Government policies encourage Americans to live in risky places on seacoasts and along flood-prone rivers. Disasters happen, governments bail people out, they rebuild in the same places, bad incentives stay in place, further disasters strike and more dollars and lives are lost.

The Washington Post reported on recent flooding along the Mississippi River, which I’ve excerpted below.

But first, here are some general points about flooding and governments:

• Man-made vs Natural. Damage blamed on climate change and natural disasters is often caused by big government policies. Talking about Mississippi flooding, an expert in the Post story says, “The major cause of record, recent flooding is entirely man-made.” That is also true of a lot of seacoast damage from hurricanes.
• Local Support for Development. “Environmentalists charge that jurisdictions hungry for tax revenue are continuing to plan risky projects without taking floods’ worsening intensity into account, heedless of the economic and human consequences,” notes the Post. 
• Federal Support for Development. Subsidies for flood insurance, flood control structures, beach replenishment, disaster rebuilding, and farming have encouraged development in flood-prone areas, as I discuss here. Since 1970, the number of Americans living in Special Flood Hazard Areas has increased from 10 million to more than 16 million.
• Levee Building. Government levee building along the Mississippi has reduced escape routes for the river along its course, increasing the power of the flow so that when it does break out it creates a widespread disaster. Governments have known about this problem for at least a century and a half.
• The Mississippi. Levees along the Mississippi cause the river’s thick sediment to surge with force into the Gulf rather than being deposited along the river building up the land. This fascinating 1987 essay in the New Yorker describes the Mississippi’s dynamics. At the same time, Army Corps structures around New Orleans have damaged protective wetlands.
• Global Problem. Anti-market policies by governments around the world have exacerbated flooding and disasters.

These points are developed further here, here, here, here, here, here, and here.

Here is what the Washington Post reported:

The city [St. Charles, MO] of about 70,000 has long grappled with flooding from the Missouri and Mississippi rivers, as well as rising water from creeks and streams — making it one of the most flood-prone regions in the state, with some $18 million in flood insurance claims paid out since 1970 by the Federal Emergency Management Agency.

Yet that hasn’t stopped the city from planning a $1.5 billion riverfront development along the Missouri’s banks, 120 acres of upscale shops, restaurants and apartments mostly in the river’s flood plain, an area that has been partly submerged this summer.

Several hundred miles to the south, Louisiana is experiencing the fallout from decisions like that one — decades of rampant development behind tall levees that have cut the Mississippi and its many tributaries off from the vast open floodplains the rivers once carved for themselves.

Tropical Storm Barry, which made landfall Saturday as a hurricane, is predicted to travel up the Mississippi toward St. Louis, deluging surrounding areas as it goes, with rainfall that will be channeled back toward the Louisiana coast in days to come — the latest potential catastrophe.

“The major cause of record, recent flooding is entirely man-made — the dramatic constriction of our large rivers by oversized levees, flood plain development and structural narrowing for barge traffic,” said Robert Criss, professor emeritus with the Department of Earth and Planetary Sciences at Washington University in St. Louis.

This year’s historic floods throughout the Midwest caused billions of dollars in damages; washed out highways, bridges and dozens of levees; swamped crop lands and cities; sent residents fleeing for their lives; and left a death toll in several states.

Decades of development have contributed to the problem. Claims to FEMA’s flood insurance program have increased rapidly in the past two decades and spread beyond coastal regions. 

… Yet with millions of people living in flood plains and shipping and tourism economies built on these key waterways, there is little political will for change. Environmentalists charge that jurisdictions hungry for tax revenue are continuing to plan risky projects without taking floods’ worsening intensity into account, heedless of the economic and human consequences.

“It’s lunacy,” said David Stokes, executive director of the Great Rivers Habitat Alliance. “They’re continuing to build in places where Mother Nature intended water to go. And there’s no end to it.”

At yesterday’s Senate Banking Committee hearing on Libra, the digital currency project led by Facebook with 27 other partners, concerns about its potential to undermine U.S. national security featured prominently. Senators from across the political spectrum, including Arkansas’ Tom Cotton and New Jersey’s Bob Menendez, suggested that Libra might lend itself to the scheming of malicious actors and U.S. strategic foes, a worry expressed the day before by Treasury Secretary Mnuchin.

