of five and seventeen who were forced to work on fishing boats in Lake Volta. Given that Ghana exports roughly 11 percent of its fish, it is probable that the catch traveled well beyond its national jurisdiction. In total, the Interpol-supported operation rescued 166 children. That amounts to .0000079 percent of the estimated victims worldwide. Law enforcement operations cannot be expected to tackle human trafficking alone, and rescue is not always a viable solution. High demand for cheap goods, opaque supply chains, and low consumer awareness are underlying structural conditions that contribute to the prevalence of labor trafficking. Seventy-eight percent of U.S. families reported choosing organic foods in a November 2011 survey, despite the fact that they are often more expensive. In a new Gallup poll, 5 percent of Americans identify as vegetarians for environmental reasons or because they object to the inhumane practices of many meat producers. Is there even a word to describe people who choose to eliminate slave-made goods from their daily lives? How often do we see asterisks and a note that ingredients in a meal were harvested freely by people being compensated according to domestic or international law? The American Humane Association has trademarked the “No Animals Were Harmed” ® disclaimer, and yet, no such tagline exists for cruelty to people. In the Melilla 203 case, McDonald’s refused to purchase the fish from the New Zealand supplier because it requires all of its suppliers to submit to third-party audits on its labor standards. The 2010 California Transparency in Supply Chains Act of 2010 requires companies that operate in California with an annual worldwide profit that exceeds $100 million to “disclose what efforts, if any, they have taken to eliminate human trafficking from their supply chains.” This is a laudable first step. Companies like McDonald’s that prioritize the elimination of slave labor from their supply chains would benefit from printing the fact on their products. As consumers become more conscious of their purchases, a label on a box that distinguishes their product—“This company and its suppliers submit to third-party audits on its labor standards” or “No slaves were used”—would go a long way. For their part, countries, or even U.S. states with large economies where multinational companies have a large stake, should lead the way by requiring companies to publish such taglines on products.
    Blog Post by Guest Blogger for the Internationalist July 31, 2012 The Internationalist
  • Transnational Crime
    The Google Ideas Summit: Some Reflections
    The Council on Foreign Relations (CFR) partnered with Google Ideas and the Tribeca Film Festival to convene a major summit on “Illicit Networks: Forces in Opposition” (INFO) in Los Angeles, California, that explored the potential of technology to “expose, map, and disrupt” illicit networks around the world, and to empower individuals, civil society, governments, and corporations to fight back. These closing remarks were delivered at the INFO summit on Wednesday, July 18. I have worked at the Council on Foreign Relations for four years, and this is without a doubt the most exciting initiative I have worked on during that time. On behalf of CFR, I want to thank Jared Cohen and the whole Google Ideas team for their incredible work in putting on this INFO Summit—and inviting us to collaborate on it. It is hard to imagine any other company pulling off what you have accomplished here—to convene in one place the world’s leading investigative journalists, premier computer engineers, current and former anticrime fighters, and, most poignantly and inspirationally, survivors who have transcended their own suffering at the hands of illicit networks to fight for a better world. It was a bold move for Google to take on this agenda, given the potential risks—and the expectations you have now created. But after listening to Eric Schmidt speak about using technology to ensure “freedom from fear,” it is clear that Google is a different sort of company. Now only a madman would try to summarize what we have learned over these two extraordinary days. I’ll just offer a few reflections based on insights we heard from this stage and in the labs. The summit confirmed a few assumptions we had going into this project: The illicit economy is pervasive. It is not something that takes place on the margins of global commerce—it is deeply embedded in globalization. And each of us here is linked to it, wittingly or unwittingly, by the choices we make—whether it is doing something complicit, like buying illegal drugs or pirated goods, or simply purchasing goods, like clothes or food, whose supply chains depend on slave labor. When it comes to data on the illicit, we are often flying blind. We hear lots of numbers tossed around about the scope of money laundering or human trafficking. But much is pure guesswork. This is partly inevitable. Unlike Fortune 500 companies, cartels do not publish quarterly reports. But it is also because where data exists, we have often lacked the tools to sift through it and connect the dots. Illicit networks flourish in the darkness, where corruption is the norm and transparency is absent. This problem is most acute in so-called “mafia states,” where the government has become a full-fledged criminal enterprise—of which the “soprano state” of North Korea is the most glaring example. But no country is exempt from corruption. And where transparency is lacking, there is no way for citizens to fight back. The problem of illicit networks is simply too massive, too complex, for national governments to handle alone. Nimble criminal networks can hopscotch across sovereign jurisdictions and evade lumbering law enforcement efforts. Successful approaches will require more effective multilateral cooperation and stronger global institutions like INTERPOL. They require new, creative partnerships with the private sector and civil society. And these need to be bottom-up, not simply top-down. The good news from this summit is that illicit networks are not invincible. Forces of opposition do exist—and they can be mobilized in new, creative ways. Now, I often feel like the last analog guy in a digital world. But over the past two days I have seen time and again how we can harness information technology to combat illicit networks. We have witnessed the power of film to put a face on the victims of human slavery—and provide survivors with a voice to tell their own, compelling stories. We have seen how data-mining technologies can help investigative journalists expose illicit networks—from the global trade in body parts to the financing of Somali piracy. We have heard how engineers can help banks and regulators track flows of dirty money, name and shame miscreants, and shut down the world’s laundering centers. We have learned how risk assessment tools can reveal vulnerabilities in the transportation infrastructure—and harden the world’s chokepoints for trade and travel, from Dubai Ports to the Panama Canal. We have watched network analysts map the growing convergence among criminals, narcotraffickers, terrorists and insurgents. Finally, we have seen how social media and crowdsourcing can empower beleaguered citizens to report crime and violence, without placing their own lives at risk—and allow exploited workers draw global attention to sweatshop labor and slavery conditions. So yes, we all know technology is a double-edged sword that cuts both ways. But it is a weapon that we cannot afford to leave in the hands of criminals, while we unilaterally disarm. Now, before we pat ourselves on the back, let’s remember that our work has just started at this summit. I like to think that Google Ideas has created a new, licit network. And it is our job to keep that network alive and vibrant, to leave here committed to empowering the forces of opposition. Yesterday from this podium, Eric Schmidt invoked Franklin D. Roosevelt, so it is only appropriate to close with a well-known phrase from Winston Churchill, who attended a few summits of his own with President Roosevelt. This summit is not the end. It is not even the beginning of the end. It is, at best, the end of the beginning. The Council looks forward to working with Google Ideas, Tribeca Films, and all of you on this agenda in the months and years ahead. Thank you so much.
    Blog Post by Stewart M. Patrick July 19, 2012 The Internationalist
  • Transnational Crime
    How to Attack Transnational Crime
    Over the past two decades, as the world economy has globalized, so has its illicit counterpart. Criminal groups have appropriated new technologies, adapted horizontal network structures that are difficult to trace and combat, and diversified their activities. International trafficking in drugs, people, and illicit weapons, as well as cyber crime and money laundering have risen to unprecedented levels. CFR’s new Global Governance Monitor: Transnational Crime, tracks the international community’s response to this growing scourge. By definition, transnational crime crosses borders—and increasingly hopscotches across multiple sovereign frontiers and even continents. But efforts to combat it remain corralled within national borders. Existing international legal frameworks focus too little on combating corruption and do not effectively address the market that underpins transnational crime globally. The current regime suffers from critical normative gaps, and lacks sensible strategies where norms exist. The UN Convention Against Transnational Crime is the central international framework governing crime, but it has not been implemented faithfully. The primary global institutions responsible for coordinating multilateral anticrime efforts, the UN Office on Drugs and Crime and Interpol, remain grossly underfunded. Bilateral programs like Plan Colombia and the Mérida Initiative channel significant funds toward the effort, but the aid is overwhelmingly targeted at military cooperation, interdiction, eradication, and prosecution, rather than more comprehensive solutions. The Monitor provides six recommendations to improve international frameworks to fight transnational organized crime: 1) Improve data with a trust fund for independent research All estimates of the magnitude of transnational crime are necessarily approximations; criminals obviously do not report their annual earnings or scope of activities, and published estimates are often politicized or rely on shaky data (PDF). The United States and its partners require more reliable data on transnational crime to appropriately allocate resources where they will achieve maximum impact—and reduce spending on ineffective programs. To accomplish this, the United States should work with likeminded governments to establish a UNODC trust fund to improve data collection on a range of transnational criminal issues. UNODC currently compiles global statistics on drugs, human trafficking, and corruption, but accurate figures are hard to come by, given limited in-country resources, manipulation of data, and low levels of participation from local institutions. The envisioned trust fund could be used to build technical expertise among local staff that collects and analyzes data, and create a mechanism for ongoing training (as noted in a report by the UN Commission on Narcotic Drugs). A model for this sort of effective data analysis is the "crime observatories" program, managed by the International Center for the Prevention of Crime. 2) Draw on lessons from antiterrorism efforts The U.S. experience fighting global terrorist networks since 9/11 can provide important lessons on how to weaken transnational organized criminal groups. The United States should work with international partners to apply successful initiatives from the counterterrorism regime, such as the systems of joint threat analysis and international and public-private relationships, and apply these to the transnational crime threat. The U.S. government has already taken some steps to apply counterterror strategies to anticrime efforts, for instance by applying sanctions against criminal networks that resembled sanctions on al-Qaeda. It should push for broader international cooperation to reinforce the impact of these national initiatives. 3) Bolster anti–money laundering regulations The IMF and World Bank estimate that between $2 and $3 trillion is laundered each year. But worldwide, only $170 million is detected and stopped annually. There are a number of areas where the U.S. government could work more closely with the financial sector to crack down on money laundering and address its linkage with political corruption. Positive steps would include closer global scrutiny of the banking practices of public officials, as well as new partnerships with foreign governments to develop more effective supervision of informal remittance networks and money transfer systems. Furthermore, current anti–money laundering standards in the United States require banks to know their customers. But evidence of significant illicit transactions suggests that these regulations need to be implemented more faithfully. The United States should also work more assiduously with international partners to clamp down on the use of offshore tax havens by U.S. corporations or individuals, since such havens are often used to launder the proceeds of illicit trade. 4) Streamline U.S. government anticrime capacity building The United States should streamline existing capacity-building efforts, which are currently scattered across numerous domestic and international agencies. Currently, the U.S. Department of State bureaus of international narcotics and law and counterterrorism, the Drug Enforcement Administration, the U.S. Agency for International Development, the National Institute for Justice, and Department of Defense—in addition to an array of international programs—all conduct operations to bolster the ability of developing countries to fight transnational crime. But these agency-led programs are often uncoordinated. Building on the 2011 Strategy to Combat Transnational Organized Crime, the U.S. government should compile a database mapping its own government-wide efforts to counter transnational crime across regions and issue areas, and use the results to improve coordination and reduce duplication of efforts. 5) Support evidence-based drug policy The United States should support an evidence-based approach to tackling illicit drugs—and end its inflexible commitment to prohibition regimes that prioritize supply reduction over analysis of pricing incentives, strategies for cutting demand, and harm reduction programs. Generally speaking, global prohibition regimes perversely inflate the price of illegal drugs, creating tremendous market incentives for people to produce and transport these forbidden commodities. Studies of alternative anti-drug policies have often proved not only successful in tempering incentives to sell illicit drugs, but have also not resulted in increased drug use. At times, these policies have actually decreased violence more successfully than law enforcement interventions. These were the conclusions of the Global Commission on Drug Policy, whose nineteen members included a former U.S. secretary of state and former U.S. chairman of the Federal Reserve, and four former heads of state. The U.S. government must engage in a more open debate about policies to manage drug abuse. 6) Combat criminal impunity In countries with fractured judicial systems, weak rule of law, or widespread corruption, violent criminal organizations operate with impunity. The United States and its international partners should explore the possibility of setting up a complementary, international judicial framework that could prosecute criminals if local judicial systems are deemed incapable of holding a fair trial. The UN should revisit relevant early debates about the International Criminal Court (ICC), which some originally proposed should also try drug traffickers. Beyond prosecuting egregious violent crime under the mandate of the ICC, other measures to combat impunity could include establishing a distinct body to try such cases, or setting up hybrid international-national courts. These policy recommendations reflect the views of Stewart Patrick, director of the International Institutions and Global Governance program, and James Cockayne, codirector of the Center on Global Counterterrorism Cooperation.
