UNCLOS would subject U.S. to anti-competitive regime
The UNCLOS treaty was originally concieved as a way to redistribute wealth on a global scale and the international regulatory structure that remains will likely inhibit development, depress productivity, increase costs, and discourage innovation.
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As originally written, the treaty was explicit- ly intended to restrict mineral development. Among the treaty’s objectives were “rational management,” “just and stable prices,” “orderly and safe development,” and “the protection of developing countries from the adverse effects” of mineral production. The LOST explicitly limited mineral production and authorized commodity cartels (rather like OPEC). Further, the treaty placed a moratorium on the mining of some resources, such as sulfides, until the Authority adopted rules and regulations— which might never have happened.
The procedures governing mining reflect- ed that anti-production bias. A firm would have been required to survey two sites and turn one of them over gratis to the Enterprise before even applying for a permit. The Authority had the power to deny an applica- tion if the operation would violate the treaty’s anti-density and anti-monopoly provisions, aimed at U.S. operators. And the ISA’s deci- sions in this area were to be set by a subsidiary body, the Legal and Technical Commission. Developing countries would dominate the 36- member council, as they did the Assembly, leaving access of American firms to the deep seabed (that beyond national jurisdiction) dependent on the whims of countries that might oppose seabed mining for economic or political reasons.
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The LOST’s fundamental premise is that all unowned resources on the ocean’s floor belong to the “people of the world”—effec- tively the UN. But an international regulato- ry system would likely inhibit development, depress productivity, increase costs, and discourage innovation, thereby wasting much of the benefit to be gained from mining the oceans. The Byzantine regime created by the LOST was, and remains, almost unique in its perversity. In the original agreement, the UN would have asserted its control through the International Seabed Authority, ruled by an Assembly dominated by poorer nations and a council that would regulate deep seabed mining and redistribute income from the indus- trialized West to developing countries. The ISA would employ as its chief subsidiary to mine the seabed a body called the Enterprise, which would enjoy the coerced assistance of Western mining companies.
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This redistributionist, collectivist language, I’ve suggested, is archaic and this is not surprising. The treaty was drafted during the height of the G-77 – when many saw world poverty as the result of the west’s wealth. People in Africa, Asia, and South America were poor because we were rich; make us poorer and they will become richer! In that era, only foreign aid and other wealth redistribution schemes were viewed as offering any hope of alleviating world poverty. LOST was typical of the flawed policy prescriptions of that era. But the world has learned much over the last decades. Most now recognize that Foreign Aid, while occasionally useful in emergency relief situations, can too often stifle the entrepreneurial forces and political reforms which offer the only hope for sustainable economic growth. The work of Lord Peter Bauer, recipient of the Cato Institute Friedman Prize, showed that too often foreign aid is simply the transfer of wealth from the poor in the rich world to the rich in the poor world, that such wealth transfer programs hurt, rather than helped the poor. LOST was crafted in this era and it shows. Even the World Bank and its other international institutions increasingly recognize that the key to addressing poverty is for the affected nation states to move toward economic freedom, private property, a predictable rule of law, a reduction in domestic violence. To enshrine collective political management of the oceans does nothing to advance this cause.
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The primary stumbling block to ratification is the bizarre regulatory regime governing seabed mining of deep ocean resources like the minerals cobalt and manganese. This system is unique in its byzantine complexity. The treaty effectively treats the ocean’s unowned seabed resources as property of the United Nations. The LOST established an International Seabed Authority (ISA), ruled by an Assembly and a Council, to govern deep seabed mining and redistribute income from the industrialized West to developing countries. Perhaps inspired by “Star Trek,” the LOST also created an entity called the Enterprise, which would mine the ocean floor—with the coerced assistance of Western mining companies—on behalf of the Authority.
The convention explicitly limited resource development and promised to protect developing countries from the lower prices that would result from minerals production. Essentially, it authorized an OPEC-style commodity cartel.
The details spelled out were as bad as the principles. Private companies had to survey two sites and turn one over gratis to the Enterprise; they also were required to transfer technology to the Enterprise and to developing states. American miners would be targeted by anti- density and antimonopoly provisions, while developing nations would dominate the Authority. Western governments would be required to enforce payment of fees and royalties, subsidize the U.N.’s mining operation, and provide resources for redistribution to Third World governments and pseudo-national entities like the Palestinian Liberation Organization (now the Palestinian Authority).
The problems with such a system are numerous. It would empower an inefficient international organization and incompetent—often kleptocratic—Third World governments, setting poor precedents for the development and operation of other multilateral institutions. Establishing a global oceans regulatory system that restricts entrepreneurship would do more than hinder resource development on the seabed; it would deter the production of software, technology, and processes designed for seabed mining or with dual-use capabilities. Finally, a LOST-like regime would discourage exploration of other currently unowned resources, most notably space. Although the treaty’s economic impact might have seemed limited, its future adverse effects always would have been enormous. Today, they could be even worse.
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If the United States accedes to UNCLOS, American companies will be required to adhere to all the Authority’s rules, regulations, and dictates. In matters concerning deep seabed mining, UNCLOS leaves no doubt where the power lies. The convention states that all activities in the seabed “shall be organized, carried out and controlled by the Authority on behalf of mankind as a whole” and that the Authority “shall have the right to take at any time any measures...to ensure compliance with its provisions and the exercise of the functions of control and regu- lation assigned to it thereunder or under any contract.”35
The Authority has exercised these general grants of power in a number of specific ways, notably by creating the “mining Code,” a “comprehensive set of rules, regulations and pro- cedures issued by the International Seabed Authority to regulate prospecting, exploration and exploitation of marine minerals in the international seabed Area.”36
Among the regulations thus far enacted by the Authority are the procedures regarding exploration for polymetallic nodules.37 These regulations, when read in conjunction with the Authority’s standard clauses for exploration contracts38 and the Legal and Technical Commission’s environmental regulations,39 create a regulatory regime without precedent in international law. If the United States accedes to UNCLOS, U.S. seabed mining companies will be subject to that regime.