How vulnerable will Libra be to criminal uses? A careful examination of the digital currency’s mechanics and its likely employment by financial services providers, suggests that policymakers have reacted prematurely. In fact, cryptocurrencies are significantly less useful to criminals than cash, because they leave a public record of transactions. Furthermore, Libra is even less useful than other cryptocurrencies because its management by gatekeepers means that users will not be able to conceal their identity in the limited ways available to users of open-access cryptocurrencies such as Bitcoin.

As with their warnings about systemic risk and monopoly, policymakers’ concerns about the national security risks of Libra lack a firm foundation. This post, the third in a series on Libra, discusses why.

National security risk

Even those who welcome the potential transaction-cost reductions and increased opportunities for peer-to-peer exchange that cryptocurrencies promise have expressed concerns about their use for criminal purposes. Such worries are understandable: Between 2011 and 2013, Bitcoin was the preferred medium of exchange on Silk Road, the online marketplace notorious for facilitating illicit drug purchases. And just this weekend the New York Times reported that Russian operatives working to undermine the 2016 Democratic presidential campaign used bitcoin to pay for some of their purchases.[1]

Criminals can attempt to use cryptocurrency, just as they can attempt to do so for their malicious activities.

But the anecdotal evidence overstates the degree to which cryptocurrencies facilitate crime. While the pseudonymous nature of cryptocurrency transactions disguises the identity of the people involved, most cryptocurrencies are a poor instrument for nefarious activities. This is because the transaction ledger, the blockchain, is publicly accessible and includes information about the origin and destination of cryptocurrency payments. Firms like Chainalysis (whose co-founder the Times article cited) and Elliptic have in fact made it their business to pore through blockchains on behalf of clients, including the U.S. government, to combat fraud and aid the pursuit of crime.

Libra seems even less likely to appeal to crooks. Unlike Bitcoin and Ethereum, the largest cryptocurrencies in circulation, Libra will not be an open-access network where anyone can purchase units of Libra, and generate new units, without going through an intermediary. Rather, the Libra Association expects the 100 members it hopes to have by 2020 to process Libra transactions through their own “validator nodes.” Sales of Libra to the public will take place through “authorized resellers,” which David Marcus, in his testimony Tuesday to the Senate Banking Committee, described as “a geographically distributed network of regulated custodians with investment-grade credit ratings.”

Both resellers and validators will act as intermediaries and be subject to prudential and consumer protection rules. Furthermore, digital wallet providers – who will support the applications people use to make and receive Libra payments – will collect personal information from Libra users to comply with regulations against money-laundering and financial crime in the jurisdictions where the user lives. For example, Calibra, Facebook’s own digital wallet subsidiary, has registered as a money services business with the Financial Crimes Enforcement Network (FinCEN) at the U.S. Treasury. Calibra also holds eight state money transmitter licenses as of July 16. From Marcus’ testimony, it seems Calibra would like to have licenses in all U.S. jurisdictions – states and territories – before Libra launches in 2020. Marcus also stated the Libra Association will register with FinCEN, despite being a Swiss-based foundation.

There are many problems with America’s anti-money laundering/​know-your-customer (AML/ KYC) regulations. They are the most expensive single compliance cost for banks, but their actual contribution to the fight against crime is unclear. Recent studies have pointed out that prosecutions and convictions have not increased as the number of AML/ KYC filings grew. I have previously shown that more than a third of suspicious activity reports (SARs) filed by financial institutions have no tag, suggesting that the motivation for filing them was defensive (“better safe than sorry”). Moreover, AML/ KYC regulations are sometimes the reason banks and other entities refuse to do business with certain individuals, undermining financial inclusion.

Whatever their effectiveness, AML/ KYC regulations apply to most financial intermediaries, including the firms offering payments services using Libra. Those who worry that Libra will be a gateway into the financial system for malicious actors seem unaware that members of the Libra Association will be under the obligation to comply with AML/ KYC rules. For example, Calibra, as a money services business, will collect customer information and report evidence of suspicious transactions to FinCEN. Other digital wallet providers who take custody of customer funds will fall under the same regulations. Because it is not possible to get hold of Libra units but by going through a licensed intermediary, even the limited means by which users of other cryptocurrencies currently can conceal their identity will be unavailable to Libra users.