    Blog Post by Stewart M. Patrick July 9, 2012 The Internationalist
  • International Organizations
    How Transnational Crime Hinders Development—and What to Do About It
    Today, the Internationalist is writing from the floor of the United Nations in New York, where Secretary-General Ban Ki-moon and the executive director of the UN Office on Drugs and Crime, Yury Fedotov, among others, have gathered for the hundredth anniversary of the landmark 1912 Opium Convention and the 2012 International Day against Drug Abuse and Illicit Trafficking. To mark the occasion and attempt to progress in the world’s fight against transnational crime, today’s thematic debate focuses on drugs and crime as a threat to development. Below is a summary of my prepared remarks to the panel. Transnational organized crime is particularly damaging to developing countries. Global Financial Integrity reports that illicit outflows from developing countries—including the proceeds of corruption, crime, and false transfer pricing—are “approximately 7-10 times the amount of official development assistance (ODA) going into developing countries.” That means that for each dollar of foreign aid, several dollars are lost through illicit outflows. However, it is important not to allocate all resources and political will to fight crime in weak and failing states, despite the conventional wisdom that transnational crime flourishes disproportionately in such countries. The connection between crime and state weakness varies enormously by sector, as my book Weak Links explains. Crime is particularly prevalent in weak states when it comes to piracy, coca and opium production, arms trafficking (for destination countries), and some types of environmental crime. But other transnational crimes, such as money laundering, cyber crime, and intellectual property theft rarely occur in the world’s weakest states. From the perspective of transnational criminals, weaker is not necessarily better.  Criminals generally prefer to operate in countries with at least a modicum of political order, and with ready access to functioning infrastructure, including roads and banking systems. Traffickers value geography, convenience, exploitable infrastructure, and easy access to global markets at least as highly as they do the benefits of state weakness. The ideal drug hub has one foot in the developing world and another in the modern economy. (Mexico is a case in point.) Similarly, South Africa is a more promising hub for transnational crime than many of its neighbors. Across the board, transnational organized crime—to say nothing of local crime and corruption—is a huge obstacle to sustainable development, including the Millennium Development Goals. Crime and corruption degrade already weak state institutions, as criminals use resources from illicit activities to bribe law enforcement officials, neutralize courts, purchase or intimidate politicians and journalists, and engage business leaders in criminal activities. Cumulatively, this tears at the social fabric, undermines the legitimacy of the state, drives out licit economic activity, endangers public security, and can fuel insurgency and disorder. At the macroeconomic level, as the IMF emphasizes, crime and money laundering undermine the stability of financial institutions, increase the volatility of capital flows, and dampen foreign direct investment. Crime drains resources from more productive economic activities, and can even destabilize neighboring countries, as the spillover of weapons, drug trafficking, migrant smuggling, and violent gangs across Central America attests. The welfare losses are staggering. Throughout the developing world, billions are siphoned away from urgently needed public services like health care, clean water, and infrastructure. High levels of crime are heavily correlated with inequality, as the World Bank reports, as well as with a “brain drain” of the urban middle class to other countries. Estimates suggest, for example, that if Jamaica and Haiti could reduce their homicide rates to the levels of Costa Rica, their growth rate would increase by 5.4 percent annually. And yet countries are caught in a trap, because the narcotics street value exceeds the value of the entire legal economy, creating enormous perverse incentives for people to engage in crime. Organized crime directly hinders achievement of the MDGs in a number of ways: Where crime is rampant, MDG 1—lifting humanity out of poverty—can be a mirage. Over the past twelve months, Afghans paid an estimated $2.5 billion in bribes—a sum equivalent to nearly a quarter (23 percent) of Afghanistan’s GDP. Crime can also devastate public health. One quarter of all HIV/AIDS cases in Central Asia, China, and Russia stem from IV drug use, primarily heroin. Increasingly, counterfeit medicines also undercut efforts to fight treatable illnesses.  A 2012 study revealed that one third of anti-malarials in Africa and Southeast Asia were fake, leaving patients without proper treatment as well as contributing to the growth of resistant strains. Rampant environmental crime undermines sustainable development. For instance, Global Witness has documented rapacious illegal logging in many countries, not least Cambodia and Myanmar. Illegal fishing, a multibillion-dollar enterprise, has emptied many coastal waters off Sub-Saharan Africa, costing African countries billions. Given trends in demography, human settlements, and resource scarcity, crime is likely to become a greater threat to development in the future. Rising global population and rapid urbanization will facilitate increased crime. Growing competition for essential commodities like food, fuel, and water will encourage black markets—and associated violence—to grow. Despite these devastating effects of crime on development, efforts to mainstream combating transnational organized crime into development initiatives remain in their infancy. Both national governments and international institutions need to prioritize cooperation between development and anticrime initiatives or agencies. Community policing, border control, judicial and corrections reform, anticorruption measures, and alternative livelihood programs must be mainstreamed into development interventions. Another controversial reform would be to expand the Security Council’s repertoire of multilateral sanctions beyond terrorists to include the listing and sanctioning of known criminal individuals and organizations—a strategy which the United States has now employed against groups like the Yamaguchi-gumi in Japan. In addition, countries can feasibly reduce the attraction to criminals of conflict and post-conflict environments. Rather than treating it as an afterthought, UN peacekeeping missions or other international forces should have an explicit mandate to address serious criminal activity and to share intelligence with international bodies such as INTERPOL and UNODC. Furthermore, countries need to bolster multilateral tracking of money laundering, policing financial havens, and recovering stolen assets. Beyond expanding Financial Action Task Force efforts to expose non-cooperating jurisdictions, countries also need to allocate more resources for the UNODC/World Bank StAR Program to assist transitional governments in obtaining assets stolen by kleptocratic regimes. The G20, OECD, and Financial Stability Board should also push for new rules requiring major banks to report any deposits that are potentially the result of corrupt practices—just as they already do in potential terrorist financing cases. To fight corruption, UN member states should look to a promising pilot project, the International Commission Against Impunity in Guatemala. By 2010, CICIG had helped to oust thousands of corrupt policemen, ten prosecutors, three supreme court justices, and an attorney general. Moreover, the innovative use of technology can empower citizens to fight corruption and improve transparency. The Program on Liberation Technology, for example, at Stanford University is researching the use of mobile phones to text individuals facts on government spending (per public record), so as to empower local communities with the knowledge of what they should receive and what they do receive. Other examples, such as Ipaidabribe.com, cell-phone medicine verification to detect counterfeits, and anonymous crowd sourcing technology, allow citizens to fight back against crime. These technologies also promise to provide sounder data that can inform better policies.
    Blog Post by Stewart M. Patrick June 26, 2012 The Internationalist
  • Transnational Crime
    How Globalization Affects Transnational Crime
    With drug legalization increasingly debated by world leaders, the Internationalist talks to Phil Williams about the explosion of transnational crime in a globalized world. “Transnational criminals have been one of the biggest beneficiaries of globalization.” Globalization facilitates international trade but also increases the difficulty of regulating global trade; traffickers and smugglers have exploited this. Williams adds that globalization has increased inequality around the globe, and that “its disruptive effect has actually caused people to have to go into organized crime and operate in illicit markets as coping mechanisms.” The global financial system has undergone widespread deregulation since the 1970s. This has allowed illicit actors to launder the proceeds of crime more easily. “We’ve got some reregulation to try to deal with money laundering…but it’s not particularly effective,” says Williams. http://youtu.be/Ipmpv0R1D0s Watch this video on youtube here. Terrorists, insurgents, and warlords all rely on illegal activities as a funding mechanism, says Williams. “Sometimes, when they engage in a criminal activity, they come into contact with criminal organizations, but for the most part, the direct group-to-group link is not that important. It’s just a market activity or a supplier relationship,” he notes, disputing the idea of a “crime-terror nexus.”  “There’s no single model of a criminal organization.” The conventional wisdom that criminal networks have abandoned their hierarchical structure, Williams says, obscures the fact that criminals adopt myriad distinct structures depending on their circumstances—and some of them remain hierarchical.  Illicit networks are challenging to states, because states are military and diplomatically organized to deal with other states. Governments around the world “have found it very hard to adapt to nonstate or sovereignty-free actors.” This video is part of The Internationalist, a series dedicated to in-depth discussions about leveraging multilateral cooperation to meet today’s transnational challenges.  
    Blog Post by Stewart M. Patrick May 31, 2012 The Internationalist
  • Global
    How Globalization Affects Transnational Crime
    With drug legalization increasingly debated by world leaders, CFR’s Stewart Patrick and Phil Williams of the University of Pittsburgh discuss the explosion of transnational crime in a globalized world.
    Explainer Video with Stewart M. Patrick and Phil Williams May 30, 2012
  • Transnational Crime
    Illicit Networks and the Rise of “Mafia States”
    The conventional narrative of transnational crime describes a weak nation-state exploited by sophisticated organized criminal groups. In this zero-sum worldview, the state loses control as nonstate actors gain power. In some countries, however, government institutions—from executive bodies to intelligence services to central banks to the police—are involved in a  range of illicit activities. In a recent piece in Foreign Affairs, Moises Naim labeled this phenomenon “mafia states,” arguing that the new breed of criminal statehood poses a particular threat to the international community by “blurring the conceptual line” between the licit and illicit worlds. To analyze the structure of illicit networks and assess gaps, weaknesses, and opportunities in anticrime efforts, Google Ideas and the Council on Foreign Relations launched a new roundtable series. The second roundtable, “Illicit Networks: Mafia States, Nonstate Actors,” convened fifteen experts to deconstruct the concept of ‘mafia states’ and explore its role in illicit networks. The discussion (summarized here) yielded several important observations. When it comes to the illicit, the traditional dichotomy between states and nonstate actors is no longer applicable. Criminal organizations are inherently attracted to states or regions where there are market opportunities, oversight is limited, institutions are weak, corruption is pervasive, and rule of law is absent. But illicit networks can also be harnessed by the elements of the state to advance political interests and reap profits. To varying degrees, states such as North Korea, Venezuela, Myanmar, Guinea-Bissau, Russia, and Ukraine, among others, rely heavily on profits from transnational crime. Existing multilateral tools to combat transnational crime, however, have yet to acknowledge and adapt to this convergence between states and organized crime. International treaties and initiatives primarily target nonstate criminal actors, and rely on states to comply with and implement recommended policies—a tactic that is significantly undercut when the state itself is involved in illicit activities. Mafia states are not a “new” threat. States have long been engaged in, or complicit with, illicit activity. For centuries, states smuggled goods to evade taxes and tariffs. For example, both the American Continental Army and the Confederate Army depended on transatlantic smuggling during the Revolutionary War and Civil War. And no contemporary criminal organization rivals the power and influence of the British East India Company, which held a monopoly on the global opium trade in the late eighteenth and early nineteenth centuries. But the establishment of new global prohibition regimes, particularly over the past several decades, exponentially increased the number of illicit commodities—including trafficking of endangered species, counterfeit products, and drugs—which were previously unregulated. Criminal groups as well as states have exploited the increasing demand for prohibited goods and the high profits available to those who assume the risks of trading in them. The term “mafia state” oversimplifies a broad spectrum of criminal-state relationships. There are weak and failing states like Somalia that are coopted or directly challenged by criminal organizations; “swiss cheese” states that have pockets of integrity and holes of criminality, such as Guatemala; and states that are fully functioning criminal enterprises, epitomized best by North Korea—also known to U.S. officials as the “Soprano state.” But illicit activity is not confined to weak or rogue states. China’s counterfeit industry employs millions of workers, and several high-ranking officials in Venezuela have been officially labeled “drug kingpins” by the U.S. government. In order for law enforcement to be effective, policymakers need a sharper and more nuanced understanding of the nature and functions of illicit networks. State collusion in transnational crime exacerbates law enforcement challenges. As sovereign entities, government institutions and officials enjoy a certain degree of protection and noninterference. Sheltered by the state apparatus, criminal groups can conduct their operations in relative security and stability, as well as gain access to critical tools of their trades, from passports to shipping registries to false end-user certificates for arms transfers. The usurpation of sovereignty for illegal activities plays havoc with global law enforcement cooperation. To address and overcome these challenges, Moises Naim proposes establishing “coalitions of the honest” among countries that meet certain standards of conduct. The Financial Action Task Force (FATF), for example, helped to set new norms for anti-money laundering and increase transparency in financial transactions. Critical information gaps impede progress. The activities of illicit networks are inherently difficult to track and quantify. Official statistics from international institutions and organizations are often based on fuzzy estimates provided by states themselves, which have a stake in the outcome (whether it is to increase financial assistance or mask the problem). Moreover, there is no single institution that collects solid data on illicit networks or facilitates information sharing among political authorities around the world. Technology may help overcome this information vacuum, if it is harnessed to organize, visualize, and publicize data in the public domain. Recent user-generated initiatives such as I Paid a Bribe, a website where citizens report instances of corruption, offer promising models for the future. 