A separate security concern regarding Libra involves the Association’s decision to locate its headquarters in Geneva, Switzerland. Sen. Sherrod Brown, Ranking Member of the Senate Banking Committee, has repeatedly warned against allowing “Facebook to run a risky new cryptocurrency out of a Swiss bank account.” Rep. Patrick McHenry, his counterpart on the House Financial Services Committee, has also questioned the Libra Association’s foreign base, even while describing digital currencies as “an enormous opportunity … to reduce the cost of transactions.”

Although Facebook and its partners have not themselves explained why they chose Switzerland as Libra’s headquarters, there are good and legitimate reasons for that decision. First, Switzerland has become a cryptocurrency hub, thanks to its financial regulator’s comparably welcoming approach to blockchain technology and cryptocurrency offerings. Contrast that with America’s regulatory fragmentation, political suspicion of cryptocurrencies, and the worrying trend of regulation by enforcement, as exemplified by the SEC’s recent lawsuit against Kik, Inc. In early 2018, Switzerland outlined a clear approach to the regulation of different types of cryptocurrencies. This approach has attracted many of the non-profit entities that often govern cryptocurrencies, such as the Ethereum Foundation.

Switzerland also has a long history as a politically stable and legally transparent jurisdiction for the establishment of foundations. While its longstanding protection of bank secrecy was controversial with other governments, the days of secret Swiss bank accounts are long over. Secrecy does not seem to be the goal of the Libra Association anyway. But regulatory certainty and political stability are necessary if Libra is to succeed.

So is the choice of a neutral jurisdiction for what hopes to become a loose multi-member association of financial services providers. When I first heard about Libra’s Swiss headquarters, I thought the move wise if the Libra Association wishes to attract members from countries who sometimes look warily at the U.S. government’s use of financial regulation in the pursuit of foreign policy. These countries are not mainly repressive regimes, such as Iran and Venezuela, whose financial systems are so insular and controlled that it would be difficult to bring them into the Libra network. Rather, they are mostly large jurisdictions such as India, China, and the EU, with which the U.S. has close commercial and financial ties, but whose governments do not necessarily wish for America to have control over the global financial infrastructure. Last year’s tug-of-war over the enforcement of U.S. sanctions against Iran by EU-based SWIFT, which ended with SWIFT’s reluctant agreement to cut ties with Iranian banks, illustrated the long reach of U.S. sanctions policy, even when pursued unilaterally.

Whether the Libra Association’s foreign location could undermine U.S. policy, regardless of its merits, is unclear. I think it unlikely, given what we know about Libra so far. We now know that the Libra Association itself will register with FinCEN. Furthermore, the Libra Reserve that will back each unit of Libra currency will almost certainly include U.S. dollars and U.S. government securities. U.S. entities will also feature among Libra’s transaction validators and authorized resellers. For all of these reasons, it will be difficult for the Libra Association to resist enforcing the policy of the U.S. government. In sum, the choice of Geneva as Libra’s headquarters seems to owe more to legal and regulatory expediency than to an attempt to place the new digital currency outside the reach of American financial regulation.

Despite sensational news stories, the national security risks of cryptocurrency are exaggerated. As a permissioned network with licensed financial intermediaries acting as gatekeepers, Libra will prove even less accessible to those seeking to conceal their identity and motives, including criminals. Policymakers who understand the promise of a more competitive payments system would do well to approach allegations of Libra’s vulnerability to criminal abuse with a grain of salt.

---

[1] As has become the convention, I capitalize Bitcoin when referring to the cryptocurrency network and use lower-case when referring to units of the cryptocurrency.

[Cross-posted from Alt‑M.org]

What Are the True Financial Risks of the Facebook-Led Digital Currency? (Part III: National Security Risk)

At yesterday’s Senate Banking Committee hearing on Libra, the digital currency project led by Facebook with 27 other partners, concerns about its potential to undermine U.S. national security featured prominently. Senators from across the political spectrum, including Arkansas’ Tom Cotton and New Jersey’s Bob Menendez, suggested that Libra might lend itself to the scheming of malicious actors and U.S. strategic foes, a worry expressed the day before by Treasury Secretary Mnuchin.

How vulnerable will Libra be to criminal uses? A careful examination of the digital currency’s mechanics and its likely employment by financial services providers, suggests that policymakers have reacted prematurely. In fact, cryptocurrencies are significantly less useful to criminals than cash, because they leave a public record of transactions. Furthermore, Libra is even less useful than other cryptocurrencies because its management by gatekeepers means that users will not be able to conceal their identity in the limited ways available to users of open-access cryptocurrencies such as Bitcoin.

As with their warnings about systemic risk and monopoly, policymakers’ concerns about the national security risks of Libra lack a firm foundation. This post, the third in a series on Libra, discusses why.

National security risk

Even those who welcome the potential transaction-cost reductions and increased opportunities for peer-to-peer exchange that cryptocurrencies promise have expressed concerns about their use for criminal purposes. Such worries are understandable: Between 2011 and 2013, Bitcoin was the preferred medium of exchange on Silk Road, the online marketplace notorious for facilitating illicit drug purchases. And just this weekend the New York Times reported that Russian operatives working to undermine the 2016 Democratic presidential campaign used bitcoin to pay for some of their purchases.[1]

Criminals can attempt to use cryptocurrency, just as they can attempt to do so for their malicious activities.

But the anecdotal evidence overstates the degree to which cryptocurrencies facilitate crime. While the pseudonymous nature of cryptocurrency transactions disguises the identity of the people involved, most cryptocurrencies are a poor instrument for nefarious activities. This is because the transaction ledger, the blockchain, is publicly accessible and includes information about the origin and destination of cryptocurrency payments. Firms like Chainalysis (whose co-founder the Times article cited) and Elliptic have in fact made it their business to pore through blockchains on behalf of clients, including the U.S. government, to combat fraud and aid the pursuit of crime.

Libra seems even less likely to appeal to crooks. Unlike Bitcoin and Ethereum, the largest cryptocurrencies in circulation, Libra will not be an open-access network where anyone can purchase units of Libra, and generate new units, without going through an intermediary. Rather, the Libra Association expects the 100 members it hopes to have by 2020 to process Libra transactions through their own “validator nodes.” Sales of Libra to the public will take place through “authorized resellers,” which David Marcus, in his testimony Tuesday to the Senate Banking Committee, described as “a geographically distributed network of regulated custodians with investment-grade credit ratings.”

Both resellers and validators will act as intermediaries and be subject to prudential and consumer protection rules. Furthermore, digital wallet providers – who will support the applications people use to make and receive Libra payments – will collect personal information from Libra users to comply with regulations against money-laundering and financial crime in the jurisdictions where the user lives. For example, Calibra, Facebook’s own digital wallet subsidiary, has registered as a money services business with the Financial Crimes Enforcement Network (FinCEN) at the U.S. Treasury. Calibra also holds eight state money transmitter licenses as of July 16. From Marcus’ testimony, it seems Calibra would like to have licenses in all U.S. jurisdictions – states and territories – before Libra launches in 2020. Marcus also stated the Libra Association will register with FinCEN, despite being a Swiss-based foundation.

There are many problems with America’s anti-money laundering/​know-your-customer (AML/ KYC) regulations. They are the most expensive single compliance cost for banks, but their actual contribution to the fight against crime is unclear. Recent studies have pointed out that prosecutions and convictions have not increased as the number of AML/ KYC filings grew. I have previously shown that more than a third of suspicious activity reports (SARs) filed by financial institutions have no tag, suggesting that the motivation for filing them was defensive (“better safe than sorry”). Moreover, AML/ KYC regulations are sometimes the reason banks and other entities refuse to do business with certain individuals, undermining financial inclusion.

Whatever their effectiveness, AML/ KYC regulations apply to most financial intermediaries, including the firms offering payments services using Libra. Those who worry that Libra will be a gateway into the financial system for malicious actors seem unaware that members of the Libra Association will be under the obligation to comply with AML/ KYC rules. For example, Calibra, as a money services business, will collect customer information and report evidence of suspicious transactions to FinCEN. Other digital wallet providers who take custody of customer funds will fall under the same regulations. Because it is not possible to get hold of Libra units but by going through a licensed intermediary, even the limited means by which users of other cryptocurrencies currently can conceal their identity will be unavailable to Libra users.

A separate security concern regarding Libra involves the Association’s decision to locate its headquarters in Geneva, Switzerland. Sen. Sherrod Brown, Ranking Member of the Senate Banking Committee, has repeatedly warned against allowing “Facebook to run a risky new cryptocurrency out of a Swiss bank account.” Rep. Patrick McHenry, his counterpart on the House Financial Services Committee, has also questioned the Libra Association’s foreign base, even while describing digital currencies as “an enormous opportunity … to reduce the cost of transactions.”