    Blog Post by Stewart M. Patrick May 24, 2012 The Internationalist
  • Americas
    Countering Criminal Violence in Central America
    Play
    PAUL STARES: Good day, everybody. Good day, everybody. Welcome to the Council on Foreign Relations. Thank you for coming here today. Some of you know me. Many of you don't. I'm Paul Stares. I'm a senior fellow here at the council, and I also direct its Center for Preventive Action -- excuse me -- under which -- whose auspices this meeting is being organized and the report was commissioned. The purpose of the meeting is to discuss the growing threat of criminal violence in Central America. And we're particularly concerned with the Northern Tier countries, Honduras, El Salvador and Guatemala. The murder rates and other criminal -- violent criminal behavior has been skyrocketing. It's particularly disturbing that -- how this has escalated in recent years, and I think it's now amongst the highest in the world. Besides the obvious public security implications of this -- these murder rates, there are clearly other consequences in terms of democratic governments in those countries as well as economic performance, all of which have significant interests or implications for U.S. interests in the region. So with this sort of general concern in mind, we, the Center for Preventive Action, commissioned one of our council special reports to look at this, and we were very grateful that Michael Shifter, who is president of the Inter-American Dialogue here in Washington, agreed to do it. And he's produced an excellent report, and I think it actually complements another report that we did on the drug war in Mexico, which I commend to you. We're going to hear from Michael about the report shortly. But first, we're very grateful that Jose Fernandez has agreed to also speak here today. Again, many of you know him. He is the assistant secretary of state for economic and business affairs, has long- standing interest and activities related to Central and Latin America in general. I will dispense with a full description of his bio; it's there for you to see. He is going to talk for 15, 20 minutes or so, I'm not sure exactly how long, to give the State Department's -- U.S. government perspective on this challenge and other related issues. And then, as I say, we will hear from Michael and then open it up for Q-and-A. I just want to remind everybody that this meeting is on the record. There are press present, which we are -- obviously welcome you here today. But it is on the record, rather than the normal council rules of not for attribution. One last housekeeping request: Please, if you have BlackBerrys and other electronic devices, turn them off, or at the very least turn them to mute if you do absolutely have to stay in touch with your respective motherships. (Laughter). I understand that that is hard to do, but please, if you could at least mute them. So without further ado, I'm going to hand over to Jose. Again, thank you here -- for being here today, and I look forward to your remarks. JOSE FERNANDEZ: Thank you. Thank you, Paul, and good afternoon, everybody. Good to see some friendly faces in the crowd, people that I haven't seen in a while, so it's good to be here. I'm delighted to be here. My lane isn't necessarily security, but Central America is a part of the world where I've been very interested in for a very long time. In fact, one of my first pro bono jobs as a -- as a lawyer was working in Central America leading the ABA's Rule of Law Committee in the '80s, those of you who were around then, to try and work on human rights in -- during the conflict years and on labor arbitration and things that to this day remain relevant in that part of the world. Clearly, one of the most urgent and complex challenges that we face in Central America is the dramatic decline in citizen safety, and that's why I'm delighted that Michael and the council decided to put together this report. The average murder rate in Central America ranges from -- depending on the country, but overall it's twice as large as Mexico's. Closer to home, it's -- some -- in some countries, it's 16 times the murder rate, 16 times what we see in New York City. And it's not just an issue of human tragedy, but it's also an issue that the crime and insecurity take a heavy toll not just on the victims, but also on economic growth. Last year the World Bank noted in their report that the direct cost of crime exceeds 9 percent of GDP in several Central American countries. And in addition to that, it has the impact of discouraging business investment, discouraging firms from expanding and creating jobs. And in El Salvador, which is a country that I -- that I'll talk about a little bit in a couple of minutes, it has one of the highest murder rates in the world. The World Bank has estimated that the rime and insecurity in El Salvador will cost the country almost 11 percent of its annual GDP. And in fact, it's projected that a 10 percent reduction in the homicide rate would boost per capita income by 1 percent. So you would still have an unacceptably high murder rate if you were able to cut it in half, but at least you'd have some growth in a country that sorely needs it. The U.S. is committed to helping Central American countries tackle their citizen security challenges. We do this largely through the Central American Regional Security Initiative, CARSI, which is an integrative program designed to work with our partners in the region to disrupt and dismantle the gangs and transnational criminal organizations that have generated so much of the crime in Central America. Between 2008 and 2011, fiscal years 2008-2011, Congress appropriated $361 million towards CARSI. And two weeks ago in Cartagena, the president announced that he intends to allocate an additional $130 million for CARSI in FY 2012 in recognition of the -- of the significant security challenges that you have in the region. But you know, the crime and the violence in the region is not just a result of organized crime groups and gangs. In fact, it's not even -- you could argue that it's not the result of the gun traffic that certainly goes on from south -- from the U.S. down south, although it is a contributing factor. But you know, there are a number of other factors that I think Michael's report addresses and that I think it's important to talk about, and that's the larger societal problems such as the lack of access to education, employment and an ineffective government presence in many communities and a sense of a weak state apparatus. Through CARSI, we work with government and regional organizations like SICA, la Sistema de Integracion Centroamericana, to ensure that U.S. assistance complements and reinforces the strategies and policies that the Central American countries themselves are implementing, both on a national and regional basis. And our support isn't limited to simply tracking down the criminals. We're working to deal with many of the issues that Michael's report addresses, the root causes of violence, from impunity, which he talks about -- the 90 percent number is one that's -- is shocking to many of us -- from impunity to lack of opportunity. We're working to build accountable institutions free from corruption, institutions that respect human rights and enhance the rule of law. That's what I was doing in the 1980s with the ABA Rule of Law Initiative. We're still doing it 30 years later. We're building partnerships to improve courts and prisons, train police and prosecutors and enhance educational systems and job training centers. And something that's important and that perhaps ought to be addressed in greater detail is we're working to build partnerships with political leaders, with civil society, but also with business and the elites in Central America that have to take a role, have to play a role in -- certainly in finding a solution to the crime. In addition to new partnerships with Central Americans, we're building partnerships across the Americas. One example is our cooperation with Colombia in Central America that's alluded to in the report. In Cartagena, President Obama and President Santos announced a new action plan for regional security cooperation at the Summit of the Americas, and that's something that we'll be putting place. And Colombia has been a wonderful partner for some of our efforts in Central America. But besides the hard-core security work of CARSI and other initiatives, we're doing a number of other things. And one of them I'd like to talk about is the Partnerships for Growth, PFG, which is something that I was very involved in last year and still continue to be involved. The Partnership for Growth with El Salvador is an agreement that we signed last November. And what it -- what that was -- it's an intensive and whole-of-government effort focused on creating broad-based, sustainable economic growth. And it started with something that was -- that I had assumed was done a lot in government, but I understand that it's really not that common, and it started with a joint Salvadorian-U.S. economic analysis of the economic constraints to El Salvador's growth. This was an agreement that called for that study to take place. The idea was that it would start from a -- from an honest, serious economic analysis and then would come up with the proposed solutions. It's one of four agreements that the U.S. has signed for a Partnership for Growth compact, the other three countries being Tanzania, Ghana, and one more that I will remember in a second. MR. : Philippines. FERNANDEZ: Philippines. As part of the partnership, the U.S.-El Salvador economic team conducted an extensive analysis, and it basically came up with two constraints that we were going to tackle as part of the agreement. One is climate insecurity, and secondly what's called low productivity in exports. You know, the Salvadorean economy is largely dependent on exports, and yet the Salvadorean -- the percentage of exports in the Salvadorean economy is way lower than the norm in other CAFTA countries. And so we looked at how we could address both of those constraints. We also spent a lot of time talking to thought leaders around the U.S. and also in Central America and here. Here I have to thank Michael and his Inter-American dialogue, and Peter, for hosting some of these meetings. And we came up with a joint action plan that we signed in November, as I mentioned. And to address insecurity, our two governments agreed to support institutions and programs to prevent crime and violence, including supporting units -- special units to combat crimes against businesses and in transit, against buses, which is a major issue in El Salvador. On payday, thieves, thugs would board the buses and just steal the salaries that people have gotten that day. So what was happening is that factory owners didn't announce what day people would get paid. So you could get paid on a Monday and then not get paid for another three weeks, simply because they didn't want to tell thieves when you'd be getting your paycheck, because that would just -- that would just cause more theft. And what happened is, in a couple of cases when the thugs and the criminals were not getting what they wanted from the buses, they burned them, and they burned them with people inside. And so we thought that in order to address the economic constraint, we also had to deal with the insecurity issue, and so we focused on transit, on buses. We agreed to work on professionalizing the justice sector institutions, again -- improving the effectiveness of the criminal justice system and enhancing the security of prisons -- again, things that Michael's report talks about. We also agreed to work together to create jobs for at-risk youth, including the creation of small businesses and working with our SBA, job placement, and also to support community policing throughout El Salvador. And then, to improve productivity, one of the things that we agreed to do was to undertake actions to improve the business climate, to facilitate infrastructure, which is a critical need in El Salvador, and also to improve the quality of education. And then probably the thing that I was very proud of is we forged an agreement -- we agreed to support the establishment of a national growth council, which is basically a council composed of some of the large business associations in El Salvador and businessmen and -women in El Salvador to have regular meetings -- and in this case it's happening once a week, I'm told -- regular meetings with the president, with the government to talk about what were some of the items, what were some of the initiatives that they were hoping that the government would undertake in order to promote a business -- a friendly business climate. So this is something that, as I said, started in November. We're very proud of it as something that we hope is different, because again, it started from a joint study and it was a joint agreement on the part of two countries. The last thing I'll talk about that fits in well with the report is what we're calling Domestic Finance for Development, which is a program announced by Secretary Clinton about a year ago, which basically tackles one of the items that's throughout the report that Mike talks about, and that's the weak state, the weak state apparatus. And DF4D, Domestic Finance For Development, starts from the premise that in order for countries to be able to own their development, ultimately they have to be able to pay for it. And when you look at the tax intake on the part of Central American government, as Michael points out, it's low by regional standards, it's low by national standards -- by international standards. So one of the things -- and as a result of that they, you know, they have trouble paying for education, for the basic services, for the court systems and the like. So one of the things that DF4D does is it works on tax administration. It doesn't get involved in what the actual rate -- tax rate ought to be. That's hard enough to do in this country. But what it does is whatever rate is agreed upon by the country, it talks about, how do you -- how do you collect it, how do you administer it. And then it says that if you're going to do that, then you're going to have to convince your citizens that those funds are not going to end up in a Miami bank account. So you've got to work on corruption, and you also have to work on transparency. The citizens have to be told where those funds are going to end. So this three-legged stool of transparency, anti-corruption and tax administration is part of DF4D. It's something that we are working on in both El Salvador and in Honduras, which are two of the countries that I think need it the most. So our hope is that, through DF4D, the -- Honduras and El Salvador will be able to increase their capacity to generate domestic revenues, to fund their own crime prevention and development programs and thereby reducing their dependency on foreign assistance. So these are some of the ways that we're working on the issues that are outlined in Michael's report. I was heartened to see that many of things that we're trying to do were things that are in the report, but I'm more interested in hearing his thoughts and your thoughts on what are some of the things that are in the report that we perhaps are not doing yet. So with that, let me just turn it over to Paul and Michael. Thank you. STARES: Terrific. Thanks very much, Jose. And I think that's a good -- very good platform for you, Michael, to run with, if that's the right -- MR. : Correct. STARES: -- mixing metaphors. (Laughter.) MICHAEL SHIFTER: Thank you. Thank you, Paul, and thank you, Jose, for agreeing to join us and for your -- for your excellent comments. And I want thank everybody for coming. I see a lot of friends and colleagues here in the room. I look forward to a good exchange, discussion. I particularly want to thank and recognize Carla Hills, who's co- chair of the dialogue of the council and a lot of other organizations I don't -- (laughter) -- some day I'll understand how she does it all, but so far it's a mystery to me. But thank you, Carla, for being here. And I also just want to thank the council for giving me this opportunity. It's hard to compete with Afghanistan and Iran and North Korea and to think about Central America and try to focus some attention on Central America because I think the council should be commended for that because it often gets lost in some discussions of foreign policy. I'm reminded -- if I could just start maybe with a few reflections, 12 years ago I did a report -- the dialogue did a report with the Council on Foreign Relations together -- this is a council report; the other one was a joint effort that we did on Colombia and Plan Colombia. That was in 1999, 2000, and many of you in this room will remember that debate and discussion. And as I was writing this report, I found myself thinking -- going back to that report, 12 years ago, when I said -- asked myself, you know, why should the United States care about Central America? The same question I asked 12 years ago -- why should we care about Colombia; what should our objective be in Central America -- was the same question I asked -- what should our objective be in support of Colombia? What's the sense of U.S. responsibility to Central America? Well, there were some similarities with Colombia. Here we have a situation where there is a democracy, rule of law that's at great risk because of spreading criminal violence to a neighbor, as Colombia was. And one could even argue that Central America the rationale is even more compelling. This is a set of countries that's closer to the United States. There are 3 million Central Americans who live in the United States and remittances, as Jose knows better than anybody, are a very important share of the economy of these countries. The United States had a very -- there was a time when Central America was the highest priority for U.S. foreign policy, in the 1980s. And so there's also a sense of responsibility as well. So for reasons of demography and history, one could even make the case that Central America is more important than Colombia. And then, of course, there's the issue that's a term that used widely today of so-called shared responsibility, which was a term we used back 12 years ago in Colombia. It's not that original. The United States is the largest consumer of drugs. Drugs is an important factor and dimension of the violence that is really having a tremendously adverse effect, particularly in Honduras, El Salvador and Guatemala, but also in other countries. Look at Costa Rica, a country that we still associate with sort of tranquility, serenity, peace and order. They are being hit very hard by the drug-related violence and are not prepared to deal with it very well and don't have an army, haven't had one since, what, 1948, and so they have to strengthen their police force. So there's tremendous pressure on a lot of these countries. A lot of it is fueled by the drug issue. It's not only the drug issue. I think that Jose put his finger on it when he talked about weak state capacity, weak governance structures. And if you look at the comparison with Mexico, Mexico is also going through a very difficult period, but Mexico has state capacity. Central America is much less equipped, doesn't have the resources and the development of state structures to deal with this violence. So I think, in that sense, there are a lot of similarities. And then what's the objective? The objective not to turn Central America into Sweden, as that wasn't the objective in Colombia as well. It's to get the violence under control, to reduce the levels so that you can have, as Jose said, economic development and a much more productive society, and that is so that situation is manageable and doesn't pose the threat that it currently poses. That was the -- that was the very similar argument that I made in the report 12 years ago with respect to Colombia. The report covers a variety of causes of the violence, which I think it's hard to reduce to any one factor, and one has to be careful about not mixing one country to another country. It's quite different, and they have different phenomena. And in some countries, gangs are more important; in other countries, cartels are more important. Some countries, the effect of Mexico -- of the drug organizations going south is -- has a greater presence, and other countries less so. In some, there have been political crises. We know about the Honduras crisis and the coup of 2009. That had an impact on Honduras. So the report tries to look at it from a regional perspective, but also takes each