Although Facebook and its partners have not themselves explained why they chose Switzerland as Libra’s headquarters, there are good and legitimate reasons for that decision. First, Switzerland has become a cryptocurrency hub, thanks to its financial regulator’s comparably welcoming approach to blockchain technology and cryptocurrency offerings. Contrast that with America’s regulatory fragmentation, political suspicion of cryptocurrencies, and the worrying trend of regulation by enforcement, as exemplified by the SEC’s recent lawsuit against Kik, Inc. In early 2018, Switzerland outlined a clear approach to the regulation of different types of cryptocurrencies. This approach has attracted many of the non-profit entities that often govern cryptocurrencies, such as the Ethereum Foundation.

Switzerland also has a long history as a politically stable and legally transparent jurisdiction for the establishment of foundations. While its longstanding protection of bank secrecy was controversial with other governments, the days of secret Swiss bank accounts are long over. Secrecy does not seem to be the goal of the Libra Association anyway. But regulatory certainty and political stability are necessary if Libra is to succeed.

So is the choice of a neutral jurisdiction for what hopes to become a loose multi-member association of financial services providers. When I first heard about Libra’s Swiss headquarters, I thought the move wise if the Libra Association wishes to attract members from countries who sometimes look warily at the U.S. government’s use of financial regulation in the pursuit of foreign policy. These countries are not mainly repressive regimes, such as Iran and Venezuela, whose financial systems are so insular and controlled that it would be difficult to bring them into the Libra network. Rather, they are mostly large jurisdictions such as India, China, and the EU, with which the U.S. has close commercial and financial ties, but whose governments do not necessarily wish for America to have control over the global financial infrastructure. Last year’s tug-of-war over the enforcement of U.S. sanctions against Iran by EU-based SWIFT, which ended with SWIFT’s reluctant agreement to cut ties with Iranian banks, illustrated the long reach of U.S. sanctions policy, even when pursued unilaterally.

Whether the Libra Association’s foreign location could undermine U.S. policy, regardless of its merits, is unclear. I think it unlikely, given what we know about Libra so far. We now know that the Libra Association itself will register with FinCEN. Furthermore, the Libra Reserve that will back each unit of Libra currency will almost certainly include U.S. dollars and U.S. government securities. U.S. entities will also feature among Libra’s transaction validators and authorized resellers. For all of these reasons, it will be difficult for the Libra Association to resist enforcing the policy of the U.S. government. In sum, the choice of Geneva as Libra’s headquarters seems to owe more to legal and regulatory expediency than to an attempt to place the new digital currency outside the reach of American financial regulation.

Despite sensational news stories, the national security risks of cryptocurrency are exaggerated. As a permissioned network with licensed financial intermediaries acting as gatekeepers, Libra will prove even less accessible to those seeking to conceal their identity and motives, including criminals. Policymakers who understand the promise of a more competitive payments system would do well to approach allegations of Libra’s vulnerability to criminal abuse with a grain of salt.

---

[1] As has become the convention, I capitalize Bitcoin when referring to the cryptocurrency network and use lower-case when referring to units of the cryptocurrency.

Read more on Libra:

• Of Libras and Zebras, Part One by Diego Zuluaga
• Of Libras and Zebras, Part Two by Diego Zuluaga
• Libra’s Unresolved Puzzles by Larry White

For many decades, critics have noted that agencies were using Dear Colleague and guidance letters, memos and so forth — also known variously as subregulatory guidance, stealth regulation and regulatory dark matter — to grab new powers and ban new things in the guise of interpreting existing law, all while bypassing notice-and-comment and other constraints on actual rulemaking.

That’s a problem we at Cato have been concerned about for at least twenty years — the quote itself is from my 2017 post in this space. In financial regulation, for example, as Charles Calomiris argued in a Cato working paper around the same time, agencies’ overreliance on guidance is a systematic failing that “avoids transparency, accountability and predictability.” We’ve published much more on the topic, in both a lighter and a more serious vein.

Since my update post last year, there have been a number of new developments. Soon after then-Attorney General Jeff Sessions’s announcement of the new policy, followed by the revocation of dozens of existing guidance documents, then-Associate Attorney General Rachel Brand issued a January 2018 directive telling Department of Justice attorneys not to rely on allegations of noncompliance with agency guidance, in and of themselves, as reason to initiate civil enforcement actions. And this past winter, DOJ updated its Justice Manual to limit the use of guidance as a basis for direct liability in both civil and criminal enforcement. “Guidance is not law. It’s not binding. And it shouldn’t be given the force or effect of law,” said Deputy Assistant Attorney General Charles Cox in a January speech.