country and national situations as well and look at the particular characteristics of national situations. It also looks at attempts by governments to deal with this problem, individual governments: the so-called monduro (ph) approach, sort of round up everybody, arrest everybody, which is why you have overcrowded prisons and the prisons problems that we've had in a number of a countries, to some reform efforts to try to deal with corruption seriously, to try to improve the capacity of the police and so forth. There have been some successes, some gains, but nothing very sustainable. And the situation, I think, if one looks in the last couple of years, has gotten worse, and insecurity is spreading. The United States, I think, after this period of almost being obsessed with Central America in the 1980s, when the peace accords came, it kind of fell off the radar and then came back towards the end of the Bush administration and the beginning of the Obama administration. And Jose mentioned the CARSI program and other programs that are -- that have been in effect. The recommendations that are in the report point to both things that I think would be useful to think about, both in terms of dealing with Central America as well as domestic policies, U.S. domestic policies that have a profound impact on Central America. This is also one of the situations in the world, I think, where one could make the case pretty persuasively that what happens in the United States in terms of drug policy, immigration policy, control of arms that are moving south does have an effect to our countries -- to our neighbors to the south, perhaps more than in other parts of the world. The first point, the recommendation is really -- is always a tough call -- and this was also similar in the Colombia case, if we remember -- is this balancing act of the U.S. taking a more active, vigorous role in trying to shape a coordinated approach with at the same time making sure that there's buy-in by individual countries, in other words, that the United States is not going to impose a solution, but also, the United States can't come -- stand back and say, OK, every country can do what they want. There should be some middle ground there. And I think -- I think, to the administration's credit, they have moved a little bit in that direction of trying to balance that. Also, this is not just not a Central American problem. This is Mexico. The successes in Mexico have moved south and have aggravated an already difficult situation. The drug routes have changed and now go through Central America, so the -- where drug routes have improved, those countries have a responsibility. The producer countries of coca -- we're talking about really cocaine in the case of Central America -- producer countries of cocaine -- Peru, Colombia and -- in South America also have a responsibility. And the United States is in -- uniquely positioned, I think, to try to mobilize that support and try to fashion a more coordinated approach. There was, I think, a very promising meeting almost a year ago, I guess in June of last year, in Guatemala that Secretary Clinton convened. It was very, very instrumental and brought everybody together. But it's very hard to sustain a level of interest and support and resources that I think the situation requires and demands, and I think that is really a central challenge. There are programs that -- one could list the long litany of programs that are in effect. Some of them are very helpful. But it just needs to be, I think, ratcheted up, given the gravity of the situation in the region. So the report tries to kind of identify where and how the U.S. should deal and balance this leadership role versus trying to encourage strategic sort of buy-in by the countries. Second point is one that Jose touched on as well, which is having a strategic focus on institutional building. It's hard to see any long-term success in Central America in overcoming these problems unless you have a functioning and more effective justice system and police forces, that one -- that one can deal with what is criminal violence. And police are supposed to -- that's their job, that's their function. The police forces are very weak. Again, there's been some focus on this, but I think it needs to be more -- it needs to get more attention. And that means that other things, like interdiction, going after high-profile drug kings and the like, perhaps should not the same attention. One has to do everything, but with limited resources, one has to pick and choose and select priorities, and in that situation this should get the highest priority, is the institution-building emphasis. On the justice question, we have a positive example that one has to look at in Latin America, in Central America, which is the CARSI program, a U.N. program of a commission against impunity that has had a record, that's been in -- around for a couple and has had a positive record in going after and convicting -- prosecuting and convicting criminals, supporting the attorney general, supporting the public prosecutor office in Guatemala. This is a successful program that I think could be usefully thought about being applied in some of Guatemala's neighbors, especially El Salvador and Honduras, governments that I understand are interested in program, U.N. program. Obviously that's not something the U.S. could do on its own, since it's the U.N., but again, to really push for this, I think, would make -- would be very, very helpful. There are also some community-level successful programs, initiatives that need to be looked at very carefully, scaled up, replicated elsewhere. Nicaragua's an interesting case. It's a country where, I think -- which challenges some of the views of -- that poverty is the -- is the -- is the main explanation of violence. It's a very poor country, and yet the levels of criminal violence are much lower than -- for now, at least, to Salvador, Guatemala and Honduras. And that's due in part to the professionalization of the police force, but it's also due to some community programs -- level programs that have been successful, and they should be looked at more carefully. The question of military aid and military assistance is a very tricky, sensitive and controversial one, in light of the history that we're aware of in Latin America, in Central America. One of the positive things in the region has been the downsizing of these militaries since the civil wars in the 1980s, and I think it would be -- one has to be very careful about building the militaries back up. And on the other hand, there's a lot of public pressure from -- for a much tougher stand on -- obviously people are concerned about public order and safety and security. But I think the United States should really be very cautious on this question of military assistance and really concentrate strategically on the building of an effective police force. And finally, there's the issue of the fiscal reforms, some of the questions that Jose raised. Again, the United States should not lecture Central Americans about taxes. But if this is going to work, this is going to have to be some commitment on the part of the private sector in countries that have low tax rates, weak tax collection, and there has to be -- that's the only way that one could imagine that this is going to happen. In Colombia, there was a call in -- for a special tax, a security tax. That's also taken place in Central America. But more of that needs to be done so that people also contribute and really feel that they're committed to what's happening at the national level in dealing with this issue. On domestic policies, those are the main highlights of the recommendations of what the U.S. should do dealing with Central America. Then there are things to be done here at home that would have a positive effect in Central America. The first is the drug policy, and we saw this come out at the Summit of the Americas in Cartagena. This was probably the biggest issue that was discussed. I think it was very encouraging that it was talked about at the summit because if -- the drug problem may not be a big political issue in the United States; we may not be seeing violence spreading around in our cities because of the drug issue, but certainly that's happening in the region. And it wasn't surprising that the leaders would bring this up with President Obama. And one of the leaders on this issue has been Perez Molina, the president of Guatemala, who has been very forceful on this. And no one can accuse him of being soft on crime given his background. And yet he has -- is pushing this. This is something -- I'm not going to get into, you know, what's a solution to the drug problem. But I do think that it's a problem that deserves serious discussion and debate and that the United States -- even though there's not political pressure to do so here, if the United States really were engaged seriously in really looking at other approaches, other alternatives, it would be a very positive sign for many of our friends in Latin America that there is a sense of shared responsibility. Then there's the question of guns and money that's flowing south. This has been discussed widely. Again, this is -- this is an issue where a lot more needs to be done. There have been steps that have been taken, and I think the Obama administration deserved credit for that. But in terms of background checks of these guns and just the flow of them to -- that are supporting -- that are getting to the hands of criminal groups, again, a more energetic approach. Finally, on the domestic policy side, immigration and deportations -- there's an estimated -- for example, in Honduras, 25,000 Hondurans were deported last year, I think similar number of El -- Salvadorans. There -- we're not going to end deportations, and that's not -- that's not the recommendation in the report. But what we do say is that it's very, very important to communicate exactly what the background of these deportees is and to really coordinate very closely to -- with officials in the host countries. The sense is that this is being done to some extent. It could be done a lot more. And especially if people with criminal records go back to these countries that are already very fragile and very volatile, it's particularly urgent that that kind of effort is really taken very, very seriously. Let me just conclude with two points, and then I look forward to your questions, comments and discussion. One is that this is a real opportunity. The need not only is great because of the -- because of some of the data that we have, the highest homicide rates in the world of last year in Honduras and El Salvador, Guatemala not far behind. So the need is very compelling, but also the opportunity. You have a set of governments in Central America that essentially are open and interested in working with the United States and cooperating more with the United States. That may not be the case a couple of years from now. One doesn't know. And so there is a window where a partnership can be forged that is very, very important and very effective. So there is a sort of a -- there is an opportunity and a moment here that needs to be seized, I think. And just to conclude, I've gotten some skepticism about this report, as I did with the Colombia report 12 years ago. Let me conclude on this, and people -- as I presented the Colombia report, everybody said, you know, you're crazy; why should you support Plan Colombia; you know, this is a corrupt government and nothing will happen; it will all be wasted. And in some ways, you know people have -- I've gotten similar reactions to Central America, which has been interesting. And it's true that the drug issue is not the concern it was 12 years ago, and it's also true that we're in a different fiscal and foreign policy environment. Remember 12 years ago when Plan Colombia was approved, it was a year before 9/11, and 9/11 changed a lot of things. And then our economic problem -- and I don't think Plan Colombia would have been approved after 9/11. It would have been much more difficult. The attention would have been elsewhere. So the context is different. But I just think it's important to recall that Colombia still has enormous problems. I don't think this is the -- you know, the greatest success story in the history of U.S. foreign policy. But the fact is that it's a very much better situation than it was. The Colombians deserve most of the credit for that, but the U.S. made an important contribution, and they -- because they sustained attention and high levels of resources and productive engagement with Colombia, and I think one can think about some -- and a similar kind of approach and strategy in dealing with Central America. Thank you very much. STARES: Great. Thank you, Michael. I take the skepticism as a good sign. I think if there wasn't the skepticism -- SHIFTER: Right. (Chuckles.) STARES: -- that you wouldn't have been doing your job properly. So I appreciate that, and for your presentation, Jose. We're going to open it up. We've got a good chunk of time. As normal, just put your name plates up, and I'm going to have probably a hard time reading everybody, but I will try my best. I think, David, you're first. QUESTIONER: Thank you. David Holiday, from the Latin America Program of the Open Society Foundations. My question is primarily for Assistant Secretary Fernandez. You spent a lot of time talking about El Salvador and the Partnership for Growth. (Chuckles.) And interestingly, there were -- there were reports in the Salvadoran press that the U.S. conditioned the Partnership for Growth on removal of the minister of justice and public security, which happened. And the person who replaced him was a general and former minister of defense. And actually, it's happened -- there has been a few interesting developments in the last few months, some worrisome and some interesting. A couple of sort of the worrisome developments are discussion -- or the movement of -- within the police, of personnel, including perhaps putting some less savory people in different positions of leadership. Concurrent with that is a weakening of the inspector general's office, who resigned and has not been replaced. And it seems those two things are very much linked, because if you don't have good accountability, then, you know, I can say whatever I want about someone, but we actually don't know who's sort of -- who are the good guys within this -- the police force or not. And I was reminded because recently I met with the head of international cooperation of the Colombian police. And his own personal narrative really started off with saying, you know, when I joined the police, it was so corrupt, I really wasn't sure I should be there, but then we started arresting the bad guys, and I myself put the cuffs on a colonel. And that -- and I think we sometimes lose track of the importance of accountability -- internal accountability within police forces, and external as well -- you know, criminal prosecution, where necessary. So those are the -- kind of the worrisome developments. And the positive thing that I'd like your comment on -- or not positive -- it's positive that homicides have been reduced, but there's a very interesting gang truce now. And I don't know -- thoughts on that? What sort of should -- what are the parameters of, you know, when -- obviously, we have a lot of experience with gangs in our own country and sort of -- I don't know. What do people think about that reality? STARES: There's a lot there. (Chuckles.) FERNANDEZ: (Chuckles.) I feel like a mosquito in a nudist colony; I don't know where to begin. (Laughter.) The -- look, I mean, accountability is critical, and it's part of what we -- what we stress -- both of us stressed. The agreement actually provides for specific milestones that we want to meet for specific things that will be done within a short period of time and then medium- and long-term, all the way to five years. But I'm not familiar with the -- with the -- with the situation with the -- at -- in the accountability office in El Salvador, but it's -- it is something that, you know, we have -- we are scheduled to have a meeting with the Salvadorians every couple of months on the progress, and I'm sure that's something that will come up if that is an issue. But I'll be the first to say that we insisted on -- both sides insisted on making sure that we had -- we had accountability and to -- and to focus on results as opposed to process. STARES: Do you have anything to add, Michael? SHIFTER: I would just add that, you know, I think this question, the last part of your question, about this -- the gangs and the truce and all of this I think deserves a lot of debate, frankly. And you know, I don't think it's the -- I'm not saying I think it's the solution, but one has to recognize if, you know -- if you're living in El Salvador and there's a truce that produces no violence, that's something that's very meaningful and to take to account. I don't -- you know, I'm not saying it's the answer, but I have seen some comments and some analyses that have come out of the Salvadoran situation, and it just strikes me that there are a lot of issues there. And they're not -- haven't been thought through. And I haven't thought them through because this has just happened. And -- but I think -- I would -- I think it's something that's worth looking at without just saying either this is the solution or this is terrible and we can't even think about this, because, you know, it has consequences. STARES: Thank you. Johanna (ph). QUESTIONER: Yes. Thank you, Paul, and thank you to both of you for a very good overview. I -- something struck me in the report, Michael, about the recommendation on the rule of law because I think we've seen this for 25 years. And not as a critic of what you're saying, but we've invested billions, literally, of dollars in improving court systems; we've built Kubla Khan legal palaces. But the access to justice still remains a real key issue and people's confidence in the legal system continues, in polling that we read, to be very low. So I was wondering, given new technologies and tools that exist, whether one could do things in the field of alternative dispute resolution that begin to give people confidence that the state does care about justice, whether it's the robbery of someone's salary, which is not necessarily a gang action, but a criminal action. I've seen very little progress there, a lot of push on the police, which I think is an important entry point, but the police without a legal justice system is only a part. So have you thought -- and Secretary Fernandez, perhaps you as well, coming out of the legal profession -- thought of ways that you could provide a better sense of access that would give citizen confidence as a first step to building a stronger state institution? MR. : (To colleague.) (Do you want me to ?) -- QUESTIONER: In 20 seconds, right? (Laughter.) Right. SHIFTER: As you know -- as you know, Johanna (ph), there's been -- I mean, that's a great question. And as you know, there's been a lot of work in a lot of places in Latin America on alternative dispute resolution, and it's been -- some of it's been very, very positive. And I think if one looks at sort of this whole issue of rule of law and justice and look at what happened in the last 25 years, that's one of the -- that's one of the areas where there's been progress. QUESTIONER: But we don't have "Judge Judys," I mean, except on Univision. But I think -- (laughter) -- I've -- seriously, I've always thought, Michael, that that gives people more of a sense that you get a resolution of a dispute -- SHIFTER: Right. QUESTIONER: -- than going to some court system where you can't even get in the door -- SHIFTER: Right, right. QUESTIONER: -- because you don't have access to it. SHIFTER: Right. Well, I had "Judge Judy" in the draft, but they took it out -- QUESTIONER: Oh. (Laughter.) SHIFTER: -- one of my recommendations. But they thought it wasn't appropriate for a council report, so -- QUESTIONER: No. FERNANDEZ: But let me see if I can -- I think you bring up an excellent point, and it's true. For the last 30 years, there's been a lot of money poured into -- QUESTIONER: We've been on a lot of ABA committees. FERNANDEZ: -- a lot of ABA committees, a lot of ABA money that has -- that has gone into Central America. QUESTIONER: Mmm hmm. (Affirmative.) Yeah, legal -- FERNANDEZ: When I looked at the issue, one of the -- one of the things that struck me was the cost of the lack of access. You know, you get into -- and it's in Michael's report, the -- not just the impunity but also the lynchings, people taking justice in their own hand, and also the fact that the failure to observe the law permeated a number of other areas in the -- in the civil society in Central America. When we looked at it, one of the -- one of the suggestions was some sort of out-of-court process, arbitration and the like. The issue there that I was always coming up with is you can't fix a legal system by circumventing it. You actually have to address the system itself. There's been a lot of work done on it, and I think it's going to be -- you know, the criminal process and the accusatory process is slow. There's been talk and it's been -- the ABA and others have worked on this in Mexico -- of putting in a much more Anglo-Saxon -- which has its own problems -- Anglo-Saxon system of direct trials, less of an accusatory "fiscal general" type of system. The other angle that I think is important -- and I never got to do it because I ran out of money in El Salvador, but I think it'd be -- in Central America -- but I think it'd be useful -- is our concept of small claims courts, which is something that the Brazilians have used in some -- in some cases. QUESTIONER: Right. FERNANDEZ: And it's a way of -- within the system -- you're not circumventing the system through arbitration -- of improving the system. And I think that's something that, if I ever have the chance, I'd love to work on. STARES: Barry Calder (ph). QUESTIONER: Yes. Michael, in the report and in your presentation, you -- I think your preferred solution is something along the lines of the cooperation between the U.S. and Colombia that has led to a better situation. What I'm wondering about now is what you think about the future of the ideas to legalize drugs. As you mentioned, Perez Molina has come out strongly for legalization. It came up at Cartagena as a big issue. The U.S. isn't interested in that, particularly this year, I would think. And so is there a danger that we're going to diverge with one of the key countries in Central America, or do you think maybe with financial aid and other support, we might get them to moderate their views on this, because I feel we're not changing soon, the United States, but there are powerful forces, (maybe ?), to change down there. MR. : Jose -- (inaudible)? FERNANDEZ: No. (Laughter.) SHIFTER: My sense is that there's a consensus that the current drug policy is not really producing results, and it's been in effect for a long time. I don't think -- I think we're very far from any kind of alternative consensus. And legalization is -- is a way to get attention and to provoke a debate. Hopefully it leads to -- in a constructive way. But I think staking out -- I mean, you know, I think if one -- one doesn't rely have a lot of basis for making -- you know, for making the claim that this is going to really be the solution of the problem, of the drug problem. And Perez Molina, I think, got a lot of attention in his position, but my sense is that there's room for a lot of discussion and that there are other measures. There was a Latin American Commission report led by President Zedillo, President Cardoso and President -- former presidents Zedillo, Cardoso and Gaviria, came out in 2009, which I think was -- sort of laid out in a very sensible way, you know, that this is really having a very negative -- current policy is having very negative consequences. And there may be ideas that are on the table, and decriminalization of marijuana, focused less on sort of rounding people up and -- (inaudible) -- I mean, there are measures that are intermediate measures that don't go sort of towards legalization. I think that it's a mistake to think that this is a unified Latin American position. As you know, Perez Molina called a conference -- right? -- in Guatemala, and they had two presidents who showed up and other presidents didn't show up. So even if you take -- forgetting about Latin America for a second, just take Central America, take five countries, that there are very sharp differences in view. What they agree on is that something else needs to be debated and discussed, and I think the United States not just should say, well, this is -- you know, let's listen to the Latin Americans and let them (say ?), but really engage in it, use the expertise that's in this country. And a lot of people know about this drug issue because they've been studying it for 25 years or whatever, have a lot to say, should be part of that discussion and try to help fashion measures and approaches that don't go -- you know, that are realistic and that could -- that could have an effect. I should also say that the drug problem -- even if one were to wave a magic wand and solve the drug problem, you know, there's still criminal -- there are a lot of sources of criminal violence that have nothing to do with drugs. There's, you know, trafficking of arms and people and extortion and kidnapping. So we go back again to the issue Jose raised first of just the kind of institutional state capacity which is the underlying challenge, and that shouldn't be lost sight of as we -- even as we tackle alternative approaches to the drug issue. STARES: Any comments? FERNANDEZ: Sure. Look, I mean, you really feel for the Central Americans and discussing -- QUESTIONER: (Inaudible.) FERNANDEZ: Sure. Sorry. You feel for the Central Americans on this point because they really are between a rock and a hard place, in this case between the U.S., the largest consumer, and -- you talk about the balloon and how -- the balloon effect on Colombia. You improve the drug situation, but it moves on to other countries, and it's now hitting them. We don't think legalization is the answer. And I was in Cartagena, and what President Santos was very clear about is that he wasn't proposing legalization, he just wanted to have a discussion. And that's something that our government was obviously willing to do. There are a number of other countries that are not in favor of legalization, even within Central America, as Michael pointed out. So this is -- this is a debate that's occurring, and I think it's going to go on for a while. People who have looked at this issue in Europe, where you've had some legalization of some, quote/unquote, soft drugs, you know, have seen a rise in addiction. And it's not -- it's not a pretty picture. So we have our concerns. And then knowing Central America, I shudder to think what a -- you know, a well-financed above-ground drug dealer would do in a -- in a -- in a -- in a country that has a weak state apparatus. And just think of that as a -- as a consequence. So I think -- I think our government is -- has come out against it. We're obviously willing to discuss it, and I think this is an issue that has a lot more than simply just a talking point. It is a very complex situation. STARES: If I could add my two cents on this, in one of my many incarnations as a policy analyst, I actually wrote a study on drug legalization for the Brookings Institution about 15 years ago. And people propose this as if it almost means no regulation, when even licit drugs, legal drugs, have some kind of regulatory regime that controls, you know, which drugs in what quantities are sold when to whom, how, advertising. This is a hugely complex set of questions that have to be addressed. And as far as I know, even the proponents of legalization have never systematically gone through what a regulatory regime would look like for currently illicit drugs, because it's not as if they would suddenly become available to everybody anywhere, anyhow, et cetera. But correct me if anybody knows of details -- assessments of this. But each of those regulatory constraints on the sale of what would now be legal drugs have implications for the marketplace, for public health, even still for criminal activity. So it's not as if it's somehow a -- as Michael says, a magic wand that this issue would disappear. But I'd be happy to send references to the study I did on this so many years ago. Anyway, let's see, who's next? I think Bert (sp). QUESTIONER: OK. (Phone rings.) QUESTIONER: Sorry. QUESTIONER: I think Jose and Michael gave a beautiful analysis that covered 99 percent of the -- of the ground. But there's one thing that I would -- (inaudible) -- a little bit. I've been living for seven years in Central America and the Caribbean as an IDB representative. And the one thing that struck me was the very low degree of social emergence in these countries. It was always the same families who were doing -- always controlling every business, every industry, every banking -- and -- (inaudible) -- for it. And Jose mentioned the low labor productivity. And it goes a little bit beyond the physical productivity, because many of these countries gambled on the zona franca model, the export processing industry. But that one suffered from two things. First of all, it suffered from a lot of absentee landlordism. It was quite often not local entrepreneurs who set up these things. They might have been involved in a joint effort, but often it was Chinese companies or Korean companies or faraway companies. There was little learning curve on the side of the entrepreneurship, but also on labor. It's -- for labor, it was a dead-end street because it was basically the old day labor situation. You could maybe have a job tomorrow, but certainly not next month, or -- and so on. So it didn't really emerge. The other aspect that I would like to point out is the educational system in these countries, because there is more effort dedicated to social sciences and letters and whatever than there is to some core activities in education that can speed up the development process in the country -- in math, science and technology. And the region is underrepresentative in those areas. Too few students choose those relatively hard-core things, and they miss a lot of opportunities for learning and for again speeding up labor productivity in the future. And in the other one, you have beautiful business schools that the IDB supported very strongly in -- (inaudible) -- but with very high tuition rates or whatever. The access to that beautiful institution is relatively limited in terms of social emergence of certain groups. And those two things, I mean, have been hampering the development process in the region rather strongly. FERNANDEZ: Let me -- I have a question. Why do you say that the -- you started out by saying that the free zone market hasn't worked. My understanding is that it has worked. In a place like Costa Rica has -- it's -- it seems to have worked. In Honduras, with the maquiladora, seems to have worked. I'm not aware of the Salvadorans having much in the way of free trade zones. Tell me again why you think it hasn't worked. QUESTIONER: Well, they started relatively early. But then Mexico moved into NAFTA. And Mexico became a major, much more large-scale producer of many things. And a lot of higher-technology stuff, including in the -- in the motor industry moved to Mexico and never returned. So -- and the other one is Mexico itself suffered from the emergence of China very strongly in that area. So in the end, what stayed in the region often has become a very low-margin, relatively low-wage type of thing, whereas you would see, in terms of development process, what's happened in China, that you've started at a low end, but you get out of cheap textile and cheap (food or whatever ?) rather quickly, and you move into the higher electronic business or whatever. That process has not happened in Central America. Or where it has happened, it has been happening by very low import -- or very high import tariffs and things like that, too much protection. FERNANDEZ: OK. I mean, we've got a factual dispute. QUESTIONER: (Chuckles.) Sorry. I got some (boilerplate experience ?) there. FERNANDEZ: My understanding has been that the tariff regime in Central America is quite low, at least with respect to the U.S. I will agree with you that the educational system, some of which we've targeted in the -- that we've targeted both in the PFG and in other programs in Central America is a critical need. And part of the reason why you still have a system that depends on labor inputs, i.e., cheap labor is that you haven't been able to raise the educational system, not necessarily in a -- in a classic liberal arts setting, but in a vocational school type setting. And that is something that we've tried to address not just through the PFG, but through other programs. And that is a challenge. QUESTIONER: Yeah. STARES: Mark (sp), did you have a question? QUESTIONER: Very kind of asterisk, but if I could hop on the legalization of drug question, since you raised your study, has there been another study out there that's talked about kind of if you taxed it and regulate it and focus the money that was supposed to be focus on enforcement into drug treatment and other programs, what that might do to the spectrum of challenges that we might face and Central America might face? MR. : Do you know, Peter (sp)? QUESTIONER: Not really. I mean, it's one of the problems -- MR. : Peter (sp) -- (inaudible). Peter (sp), go ahead. QUESTIONER: I mean, it's so hard to sort of begin to play out the -- what happens if you do begin legalization. First you have to define a whole lot of details like you're really talking about legalization, or you're talking about decriminalizing marijuana. And you know, people use that word in a variety of ways. And the most important question is not that question; it's what are the real alternatives, as Michael suggested. And you know, it's not just that legalization is bad. It is bad. But illegalization is bad also. And you have to weigh one against the other, and you have to sort of look at the outcome. You have to be about -- whether it's alcohol or prescription drugs or marijuana or other drugs, what is a strategy that will reduce the amount of cost to societies? And it's not a question -- it's not a moral issue; it's a very pragmatic issue. And I don't -- that's what I think is wrong with taking that stand against legalization without looking at the costs of keeping it illegal. SHIFTER (?): (As we all know ?), it's the net -- a net assessment has to be, you know -- QUESTIONER: Exactly. And that's the problem. I mean, you can try and work out all those things, but you get lost after the first iteration of what is it going to cost, how many people are going to now be using drugs that weren't using them, et cetera. STARES: It's hard to do a controlled experiment in a -- in a particular locality, too, because of the external factors that come into play. SHIFTER (?): Right. STARES: We've seen this in the Dutch case. So it's just hard to say, well, let's give it a try here and just see how it works, because is that a true experiment? But we can get into this. Christopher (sp), I think, is next. QUESTIONER: Yes. So in the discussion around the comparisons between Plan Colombia and Central America, one of the things that wasn't mentioned was that Colombia is an upper middle-income country with institutional capacity, human capital; Central America, many low- income countries, lower middle-income countries, relatively lower institutional capital and human capital, and so therefore the challenge of building institutions that can confront this massive traffic of tens of billions of dollars of drugs every single year. And the other thing to note is that despite the successes of Plan Colombia, Colombia, Peru, Ecuador continue to produce lots of coca. (Chuckles.) And the coca continues to flow north. And so while there has been some production of marijuana, which Mexico has done for years, and heroin and all that, all the opiates, the coca is still flowing despite the successes of Plan Colombia. So the question I have in terms of the U.S. government focus and effort is going after the money. And obviously, you have to strategically focus your efforts. You can't do everything everywhere. You can't fix these societies overnight in the short term. One of the areas that I think merits emphasis is on bulk cash smuggling, on going after money laundering, and then also on financial disclosures by senior officials in the justice sector, by judges, et cetera. Obviously, people around the world think of all kinds of creative ways to move and to hide money, and we grapple with this problem even in this country. But I would be very interested in our distinguished panel's thoughts on those issues. STARES: Going after the money. FERNANDEZ: You know, Michael, this is your show. You keep -- SHIFTER: I'd be happy to -- FERNANDEZ: I'll let -- SHIFTER: I just want to defer to the, you know, authority, you know. (Laughter.) FERNANDEZ: Right. The -- I mean, I think there's something in the report, actually -- I was looking for it -- on how the -- how few convictions there have been on money laundering in Central America. SHIFTER: Yeah. FERNANDEZ: And that's -- that goes -- you know, you can -- that goes back to the -- to the need to create institutions, to focus on the courts that -- the criminal courts. And I will agree with you, it's something that -- as we look at the -- at the problem, the rule of law and the -- and the ability to enforce laws already, these laws exist. They don't need to change the laws; it's just a question of enforcing them. And it's a critical issue. And that's where focusing on -- focusing on technical assistance to improve the legal system and the policing system is something that we will continue to do. FERNANDEZ: Yeah, I would just say -- I mean, I think your point is on the mark, and we deal with it a little bit in the report, maybe not at quite the emphasis. And again, the challenge was always sort of, you know, you can't do everything, and so what's going to be the focus. But we had -- I should mention we had an advisory committee that met several times and this issue came up a lot. A lot of the people sort of talked about this as really where a lot of attention needs to be done. I think there's been some things, but clearly not as much as there needs to be, and so I think it does deserve a lot more resources and priority. I think you're -- I think it's hard to argue with that point. STARES: Karen? QUESTIONER: Thank you very much. Is it on? STARES: Yeah, it's on. QUESTIONER: Great. So my name's Karen Bolker (ph) and I'm working with CeaseFire International. This is a program that based in Chicago that uses a public health model for addressing stopping the spread of violence by treating violence as if it were a disease. And I know that you have some research that you've done on that yourself in the past. So I was really struck, in the report and in the predominance of the comments here today, on the emphasis on the top=down approach, the systemic, working with the governments, working with rule-of-law type establishments. And there's in one of your recommendations a comment that we should -- that the Central American governors should be the ones to fund the local efforts. And I just wanted to maybe ask a little bit -- tease out a little bit more why is it -- why is that something that should only really be done by the Central Americans, and should we not be having both a bottom-up and a top-down approach, and especially when you have some methodologies that maybe could actually sort of quell the violence while you're dealing with some of the larger systemic issues that are by definition longer term. And I noticed that the title is "Countering Criminal Violence," whereas the center is on preventive action and the method that we've worked with actually seeks to prevent the incidence of violence in the first place. So it focuses like a (higher beam ?) or whatever on the violence as opposed to all the other issues, the noise around the violence. So if I could just maybe get some reactions from you (and ?) -- (inaudible). SHIFTER: Sure, well, thank you for the question. I mean, I don't think the report says that the U.S. shouldn't fund -- you know, also support local, you know, initiatives. But the point about the national governments, which they -- you know, that it's important that they, you know, assume responsibility, not that the -- only local initiatives should be funded by a national government and that the U.S. cooperation should not be part of that. That -- you know, that wasn't the sense. QUESTIONER: OK. SHIFTER: But it was simply -- so I think that the United States, when we talk about -- (here ?) one of the recommendations on some of the sort of -- sort of the prevention programs that are more successful, that these should be encouraged, replicated, scaled up. You know, so that's -- needs to be -- think there is PAUL STARES: Good day, everybody. Good day, everybody. Welcome to the Council on Foreign Relations. Thank you