It’s important not to overstate what is changing here: the revised Justice Manual is careful to specify that even if they do not create liability directly, guidance documents can still prove relevant to enforcement in many other ways. They can be used to prove states of mind; as evidence of professional or industry standards, practices, and customs, or that scientific or technical assertions are generally accepted in a particular field; in cases where a regulated party falsely represented itself as having followed guidance; and in various other circumstances.

On April 11, the White House Office of Management and Budget tightened another means of control when it issued guidance (irony alert) about the duty of agencies, including traditionally independent agencies, to notify OMB’s Office of Information and Regulatory Affairs well in advance of publishing new rules to ensure compliance with the Congressional Review Act. The guidance makes clear that “rule” can sometimes include “guidance documents, general statements of policy, and interpretive rules” that do not go through a conventional rulemaking process.

Meanwhile, on a separate track, the unglamorous but often influential federal agency known as the Administrative Conference of the United States commissioned Yale law professor Nicholas Parrillo to write a lengthy study on the guidance issue. (Spinoffs: summary by Parrillo and Lee Liberman Otis, Yale Journal on Regulation and related symposium, Federalist Society panel.) Parrillo agrees that the problems with guidance are real, but argues that most of them arise from structural difficulties within administrative and legal bureaucracy, rather than from a purposeful intent to circumvent process protections. He also finds that they come up unevenly: regulated parties are most likely to feel that they have no real choice but to obey guidance 1) when they need to obtain preapproval before doing business, 2) when repeat interactions with regulators are inevitable and full compliance all the time is unlikely no matter how hard they try; 3) when the consequences of agency enforcement, or even the opening of an enforcement action, are severe; and 4) when the regulated party employs a large dedicated compliance staff.

These might serve as interesting guideposts in looking for ways to revamp regulatory schemes in such a way that agencies’ whims will no longer be received as law.

NASA’s Apollo 11 blasted off 50 years ago today sending astronauts to land on the moon and return safely to earth. The mission was planned rapidly and executed almost flawlessly. The Saturn V rocket was the most powerful

engine ever built. The computers available at the time were primitive, yet everything about the timing of burns and entry angles had to be precise. Neil Armstrong, Buzz Aldrin, and Michael Collins were unbelievably brave. It was a stunning achievement. An American triumph.

If the mission were pursued today, the president would be tweeting undignified comments and hogging the spotlight. The launch would be years behind schedule and the computers would jam like during the Obamacare launch. Environmental lawsuits would shut down the launchpad. Labor regulations would slow astronaut training. NASA executives would be indicted for graft. Federal budget squabbling would close the federal government and mission control, leaving the astronauts to find their own way home from the moon. It would be a mess.

Policymakers these days keep on dreaming of big spending projects for the government. But Washington is running trillion-dollar deficits and is far more dysfunctional than in 1969. I discuss the structural reasons why the government fails so much in this study.

The federal government has suffered from corruption, cost overruns, pork barrel spending, and nasty partisan battles since the beginning. But the problems have grown worse because the government has grown far too huge to manage and oversee properly. The federal government’s budget is 100 times larger than the budget of the average state government. As Milton Friedman said, “because government is doing so many things it ought not to be doing, it performs the functions it ought to be performing badly.”

The 1969 moonshot remains awe-inspiring, as the new Apollo 11 movie captures. But looking ahead, we would get more out of the government if it did less. We would be better off letting entrepreneurs take the lead both in space exploration and in the many challenges we face here on earth.

As trade restrictions mount and as major trading countries remain mired in commercial impasse, an approaching global gathering in Central Asia next summer could prove to be the climax to the current battle between continued multilateral cooperation and increased unilateral confrontation in trade.

The World Trade Organization, with its commitment to international cooperation, has been struggling with the headwinds of unilateralism and protectionism. If a way back to multilateralism in trade is not soon found, the entire trading system may unravel, with grievous economic consequences for all the world.

So far, the developed countries of the world have been unable to counter the current trend toward the ultimately self-defeating insularities of economic nationalism. Thus, it may be left to the developing countries to play a decisive role in turning the tide. At this point, most developing countries understand – perhaps better than some of the developed countries – the considerable economic and geopolitical stakes they share in supporting the existing global trade regime.

While the rest of the world has been struggling to save the multilateral trading system overseen by the WTO, many of the developing countries that comprise most of the 164 members have just now started to benefit fully from their participation in the rules-based WTO system. The lower barriers to trade and the added links to global supply chains provided by membership in the multilateral trading system are helping further growth and feed prosperity by freeing and facilitating trade throughout the developing world.

One among numerous examples is Kazakhstan, which has grown rapidly through trade in the four years since it became a WTO member in 2015, and which has been chosen to host what could be a fateful WTO ministerial conference in its capital of Nur-Sultan in June of 2020. It can be argued that Kazakhstan and other developing countries that are just now climbing the economic ladder toward prosperity have the most at stake in saving a multilateral trading system that provides mutual market access under the rule of law. In the rules-based WTO, all countries are equal no matter the size of their economies or the extent of their trade. In the WTO, there is the rule of law instead of the rule of power. For developing countries, above all others, it would be ill-advised to undermine the international rule of law in trade.

The first President of Kazakhstan, Nursultan Nazarbayev, offered his country’s capital as a site where it is hoped that common ground may be found next summer in maintaining the rule of law in the trading system while improving the current trade rules to meet the new challenges of the 21^st century. As one European trade diplomat, Luc Levigne, put it recently, “We are engaged in WTO reform, we want success, there is no alternative, there is no second trading system. Kazakhstan will have a great responsibility in this regard. Building bridges is important.”

Located at the center of the Eurasian continent – neighbor to China to the east, Russia to the north, Europe to the west, and the Middle East to the south – Kazakhstan is well-placed for building bridges. Indeed, it has long held itself out as the ideal place for doing so. The Astana International Financial Forum and the Astana Economic Forum are two of the numerous ways in recent years that trade, investment, finance, culture, and other bridges have been built by Kazakhstan. The upcoming WTO ministerial conference can be next.

Kazakhstan is likewise well-placed to emerge as an influential economic voice for developing countries in the WTO, especially those in Central Asia. For millennia, the steppes of Kazakhstan have been a crossroads for Eurasian trade. Since becoming the 162^nd country to join the WTO four years ago, it has been engaged in a gradual transition toward a more open economy. For “ease of doing business,” the World Bank ranks Kazakhstan 36^th in the world. This opening up has enabled Kazakhstan to become ever better positioned to maximize its gains from trade, and, importantly, coupled with other reforms, this opening up can also help broaden the opportunities and possibilities for the Kazakh people beyond trade.

In a sure signal of trade arrival, Kazakhstan is now a participant for the first time in WTO dispute settlement in a dispute with Ukraine over Kazakhstan’s anti-dumping duties on steel pipe. The larger the volume of the international trade of a country, the more disputes are likely to occur with other countries over trade. The growing volume of Kazakh exports has increased from about $41 billion in 2015 to $61 billion in 2018 since the country joined the WTO. For now, exports remain mostly natural resources – petroleum, copper and other minerals, and natural gas – but diversification is a priority.

Kazakhstan’s per capita GDP of $24738.40 (PPP) puts it ahead of most developing countries. Only 2.7 percent of Kazakhs live below the poverty line. Trade is rightly seen by the Kazakhs as a means of further improving these already improving numbers. They seek increased trade with Europe, Russia, China, the United States, and, not least, other developing countries in the rapidly growing Central Asian region and beyond.

These trade circumstances and these trade aims add to Kazakhstan’s placement as a potential bridge builder in the WTO. Looking ahead to their next ministerial conference, other WTO members should look to their host, Kazakhstan, to emerge as a new leader in helping resolve the current crisis by building the new and better bridges needed to secure and strengthen the multilateral trading system.

Members of Congress are growing more appreciative of the benefits of Medication Assisted Treatment in addressing the overdose crisis. Two bills presently under consideration—one in the Senate and one in the House—are the latest evidence of that awareness. 

Medication Assisted Treatment for opioid use disorder is one of the most widely-accepted and least controversial of the tools in the harm reduction tool box. The strategy involves placing the patient on an orally-administered opioid that binds with enough opioid receptors to prevent painful withdrawal symptoms while, at the same time, not producing cognitive impairment or euphoria. The approach has been around since the 1960s and has greatly reduced overdose deaths as well as the spread of deadly infections from dirty needles.