for coming here today. Some of you know me. Many of you don't. I'm Paul Stares. I'm a senior fellow here at the council, and I also direct its Center for Preventive Action -- excuse me -- under which -- whose auspices this meeting is being organized and the report was commissioned. The purpose of the meeting is to discuss the growing threat of criminal violence in Central America. And we're particularly concerned with the Northern Tier countries, Honduras, El Salvador and Guatemala. The murder rates and other criminal -- violent criminal behavior has been skyrocketing. It's particularly disturbing that -- how this has escalated in recent years, and I think it's now amongst the highest in the world. Besides the obvious public security implications of this -- these murder rates, there are clearly other consequences in terms of democratic governments in those countries as well as economic performance, all of which have significant interests or implications for U.S. interests in the region. So with this sort of general concern in mind, we, the Center for Preventive Action, commissioned one of our council special reports to look at this, and we were very grateful that Michael Shifter, who is president of the Inter-American Dialogue here in Washington, agreed to do it. And he's produced an excellent report, and I think it actually complements another report that we did on the drug war in Mexico, which I commend to you. We're going to hear from Michael about the report shortly. But first, we're very grateful that Jose Fernandez has agreed to also speak here today. Again, many of you know him. He is the assistant secretary of state for economic and business affairs, has long- standing interest and activities related to Central and Latin America in general. I will dispense with a full description of his bio; it's there for you to see. He is going to talk for 15, 20 minutes or so, I'm not sure exactly how long, to give the State Department's -- U.S. government perspective on this challenge and other related issues. And then, as I say, we will hear from Michael and then open it up for Q-and-A. I just want to remind everybody that this meeting is on the record. There are press present, which we are -- obviously welcome you here today. But it is on the record, rather than the normal council rules of not for attribution. One last housekeeping request: Please, if you have BlackBerrys and other electronic devices, turn them off, or at the very least turn them to mute if you do absolutely have to stay in touch with your respective motherships. (Laughter). I understand that that is hard to do, but please, if you could at least mute them. So without further ado, I'm going to hand over to Jose. Again, thank you here -- for being here today, and I look forward to your remarks. JOSE FERNANDEZ: Thank you. Thank you, Paul, and good afternoon, everybody. Good to see some friendly faces in the crowd, people that I haven't seen in a while, so it's good to be here. I'm delighted to be here. My lane isn't necessarily security, but Central America is a part of the world where I've been very interested in for a very long time. In fact, one of my first pro bono jobs as a -- as a lawyer was working in Central America leading the ABA's Rule of Law Committee in the '80s, those of you who were around then, to try and work on human rights in -- during the conflict years and on labor arbitration and things that to this day remain relevant in that part of the world. Clearly, one of the most urgent and complex challenges that we face in Central America is the dramatic decline in citizen safety, and that's why I'm delighted that Michael and the council decided to put together this report. The average murder rate in Central America ranges from -- depending on the country, but overall it's twice as large as Mexico's. Closer to home, it's -- some -- in some countries, it's 16 times the murder rate, 16 times what we see in New York City. And it's not just an issue of human tragedy, but it's also an issue that the crime and insecurity take a heavy toll not just on the victims, but also on economic growth. Last year the World Bank noted in their report that the direct cost of crime exceeds 9 percent of GDP in several Central American countries. And in addition to that, it has the impact of discouraging business investment, discouraging firms from expanding and creating jobs. And in El Salvador, which is a country that I -- that I'll talk about a little bit in a couple of minutes, it has one of the highest murder rates in the world. The World Bank has estimated that the rime and insecurity in El Salvador will cost the country almost 11 percent of its annual GDP. And in fact, it's projected that a 10 percent reduction in the homicide rate would boost per capita income by 1 percent. So you would still have an unacceptably high murder rate if you were able to cut it in half, but at least you'd have some growth in a country that sorely needs it. The U.S. is committed to helping Central American countries tackle their citizen security challenges. We do this largely through the Central American Regional Security Initiative, CARSI, which is an integrative program designed to work with our partners in the region to disrupt and dismantle the gangs and transnational criminal organizations that have generated so much of the crime in Central America. Between 2008 and 2011, fiscal years 2008-2011, Congress appropriated $361 million towards CARSI. And two weeks ago in Cartagena, the president announced that he intends to allocate an additional $130 million for CARSI in FY 2012 in recognition of the -- of the significant security challenges that you have in the region. But you know, the crime and the violence in the region is not just a result of organized crime groups and gangs. In fact, it's not even -- you could argue that it's not the result of the gun traffic that certainly goes on from south -- from the U.S. down south, although it is a contributing factor. But you know, there are a number of other factors that I think Michael's report addresses and that I think it's important to talk about, and that's the larger societal problems such as the lack of access to education, employment and an ineffective government presence in many communities and a sense of a weak state apparatus. Through CARSI, we work with government and regional organizations like SICA, la Sistema de Integracion Centroamericana, to ensure that U.S. assistance complements and reinforces the strategies and policies that the Central American countries themselves are implementing, both on a national and regional basis. And our support isn't limited to simply tracking down the criminals. We're working to deal with many of the issues that Michael's report addresses, the root causes of violence, from impunity, which he talks about -- the 90 percent number is one that's -- is shocking to many of us -- from impunity to lack of opportunity. We're working to build accountable institutions free from corruption, institutions that respect human rights and enhance the rule of law. That's what I was doing in the 1980s with the ABA Rule of Law Initiative. We're still doing it 30 years later. We're building partnerships to improve courts and prisons, train police and prosecutors and enhance educational systems and job training centers. And something that's important and that perhaps ought to be addressed in greater detail is we're working to build partnerships with political leaders, with civil society, but also with business and the elites in Central America that have to take a role, have to play a role in -- certainly in finding a solution to the crime. In addition to new partnerships with Central Americans, we're building partnerships across the Americas. One example is our cooperation with Colombia in Central America that's alluded to in the report. In Cartagena, President Obama and President Santos announced a new action plan for regional security cooperation at the Summit of the Americas, and that's something that we'll be putting place. And Colombia has been a wonderful partner for some of our efforts in Central America. But besides the hard-core security work of CARSI and other initiatives, we're doing a number of other things. And one of them I'd like to talk about is the Partnerships for Growth, PFG, which is something that I was very involved in last year and still continue to be involved. The Partnership for Growth with El Salvador is an agreement that we signed last November. And what it -- what that was -- it's an intensive and whole-of-government effort focused on creating broad-based, sustainable economic growth. And it started with something that was -- that I had assumed was done a lot in government, but I understand that it's really not that common, and it started with a joint Salvadorian-U.S. economic analysis of the economic constraints to El Salvador's growth. This was an agreement that called for that study to take place. The idea was that it would start from a -- from an honest, serious economic analysis and then would come up with the proposed solutions. It's one of four agreements that the U.S. has signed for a Partnership for Growth compact, the other three countries being Tanzania, Ghana, and one more that I will remember in a second. MR. : Philippines. FERNANDEZ: Philippines. As part of the partnership, the U.S.-El Salvador economic team conducted an extensive analysis, and it basically came up with two constraints that we were going to tackle as part of the agreement. One is climate insecurity, and secondly what's called low productivity in exports. You know, the Salvadorean economy is largely dependent on exports, and yet the Salvadorean -- the percentage of exports in the Salvadorean economy is way lower than the norm in other CAFTA countries. And so we looked at how we could address both of those constraints. We also spent a lot of time talking to thought leaders around the U.S. and also in Central America and here. Here I have to thank Michael and his Inter-American dialogue, and Peter, for hosting some of these meetings. And we came up with a joint action plan that we signed in November, as I mentioned. And to address insecurity, our two governments agreed to support institutions and programs to prevent crime and violence, including supporting units -- special units to combat crimes against businesses and in transit, against buses, which is a major issue in El Salvador. On payday, thieves, thugs would board the buses and just steal the salaries that people have gotten that day. So what was happening is that factory owners didn't announce what day people would get paid. So you could get paid on a Monday and then not get paid for another three weeks, simply because they didn't want to tell thieves when you'd be getting your paycheck, because that would just -- that would just cause more theft. And what happened is, in a couple of cases when the thugs and the criminals were not getting what they wanted from the buses, they burned them, and they burned them with people inside. And so we thought that in order to address the economic constraint, we also had to deal with the insecurity issue, and so we focused on transit, on buses. We agreed to work on professionalizing the justice sector institutions, again -- improving the effectiveness of the criminal justice system and enhancing the security of prisons -- again, things that Michael's report talks about. We also agreed to work together to create jobs for at-risk youth, including the creation of small businesses and working with our SBA, job placement, and also to support community policing throughout El Salvador. And then, to improve productivity, one of the things that we agreed to do was to undertake actions to improve the business climate, to facilitate infrastructure, which is a critical need in El Salvador, and also to improve the quality of education. And then probably the thing that I was very proud of is we forged an agreement -- we agreed to support the establishment of a national growth council, which is basically a council composed of some of the large business associations in El Salvador and businessmen and -women in El Salvador to have regular meetings -- and in this case it's happening once a week, I'm told -- regular meetings with the president, with the government to talk about what were some of the items, what were some of the initiatives that they were hoping that the government would undertake in order to promote a business -- a friendly business climate. So this is something that, as I said, started in November. We're very proud of it as something that we hope is different, because again, it started from a joint study and it was a joint agreement on the part of two countries. The last thing I'll talk about that fits in well with the report is what we're calling Domestic Finance for Development, which is a program announced by Secretary Clinton about a year ago, which basically tackles one of the items that's throughout the report that Mike talks about, and that's the weak state, the weak state apparatus. And DF4D, Domestic Finance For Development, starts from the premise that in order for countries to be able to own their development, ultimately they have to be able to pay for it. And when you look at the tax intake on the part of Central American government, as Michael points out, it's low by regional standards, it's low by national standards -- by international standards. So one of the things -- and as a result of that they, you know, they have trouble paying for education, for the basic services, for the court systems and the like. So one of the things that DF4D does is it works on tax administration. It doesn't get involved in what the actual rate -- tax rate ought to be. That's hard enough to do in this country. But what it does is whatever rate is agreed upon by the country, it talks about, how do you -- how do you collect it, how do you administer it. And then it says that if you're going to do that, then you're going to have to convince your citizens that those funds are not going to end up in a Miami bank account. So you've got to work on corruption, and you also have to work on transparency. The citizens have to be told where those funds are going to end. So this three-legged stool of transparency, anti-corruption and tax administration is part of DF4D. It's something that we are working on in both El Salvador and in Honduras, which are two of the countries that I think need it the most. So our hope is that, through DF4D, the -- Honduras and El Salvador will be able to increase their capacity to generate domestic revenues, to fund their own crime prevention and development programs and thereby reducing their dependency on foreign assistance. So these are some of the ways that we're working on the issues that are outlined in Michael's report. I was heartened to see that many of things that we're trying to do were things that are in the report, but I'm more interested in hearing his thoughts and your thoughts on what are some of the things that are in the report that we perhaps are not doing yet. So with that, let me just turn it over to Paul and Michael. Thank you. STARES: Terrific. Thanks very much, Jose. And I think that's a good -- very good platform for you, Michael, to run with, if that's the right -- MR. : Correct. STARES: -- mixing metaphors. (Laughter.) MICHAEL SHIFTER: Thank you. Thank you, Paul, and thank you, Jose, for agreeing to join us and for your -- for your excellent comments. And I want thank everybody for coming. I see a lot of friends and colleagues here in the room. I look forward to a good exchange, discussion. I particularly want to thank and recognize Carla Hills, who's co- chair of the dialogue of the council and a lot of other organizations I don't -- (laughter) -- some day I'll understand how she does it all, but so far it's a mystery to me. But thank you, Carla, for being here. And I also just want to thank the council for giving me this opportunity. It's hard to compete with Afghanistan and Iran and North Korea and to think about Central America and try to focus some attention on Central America because I think the council should be commended for that because it often gets lost in some discussions of foreign policy. I'm reminded -- if I could just start maybe with a few reflections, 12 years ago I did a report -- the dialogue did a report with the Council on Foreign Relations together -- this is a council report; the other one was a joint effort that we did on Colombia and Plan Colombia. That was in 1999, 2000, and many of you in this room will remember that debate and discussion. And as I was writing this report, I found myself thinking -- going back to that report, 12 years ago, when I said -- asked myself, you know, why should the United States care about Central America? The same question I asked 12 years ago -- why should we care about Colombia; what should our objective be in Central America -- was the same question I asked -- what should our objective be in support of Colombia? What's the sense of U.S. responsibility to Central America? Well, there were some similarities with Colombia. Here we have a situation where there is a democracy, rule of law that's at great risk because of spreading criminal violence to a neighbor, as Colombia was. And one could even argue that Central America the rationale is even more compelling. This is a set of countries that's closer to the United States. There are 3 million Central Americans who live in the United States and remittances, as Jose knows better than anybody, are a very important share of the economy of these countries. The United States had a very -- there was a time when Central America was the highest priority for U.S. foreign policy, in the 1980s. And so there's also a sense of responsibility as well. So for reasons of demography and history, one could even make the case that Central America is more important than Colombia. And then, of course, there's the issue that's a term that used widely today of so-called shared responsibility, which was a term we used back 12 years ago in Colombia. It's not that original. The United States is the largest consumer of drugs. Drugs is an important factor and dimension of the violence that is really having a tremendously adverse effect, particularly in Honduras, El Salvador and Guatemala, but also in other countries. Look at Costa Rica, a country that we still associate with sort of tranquility, serenity, peace and order. They are being hit very hard by the drug-related violence and are not prepared to deal with it very well and don't have an army, haven't had one since, what, 1948, and so they have to strengthen their police force. So there's tremendous pressure on a lot of these countries. A lot of it is fueled by the drug issue. It's not only the drug issue. I think that Jose put his finger on it when he talked about weak state capacity, weak governance structures. And if you look at the comparison with Mexico, Mexico is also going through a very difficult period, but Mexico has state capacity. Central America is much less equipped, doesn't have the resources and the development of state structures to deal with this violence. So I think, in that sense, there are a lot of similarities. And then what's the objective? The objective not to turn Central America into Sweden, as that wasn't the objective in Colombia as well. It's to get the violence under control, to reduce the levels so that you can have, as Jose said, economic development and a much more productive society, and that is so that situation is manageable and doesn't pose the threat that it currently poses. That was the -- that was the very similar argument that I made in the report 12 years ago with respect to Colombia. The report covers a variety of causes of the violence, which I think it's hard to reduce to any one factor, and one has to be careful about not mixing one country to another country. It's quite different, and they have different phenomena. And in some countries, gangs are more important; in other countries, cartels are more important. Some countries, the effect of Mexico -- of the drug organizations going south is -- has a greater presence, and other countries less so. In some, there have been political crises. We know about the Honduras crisis and the coup of 2009. That had an impact on Honduras. So the report tries to look at it from a regional perspective, but also takes each country and national situations as well and look at the particular characteristics of national situations. It also looks at attempts by governments to deal with this problem, individual governments: the so-called monduro (ph) approach, sort of round up everybody, arrest everybody, which is why you have overcrowded prisons and the prisons problems that we've had in a number of a countries, to some reform efforts to try to deal with corruption seriously, to try to improve the capacity of the police and so forth. There have been some successes, some gains, but nothing very sustainable. And the situation, I think, if one looks in the last couple of years, has gotten worse, and insecurity is spreading. The United States, I think, after this period of almost being obsessed with Central America in the 1980s, when the peace accords came, it kind of fell off the radar and then came back towards the end of the Bush administration and the beginning of the Obama administration. And Jose mentioned the CARSI program and other programs that are -- that have been in effect. The recommendations that are in the report point to both things that I think would be useful to think about, both in terms of dealing with Central America as well as domestic policies, U.S. domestic policies that have a profound impact on Central America. This is also one of the situations in the world, I think, where one could make the case pretty persuasively that what happens in the United States in terms of drug policy, immigration policy, control of arms that are moving south does have an effect to our countries -- to our neighbors to the south, perhaps more than in other parts of the world. The first point, the recommendation is really -- is always a tough call -- and this was also similar in the Colombia case, if we remember -- is this balancing act of the U.S. taking a more active, vigorous role in trying to shape a coordinated approach with at the same time making sure that there's buy-in by individual countries, in other words, that the United States is not going to impose a solution, but also, the United States can't come -- stand back and say, OK, every country can do what they want. There should be some middle ground there. And I think -- I think, to the administration's credit, they have moved a little bit in that direction of trying to balance that. Also, this is not just not a Central American problem. This is Mexico. The successes in Mexico have moved south and have aggravated an already difficult situation. The drug routes have changed and now go through Central America, so the -- where drug routes have improved, those countries have a responsibility. The producer countries of coca -- we're talking about really cocaine in the case of Central America -- producer countries of cocaine -- Peru, Colombia and -- in South America also have a responsibility. And the United States is in -- uniquely positioned, I think, to try to mobilize that support and try to fashion a more coordinated approach. There was, I think, a very promising meeting almost a year ago, I guess in June of last year, in Guatemala that Secretary Clinton convened. It was very, very instrumental and brought everybody together. But it's very hard to sustain a level of interest and support and resources that I think the situation requires and demands, and I think that is really a central challenge. There are programs that -- one could list the long litany of programs that are in effect. Some of them are very helpful. But it just needs to be, I think, ratcheted up, given the gravity of the situation in the region. So the report tries to kind of identify where and how the U.S. should deal and balance this leadership role versus trying to encourage strategic sort of buy-in by the countries. Second point is one that Jose touched on as well, which is having a strategic focus on institutional building. It's hard to see any long-term success in Central America in overcoming these problems unless you have a functioning and more effective justice system and police forces, that one -- that one can deal with what is criminal violence. And police are supposed to -- that's their job, that's their function. The police forces are very weak. Again, there's been some focus on this, but I think it needs to be more -- it needs to get more attention. And that means that other things, like interdiction, going after high-profile drug kings and the like, perhaps should not the same attention. One has to do everything, but with limited resources, one has to pick and choose and select priorities, and in that situation this should get the highest priority, is the institution-building emphasis. On the justice question, we have a positive example that one has to look at in Latin America, in Central America, which is the CARSI program, a U.N. program of a commission against impunity that has had a record, that's been in -- around for a couple and has had a positive record in going after and convicting -- prosecuting and convicting criminals, supporting the attorney general, supporting the public prosecutor office in Guatemala. This is a successful program that I think could be usefully thought about being applied in some of Guatemala's neighbors, especially El Salvador and Honduras, governments that I understand are interested in program, U.N. program. Obviously that's not something the U.S. could do on its own, since it's the U.N., but again, to really push for this, I think, would make -- would be very, very helpful. There are also some community-level successful programs, initiatives that need to be looked at very carefully, scaled up, replicated elsewhere. Nicaragua's an interesting case. It's a country where, I think -- which challenges some of the views of -- that poverty is the -- is the -- is the main explanation of violence. It's a very poor country, and yet the levels of criminal violence are much lower than -- for now, at least, to Salvador, Guatemala and Honduras. And that's due in part to the professionalization of the police force, but it's also due to some community programs -- level programs that have been successful, and they should be looked at more carefully. The question of military aid and military assistance is a very tricky, sensitive and controversial one, in light of the history that we're aware of in Latin America, in Central America. One of the positive things in the region has been the downsizing of these militaries since the civil wars in the 1980s, and I think it would be -- one has to be very careful about building the militaries back up. And on the other hand, there's a lot of public pressure from -- for a much tougher stand on -- obviously people are concerned about public order and safety and security. But I think the United States should really be very cautious on this question of military assistance and really concentrate strategically on the building of an effective police force. And finally, there's the issue of the fiscal reforms, some of the questions that Jose raised. Again, the United States should not lecture Central Americans about taxes. But if this is going to work, this is going to have to be some commitment on the part of the private sector in countries that have low tax rates, weak tax collection, and there has to be -- that's the only way that one could imagine that this is going to happen. In Colombia, there was a call in -- for a special tax, a security tax. That's also taken place in Central America. But more of that needs to be done so that people also contribute and really feel that they're committed to what's happening at the national level in dealing with this issue. On domestic policies, those are the main highlights of the recommendations of what the U.S. should do dealing with Central America. Then there are things to be done here at home that would have a positive effect in Central America. The first is the drug policy, and we saw this come out at the Summit of the Americas in Cartagena. This was probably the biggest issue that was discussed. I think it was very encouraging that it was talked about at the summit because if -- the drug problem may not be a big political issue in the United States; we may not be seeing violence spreading around in our cities because of the drug issue, but certainly that's happening in the region. And it wasn't surprising that the leaders would bring this up with President Obama. And one of the leaders on this issue has been Perez Molina, the president of Guatemala, who has been very forceful on this. And no one can accuse him of being soft on crime given his background. And yet he has -- is pushing this. This is something -- I'm not going to get into, you know, what's a solution to the drug problem. But I do think that it's a problem that deserves serious discussion and debate and that the United States -- even though there's not political pressure to do so here, if the United States really were engaged seriously in really looking at other approaches, other alternatives, it would be a very positive sign for many of our friends in Latin America that there is a sense of shared responsibility. Then there's the question of guns and money that's flowing south. This has been discussed widely. Again, this is -- this is an issue where a lot more needs to be done. There have been steps that have been taken, and I think the Obama administration deserved credit for that. But in terms of background checks of these guns and just the flow of them to -- that are supporting -- that are getting to the hands of criminal groups, again, a more energetic approach. Finally, on the domestic policy side, immigration and deportations -- there's an estimated -- for example, in Honduras, 25,000 Hondurans were deported last year, I think similar number of El -- Salvadorans. There -- we're not going to end deportations, and that's not -- that's not the recommendation in the report. But what we do say is that it's very, very important to communicate exactly what the background of these deportees is and to really coordinate very closely to -- with officials in the host countries. The sense is that this is being done to some extent. It could be done a lot more. And especially if people with criminal records go back to these countries that are already very fragile and very volatile, it's particularly urgent that that kind of effort is really taken very, very seriously. Let me just conclude with two points, and then I look forward to your questions, comments and discussion. One is that this is a real opportunity. The need not only is great because of the -- because of some of the data that we have, the highest homicide rates in the world of last year in Honduras and El Salvador, Guatemala not far behind. So the need is very compelling, but also the opportunity. You have a set of governments in Central America that essentially are open and interested in working with the United States and cooperating more with the United States. That may not be the case a couple of years from now. One doesn't know. And so there is a window where a partnership can be forged that is very, very important and very effective. So there is a sort of a -- there is an opportunity and a moment here that needs to be seized, I think. And just to conclude, I've gotten some skepticism about this report, as I did with the Colombia report 12 years ago. Let me conclude on this, and people -- as I presented the Colombia report, everybody said, you know, you're crazy; why should you support Plan Colombia; you know, this is a corrupt government and nothing will happen; it will all be wasted. And in some ways, you know people have -- I've gotten similar reactions to Central America, which has been interesting. And it's true that the drug issue is not the concern it was 12 years ago, and it's also true that we're in a different fiscal and foreign policy environment. Remember 12 years ago when Plan Colombia was approved, it was a year before 9/11, and 9/11 changed a lot of things. And then our economic problem -- and I don't think Plan Colombia would have been approved after 9/11. It would have been much more difficult. The attention would have been elsewhere. So the context is different. But I just think it's important to recall that Colombia still has enormous problems. I don't think this is the -- you know, the greatest success story in the history of U.S. foreign policy. But the fact is that it's a very much better situation than it was. The Colombians deserve most of the credit for that, but the U.S. made an important contribution, and they -- because they sustained attention and high levels of resources and productive engagement with Colombia, and I think one can think about some -- and a similar kind of approach and strategy in dealing with Central America. Thank you very much. STARES: Great. Thank you, Michael. I take the skepticism as a good sign. I think if there wasn't the skepticism -- SHIFTER: Right. (Chuckles.) STARES: -- that you wouldn't have been doing your job properly. So I appreciate that, and for your presentation, Jose. We're going to open it up. We've got a good chunk of time. As normal, just put your name plates up, and I'm going to have probably a hard time reading everybody, but I will try my best. I think, David, you're first. QUESTIONER: Thank you. David Holiday, from the Latin America Program of the Open Society Foundations. My question is primarily for Assistant Secretary Fernandez. You spent a lot of time talking about El Salvador and the Partnership for Growth. (Chuckles.) And interestingly, there were -- there were reports in the Salvadoran press that the U.S. conditioned the Partnership for Growth on removal of the minister of justice and public security, which happened. And the person who replaced him was a general and former minister of defense. And actually, it's happened -- there has been a few interesting developments in the last few months, some worrisome and some interesting. A couple of sort of the worrisome developments are discussion -- or the movement of -- within the police, of personnel, including perhaps putting some less savory people in different positions of leadership. Concurrent with that is a weakening of the inspector general's office, who resigned and has not been replaced. And it seems those two things are very much linked, because if you don't have good accountability, then, you know, I can say whatever I want about someone, but we actually don't know who's sort of -- who are the good guys within this -- the police force or not. And I was reminded because recently I met with the head of international cooperation of the Colombian police. And his own personal narrative really started off with saying, you know, when I joined the police, it was so corrupt, I really wasn't sure I should be there, but then we started arresting the bad guys, and I myself put the cuffs on a colonel. And that -- and I think we sometimes lose track of the importance of accountability -- internal accountability within police forces, and external as well -- you know, criminal prosecution, where necessary. So those are the -- kind of the worrisome developments. And the positive thing that I'd like your comment on -- or not positive -- it's positive that homicides have been reduced, but there's a very interesting gang truce now. And I don't know -- thoughts on that? What sort of should -- what are the parameters of, you know, when -- obviously, we have a lot of experience with gangs in our own country and sort of -- I don't know. What do people think about that reality? STARES: There's a lot there. (Chuckles.) FERNANDEZ: (Chuckles.) I feel like a mosquito in a nudist colony; I don't know where to begin. (Laughter.) The -- look, I mean, accountability is critical, and it's part of what we -- what we stress -- both of us stressed. The agreement actually provides for specific milestones that we want to meet for specific things that will be done within a short period of time and then medium- and long-term, all the way to five years. But I'm not familiar with the -- with the -- with the situation with the -- at -- in the accountability office in El Salvador, but it's -- it is something that, you know, we have -- we are scheduled to have a meeting with the Salvadorians every couple of months on the progress, and I'm sure that's something that will come up if that is an issue. But I'll be the first to say that we insisted on -- both sides insisted on making sure that we had -- we had accountability and to -- and to focus on results as opposed to process. STARES: Do you have anything to add, Michael? SHIFTER: I would just add that, you know, I think this question, the last part of your question, about this -- the gangs and the truce and all of this I think deserves a lot of debate, frankly. And you know, I don't think it's the -- I'm not saying I think it's the solution, but one has to recognize if, you know -- if you're living in El Salvador and there's a truce that produces no violence, that's something that's very meaningful and to take to account. I don't -- you know, I'm not saying it's the answer, but I have seen some comments and some analyses that have come out of the Salvadoran situation, and it just strikes me that there are a lot of issues there. And they're not -- haven't been thought through. And I haven't thought them through because this has just happened. And -- but I think -- I would -- I think it's something that's worth looking at without just saying either this is the solution or this is terrible and we can't even think about this, because, you know, it has consequences. STARES: Thank you. Johanna (ph). QUESTIONER: Yes. Thank you, Paul, and thank you to both of you for a very good overview. I -- something struck me in the report, Michael, about the recommendation on the rule of law because I think we've seen this for 25 years. And not as a critic of what you're saying, but we've invested billions, literally, of dollars in improving court systems; we've built Kubla Khan legal palaces. But the access to justice still remains a real key issue and people's confidence in the legal system continues, in polling that we read, to be very low. So I was wondering, given new technologies and tools that exist, whether one could do things in the field of alternative dispute resolution that begin to give people confidence that the state does care about justice, whether it's the robbery of someone's salary, which is not necessarily a gang action, but a criminal action. I've seen very little progress there, a lot of push on the police, which I think is an important entry point, but the police without a legal justice system is only a part. So have you thought -- and Secretary Fernandez, perhaps you as well, coming out of the legal profession -- thought of ways that you could provide a better sense of access that would give citizen confidence as a first step to building a stronger state institution? MR. : (To colleague.) (Do you want me to ?) -- QUESTIONER: In 20 seconds, right? (Laughter.) Right. SHIFTER: As you know -- as you know, Johanna (ph), there's been -- I mean, that's a great question. And as you know, there's been a lot of work in a lot of places in Latin America on alternative dispute resolution, and it's been -- some of it's been very, very positive. And I think if one looks at sort of this whole issue of rule of law and justice and look at what happened in the last 25 years, that's one of the -- that's one of the areas where there's been progress. QUESTIONER: But we don't have "Judge Judys," I mean, except on Univision. But I think -- (laughter) -- I've -- seriously, I've always thought, Michael, that that gives people more of a sense that you get a resolution of a dispute -- SHIFTER: Right. QUESTIONER: -- than going to some court system where you can't even get in the door -- SHIFTER: Right, right. QUESTIONER: -- because you don't have access to it. SHIFTER: Right. Well, I had "Judge Judy" in the draft, but they took it out -- QUESTIONER: Oh. (Laughter.) SHIFTER: -- one of my recommendations. But they thought it wasn't appropriate for a council report, so -- QUESTIONER: No. FERNANDEZ: But let me see if I can -- I think you bring up an excellent point, and it's true. For the last 30 years, there's been a lot of money poured into -- QUESTIONER: We've been on a lot of ABA committees. FERNANDEZ: -- a lot of ABA committees, a lot of ABA money that has -- that has gone into Central America. QUESTIONER: Mmm hmm. (Affirmative.) Yeah, legal -- FERNANDEZ: When I looked at the issue, one of the -- one of the things that struck me was the cost of the lack of access. You know, you get into -- and it's in Michael's report, the -- not just the impunity but also the lynchings, people taking justice in their own hand, and also the fact that the failure to observe the law permeated a number of other areas in the -- in the civil society in Central America. When we looked at it, one of the -- one of the suggestions was some sort of out-of-court process, arbitration