One of the oldest and most well-known examples of MAT uses the synthetic opioid methadone, which is classified by the Drug Enforcement Administration as Schedule II (known medical use with a high potential for abuse or dependence). A more recent form of MAT uses the Schedule III opioid buprenorphine. Schedule III drugs have less potential for dependence or abuse than those in Schedule II. Like methadone, buprenorphine is permitted to be prescribed for the treatment of pain, but not for MAT without obtaining DEA permission.

As I have written here, federal policy regarding methadone MAT makes no sense. Health care practitioners have been permitted to prescribe methadone in oral or non-oral forms to treat pain for decades. Yet they are not permitted to prescribe methadone for opioid withdrawal management or for MAT for opioid use disorder outside of a DEA-licensed and regulated methadone clinic. These clinics must also obtain state licenses. Patients are required to take the methadone in front of a member of the clinic staff. 

These regulatory requirements have been great obstacles to providers wishing to establish methadone clinics, and even greater obstacles to patients seeking methadone MAT for their disorder. It also places onerous burdens on patients suffering from opioid use disorder who want treatment. The requirement to take the medication in the presence of clinic staff each day demands a certain amount of scheduling discipline that many addicts have difficulty achieving. It also implies that addicted patients cannot be trusted with an outpatient supply to take as directed —which is a further blow to the already shattered self-esteem that helps perpetuate substance use disorder. And patients living in remote areas underserved by methadone clinics are unrealistically expected to travel long distances each day to take their methadone in the presence of clinic staff. This problem can be alleviated by allowing health care practitioners who can already prescribe methadone for other reasons to prescribe it to outpatients for withdrawal management and MAT, as has been the case in Canada, the UK, Australia and other countries for decades.

Buprenorphine, on the other hand, may be prescribed on an outpatient basis for MAT. Research has been inconclusive with respect to the relative effectiveness of methadone versus buprenorphine for MAT. Most clinicians believe there is no one-size-fits-all answer. Depending upon the patient and the circumstances, one drug might work better than the other. In recent years buprenorphine has been combined with the overdose antidote naloxone in an oral form, commonly known by the brand name Suboxone. When taken orally, naloxone is inactive. If buprenorphine/​naloxone is crushed and injected, the naloxone counteracts the buprenorphine, preventing the user from achieving any “high.” But most users of non-prescribed diverted Suboxone report they are self-medicating to avoid opioid withdrawal, and that the Schedule III buprenorphine is a poor substitute for the “high” they get from heroin and other more powerful opioids.

A major force behind the black market for buprenorphine is the fact that there is an acute shortage of practitioners to whom people with substance use disorder can go for buprenorphine MAT. Again, this is because of onerous federal restrictions. Under the Drug Addiction Treatment Act of 2000, practitioners wishing to treat substance use disorder with buprenorphine are required to obtain an “X waiver.” Providers must take an 8‑hour course in order to have the ”X” added to their DEA narcotics prescribing license. There are also strict limits on how many patients a practitioner can treat at any given time, as well as restrictions on nurse practitioners or physician assistants wishing to obtain the X waiver. These have combined to create an acute lack of buprenorphine MAT providers. According to the Substance Abuse and Mental Health Services Administration, less than 7 percent of practitioners have jumped through the hoops and obtained X waivers. The shortage is particularly severe in rural areas. Nationally, only 1 in 9 patients with opioid use disorder are able to obtain buprenorphine MAT.

For this reason, health care practitioners interested in treating opioid use disorder, as well as other harm reduction advocates, have called for ending the requirement of an X waiver to use buprenorphine for MAT. In France roughly one-fifth of general practitioners treat people with substance use disorder in their offices without any further licensing or education requirements. It has contributed to a dramatic reduction in France’s overdose death rate.

Fortunately, members of Congress seem to be getting the message. Senators Lisa Murkowski (R‑AK) and Maggie Hassan (D‑NH) have introduced a bill that would eliminate “the separate scheduling requirement for dispensing narcotics in Schedules III, IV, and V for maintenance or detoxification treatment.” In the House, Representative Paul Tonko (D‑NY) introduced HR 2482 in May which does the same. HR 2482 has 75 co-sponsors, 15 of whom are Republicans.

It should be a lot easier for providers to help the many patients seeking help from their disorder but are are unable to find it. This legislation should help. Congress should also look at reforming laws surrounding methadone, so it can be prescribed in practitioners offices as well. But first things first.