and the like. The issue there that I was always coming up with is you can't fix a legal system by circumventing it. You actually have to address the system itself. There's been a lot of work done on it, and I think it's going to be -- you know, the criminal process and the accusatory process is slow. There's been talk and it's been -- the ABA and others have worked on this in Mexico -- of putting in a much more Anglo-Saxon -- which has its own problems -- Anglo-Saxon system of direct trials, less of an accusatory "fiscal general" type of system. The other angle that I think is important -- and I never got to do it because I ran out of money in El Salvador, but I think it'd be -- in Central America -- but I think it'd be useful -- is our concept of small claims courts, which is something that the Brazilians have used in some -- in some cases. QUESTIONER: Right. FERNANDEZ: And it's a way of -- within the system -- you're not circumventing the system through arbitration -- of improving the system. And I think that's something that, if I ever have the chance, I'd love to work on. STARES: Barry Calder (ph). QUESTIONER: Yes. Michael, in the report and in your presentation, you -- I think your preferred solution is something along the lines of the cooperation between the U.S. and Colombia that has led to a better situation. What I'm wondering about now is what you think about the future of the ideas to legalize drugs. As you mentioned, Perez Molina has come out strongly for legalization. It came up at Cartagena as a big issue. The U.S. isn't interested in that, particularly this year, I would think. And so is there a danger that we're going to diverge with one of the key countries in Central America, or do you think maybe with financial aid and other support, we might get them to moderate their views on this, because I feel we're not changing soon, the United States, but there are powerful forces, (maybe ?), to change down there. MR. : Jose -- (inaudible)? FERNANDEZ: No. (Laughter.) SHIFTER: My sense is that there's a consensus that the current drug policy is not really producing results, and it's been in effect for a long time. I don't think -- I think we're very far from any kind of alternative consensus. And legalization is -- is a way to get attention and to provoke a debate. Hopefully it leads to -- in a constructive way. But I think staking out -- I mean, you know, I think if one -- one doesn't rely have a lot of basis for making -- you know, for making the claim that this is going to really be the solution of the problem, of the drug problem. And Perez Molina, I think, got a lot of attention in his position, but my sense is that there's room for a lot of discussion and that there are other measures. There was a Latin American Commission report led by President Zedillo, President Cardoso and President -- former presidents Zedillo, Cardoso and Gaviria, came out in 2009, which I think was -- sort of laid out in a very sensible way, you know, that this is really having a very negative -- current policy is having very negative consequences. And there may be ideas that are on the table, and decriminalization of marijuana, focused less on sort of rounding people up and -- (inaudible) -- I mean, there are measures that are intermediate measures that don't go sort of towards legalization. I think that it's a mistake to think that this is a unified Latin American position. As you know, Perez Molina called a conference -- right? -- in Guatemala, and they had two presidents who showed up and other presidents didn't show up. So even if you take -- forgetting about Latin America for a second, just take Central America, take five countries, that there are very sharp differences in view. What they agree on is that something else needs to be debated and discussed, and I think the United States not just should say, well, this is -- you know, let's listen to the Latin Americans and let them (say ?), but really engage in it, use the expertise that's in this country. And a lot of people know about this drug issue because they've been studying it for 25 years or whatever, have a lot to say, should be part of that discussion and try to help fashion measures and approaches that don't go -- you know, that are realistic and that could -- that could have an effect. I should also say that the drug problem -- even if one were to wave a magic wand and solve the drug problem, you know, there's still criminal -- there are a lot of sources of criminal violence that have nothing to do with drugs. There's, you know, trafficking of arms and people and extortion and kidnapping. So we go back again to the issue Jose raised first of just the kind of institutional state capacity which is the underlying challenge, and that shouldn't be lost sight of as we -- even as we tackle alternative approaches to the drug issue. STARES: Any comments? FERNANDEZ: Sure. Look, I mean, you really feel for the Central Americans and discussing -- QUESTIONER: (Inaudible.) FERNANDEZ: Sure. Sorry. You feel for the Central Americans on this point because they really are between a rock and a hard place, in this case between the U.S., the largest consumer, and -- you talk about the balloon and how -- the balloon effect on Colombia. You improve the drug situation, but it moves on to other countries, and it's now hitting them. We don't think legalization is the answer. And I was in Cartagena, and what President Santos was very clear about is that he wasn't proposing legalization, he just wanted to have a discussion. And that's something that our government was obviously willing to do. There are a number of other countries that are not in favor of legalization, even within Central America, as Michael pointed out. So this is -- this is a debate that's occurring, and I think it's going to go on for a while. People who have looked at this issue in Europe, where you've had some legalization of some, quote/unquote, soft drugs, you know, have seen a rise in addiction. And it's not -- it's not a pretty picture. So we have our concerns. And then knowing Central America, I shudder to think what a -- you know, a well-financed above-ground drug dealer would do in a -- in a -- in a -- in a country that has a weak state apparatus. And just think of that as a -- as a consequence. So I think -- I think our government is -- has come out against it. We're obviously willing to discuss it, and I think this is an issue that has a lot more than simply just a talking point. It is a very complex situation. STARES: If I could add my two cents on this, in one of my many incarnations as a policy analyst, I actually wrote a study on drug legalization for the Brookings Institution about 15 years ago. And people propose this as if it almost means no regulation, when even licit drugs, legal drugs, have some kind of regulatory regime that controls, you know, which drugs in what quantities are sold when to whom, how, advertising. This is a hugely complex set of questions that have to be addressed. And as far as I know, even the proponents of legalization have never systematically gone through what a regulatory regime would look like for currently illicit drugs, because it's not as if they would suddenly become available to everybody anywhere, anyhow, et cetera. But correct me if anybody knows of details -- assessments of this. But each of those regulatory constraints on the sale of what would now be legal drugs have implications for the marketplace, for public health, even still for criminal activity. So it's not as if it's somehow a -- as Michael says, a magic wand that this issue would disappear. But I'd be happy to send references to the study I did on this so many years ago. Anyway, let's see, who's next? I think Bert (sp). QUESTIONER: OK. (Phone rings.) QUESTIONER: Sorry. QUESTIONER: I think Jose and Michael gave a beautiful analysis that covered 99 percent of the -- of the ground. But there's one thing that I would -- (inaudible) -- a little bit. I've been living for seven years in Central America and the Caribbean as an IDB representative. And the one thing that struck me was the very low degree of social emergence in these countries. It was always the same families who were doing -- always controlling every business, every industry, every banking -- and -- (inaudible) -- for it. And Jose mentioned the low labor productivity. And it goes a little bit beyond the physical productivity, because many of these countries gambled on the zona franca model, the export processing industry. But that one suffered from two things. First of all, it suffered from a lot of absentee landlordism. It was quite often not local entrepreneurs who set up these things. They might have been involved in a joint effort, but often it was Chinese companies or Korean companies or faraway companies. There was little learning curve on the side of the entrepreneurship, but also on labor. It's -- for labor, it was a dead-end street because it was basically the old day labor situation. You could maybe have a job tomorrow, but certainly not next month, or -- and so on. So it didn't really emerge. The other aspect that I would like to point out is the educational system in these countries, because there is more effort dedicated to social sciences and letters and whatever than there is to some core activities in education that can speed up the development process in the country -- in math, science and technology. And the region is underrepresentative in those areas. Too few students choose those relatively hard-core things, and they miss a lot of opportunities for learning and for again speeding up labor productivity in the future. And in the other one, you have beautiful business schools that the IDB supported very strongly in -- (inaudible) -- but with very high tuition rates or whatever. The access to that beautiful institution is relatively limited in terms of social emergence of certain groups. And those two things, I mean, have been hampering the development process in the region rather strongly. FERNANDEZ: Let me -- I have a question. Why do you say that the -- you started out by saying that the free zone market hasn't worked. My understanding is that it has worked. In a place like Costa Rica has -- it's -- it seems to have worked. In Honduras, with the maquiladora, seems to have worked. I'm not aware of the Salvadorans having much in the way of free trade zones. Tell me again why you think it hasn't worked. QUESTIONER: Well, they started relatively early. But then Mexico moved into NAFTA. And Mexico became a major, much more large-scale producer of many things. And a lot of higher-technology stuff, including in the -- in the motor industry moved to Mexico and never returned. So -- and the other one is Mexico itself suffered from the emergence of China very strongly in that area. So in the end, what stayed in the region often has become a very low-margin, relatively low-wage type of thing, whereas you would see, in terms of development process, what's happened in China, that you've started at a low end, but you get out of cheap textile and cheap (food or whatever ?) rather quickly, and you move into the higher electronic business or whatever. That process has not happened in Central America. Or where it has happened, it has been happening by very low import -- or very high import tariffs and things like that, too much protection. FERNANDEZ: OK. I mean, we've got a factual dispute. QUESTIONER: (Chuckles.) Sorry. I got some (boilerplate experience ?) there. FERNANDEZ: My understanding has been that the tariff regime in Central America is quite low, at least with respect to the U.S. I will agree with you that the educational system, some of which we've targeted in the -- that we've targeted both in the PFG and in other programs in Central America is a critical need. And part of the reason why you still have a system that depends on labor inputs, i.e., cheap labor is that you haven't been able to raise the educational system, not necessarily in a -- in a classic liberal arts setting, but in a vocational school type setting. And that is something that we've tried to address not just through the PFG, but through other programs. And that is a challenge. QUESTIONER: Yeah. STARES: Mark (sp), did you have a question? QUESTIONER: Very kind of asterisk, but if I could hop on the legalization of drug question, since you raised your study, has there been another study out there that's talked about kind of if you taxed it and regulate it and focus the money that was supposed to be focus on enforcement into drug treatment and other programs, what that might do to the spectrum of challenges that we might face and Central America might face? MR. : Do you know, Peter (sp)? QUESTIONER: Not really. I mean, it's one of the problems -- MR. : Peter (sp) -- (inaudible). Peter (sp), go ahead. QUESTIONER: I mean, it's so hard to sort of begin to play out the -- what happens if you do begin legalization. First you have to define a whole lot of details like you're really talking about legalization, or you're talking about decriminalizing marijuana. And you know, people use that word in a variety of ways. And the most important question is not that question; it's what are the real alternatives, as Michael suggested. And you know, it's not just that legalization is bad. It is bad. But illegalization is bad also. And you have to weigh one against the other, and you have to sort of look at the outcome. You have to be about -- whether it's alcohol or prescription drugs or marijuana or other drugs, what is a strategy that will reduce the amount of cost to societies? And it's not a question -- it's not a moral issue; it's a very pragmatic issue. And I don't -- that's what I think is wrong with taking that stand against legalization without looking at the costs of keeping it illegal. SHIFTER (?): (As we all know ?), it's the net -- a net assessment has to be, you know -- QUESTIONER: Exactly. And that's the problem. I mean, you can try and work out all those things, but you get lost after the first iteration of what is it going to cost, how many people are going to now be using drugs that weren't using them, et cetera. STARES: It's hard to do a controlled experiment in a -- in a particular locality, too, because of the external factors that come into play. SHIFTER (?): Right. STARES: We've seen this in the Dutch case. So it's just hard to say, well, let's give it a try here and just see how it works, because is that a true experiment? But we can get into this. Christopher (sp), I think, is next. QUESTIONER: Yes. So in the discussion around the comparisons between Plan Colombia and Central America, one of the things that wasn't mentioned was that Colombia is an upper middle-income country with institutional capacity, human capital; Central America, many low- income countries, lower middle-income countries, relatively lower institutional capital and human capital, and so therefore the challenge of building institutions that can confront this massive traffic of tens of billions of dollars of drugs every single year. And the other thing to note is that despite the successes of Plan Colombia, Colombia, Peru, Ecuador continue to produce lots of coca. (Chuckles.) And the coca continues to flow north. And so while there has been some production of marijuana, which Mexico has done for years, and heroin and all that, all the opiates, the coca is still flowing despite the successes of Plan Colombia. So the question I have in terms of the U.S. government focus and effort is going after the money. And obviously, you have to strategically focus your efforts. You can't do everything everywhere. You can't fix these societies overnight in the short term. One of the areas that I think merits emphasis is on bulk cash smuggling, on going after money laundering, and then also on financial disclosures by senior officials in the justice sector, by judges, et cetera. Obviously, people around the world think of all kinds of creative ways to move and to hide money, and we grapple with this problem even in this country. But I would be very interested in our distinguished panel's thoughts on those issues. STARES: Going after the money. FERNANDEZ: You know, Michael, this is your show. You keep -- SHIFTER: I'd be happy to -- FERNANDEZ: I'll let -- SHIFTER: I just want to defer to the, you know, authority, you know. (Laughter.) FERNANDEZ: Right. The -- I mean, I think there's something in the report, actually -- I was looking for it -- on how the -- how few convictions there have been on money laundering in Central America. SHIFTER: Yeah. FERNANDEZ: And that's -- that goes -- you know, you can -- that goes back to the -- to the need to create institutions, to focus on the courts that -- the criminal courts. And I will agree with you, it's something that -- as we look at the -- at the problem, the rule of law and the -- and the ability to enforce laws already, these laws exist. They don't need to change the laws; it's just a question of enforcing them. And it's a critical issue. And that's where focusing on -- focusing on technical assistance to improve the legal system and the policing system is something that we will continue to do. FERNANDEZ: Yeah, I would just say -- I mean, I think your point is on the mark, and we deal with it a little bit in the report, maybe not at quite the emphasis. And again, the challenge was always sort of, you know, you can't do everything, and so what's going to be the focus. But we had -- I should mention we had an advisory committee that met several times and this issue came up a lot. A lot of the people sort of talked about this as really where a lot of attention needs to be done. I think there's been some things, but clearly not as much as there needs to be, and so I think it does deserve a lot more resources and priority. I think you're -- I think it's hard to argue with that point. STARES: Karen? QUESTIONER: Thank you very much. Is it on? STARES: Yeah, it's on. QUESTIONER: Great. So my name's Karen Bolker (ph) and I'm working with CeaseFire International. This is a program that based in Chicago that uses a public health model for addressing stopping the spread of violence by treating violence as if it were a disease. And I know that you have some research that you've done on that yourself in the past. So I was really struck, in the report and in the predominance of the comments here today, on the emphasis on the top=down approach, the systemic, working with the governments, working with rule-of-law type establishments. And there's in one of your recommendations a comment that we should -- that the Central American governors should be the ones to fund the local efforts. And I just wanted to maybe ask a little bit -- tease out a little bit more why is it -- why is that something that should only really be done by the Central Americans, and should we not be having both a bottom-up and a top-down approach, and especially when you have some methodologies that maybe could actually sort of quell the violence while you're dealing with some of the larger systemic issues that are by definition longer term. And I noticed that the title is "Countering Criminal Violence," whereas the center is on preventive action and the method that we've worked with actually seeks to prevent the incidence of violence in the first place. So it focuses like a (higher beam ?) or whatever on the violence as opposed to all the other issues, the noise around the violence. So if I could just maybe get some reactions from you (and ?) -- (inaudible). SHIFTER: Sure, well, thank you for the question. I mean, I don't think the report says that the U.S. shouldn't fund -- you know, also support local, you know, initiatives. But the point about the national governments, which they -- you know, that it's important that they, you know, assume responsibility, not that the -- only local initiatives should be funded by a national government and that the U.S. cooperation should not be part of that. That -- you know, that wasn't the sense. QUESTIONER: OK. SHIFTER: But it was simply -- so I think that the United States, when we talk about -- (here ?) one of the recommendations on some of the sort of -- sort of the prevention programs that are more successful, that these should be encouraged, replicated, scaled up. You know, so that's -- needs to be -- think there is
    Event with Jose W. Fernandez, Michael Shifter and Paul B. Stares May 2, 2012
  • Americas
    Countering Criminal Violence in Central America
    Play
    Jose W. Fernandez and Michael Shifter, author of the new Council Special Report, Countering Criminal Violence in Central America, discuss U.S. and regional efforts to mitigate the violence.
    Event May 2, 2012