Cardin-Lugar, passed in 2010 and finalized in a formal SEC rule last June, was premised on the idea that the widespread corruption and misuse of vast mineral revenues in many oil-rich developing countries directly harms U.S. national security interests. This corruption, Sen. Lugar and Sen. Ben Cardin (D,Md.), the bipartisan co-sponsors, repeatedly argued, leads to poverty, instability, military adventurism, terrorism and unsure oil supplies. They said one way to help ease this threat to American economic and military security is to expose to the public, both here and in the developing countries, just how much the international oil, gas and mining companies are paying to the dictators and kleptocrats so that watchdogs can better hold those governments accountable. In the long run, the argument went, Cardin-Lugar would make for a more stable and prosperous world, and a safer and stronger America.

The opponents never challenged this premise. They didn’t question the value of Cardin-Lugar. They didn’t argue that the rule, enacted as Section 1504 of the Dodd-Frank reform bill, wouldn’t work as hoped.  They never tried to question the views expressed repeatedly by the Pentagon and our military leaders over the years that armed force alone can’t bring peace to troubled regions, that it must be accompanied by a robust civilian effort to build civil society and end corruption and poverty, as Cardin-Lugar aims to do. As Gen. James Mattis, President Trump’s new Defense secretary, told Congress a few years ago regarding the State Department’s diplomacy and development efforts, “If you don’t fund the State Department fully, then I need to buy more ammunition.”  They never said America has no interest in eliminating terrorism, or poverty or hunger.

In fact, opponents ignored completely the tremendous value that Cardin-Lugar would bring to our national security and our foreign policy. Most didn’t even stay for the debate. They ignored the value it has already shown by effectively creating an international anti-corruption standard for the extractives industry. They spoke as if American leadership in fighting corruption and instability was worthless.

Instead, they concentrated on the alleged price. They said it would cost the oil companies too much money to comply with the rule, using outdated and absurdly inflated figures. And they said it would hurt the competitiveness of U.S. oil companies, ignoring the sea change in the six years since Cardin-Lugar was passed that has brought roughly 80 percent of the world’s oil, gas and mining companies under the same reporting regime. The “price” of complying with Cardin-Lugar has actually fallen sharply since it was passed.

Both House and Senate opponents claimed the cost to the oil industry of filing the figures on their taxes, royalties and other payments under Cardin-Lugar would be $590 million a year.

That would indeed be a lot of money for accountants if true. But it’s not. To be fair, that figure is contained in an SEC document. But it came out four years ago, well before the current rule was finalized, and it uses a fanciful assumption that is no longer valid. The SEC figured, based on highly dubious oil company claims, that some corrupt governments would object to the oil companies’ disclosure so violently that they would kick the operators out, forcing a fire-sale of their oil fields at a loss. It’s a highly unlikely scenario and a curious accounting method. It’s sort of like saying the cost of your annual car registration is $30,150--$150 for the registration itself and $30,000 just in case you total the car once you start driving it.

In any event, the SEC solved the alleged problem—the rule as finalized now offers an exemption to any company that faces such threat. Even better, we don’t have to guess what compliance costs will be. We know. Big companies in Europe and Canada, like Shell and BP and Total, under parallel rules, have already filed their figures at relatively modest cost. One big Canadian oil company called it “a minor administrative burden.”  And to avoid duplication, the SEC said any report filed with one of the other jurisdictions is good enough for them, further cutting compliance costs. (But that $590 million figure will probably never go away.)

 Oh, and that small handful of countries that supposedly prohibit disclosure? Oil companies operating in each of them have already disclosed the payments anyway, with no ill effects.

The argument about Cardin-Lugar harming the competitiveness of U.S. oil companies came in two flavors. One was that firms will have to disclose highly sensitive information that competitors will exploit. Financial and accounting experts who have looked at this concluded that the project-by-project reporting of taxes and other payments is pretty benign from the perspective of gaining some market advantage. No contract details, trade secrets, bidding strategies, etc. are revealed, and the oil companies won an exemption for exploratory work. Again, we don’t have to guess. We can see. Shell and scores of other oil and mining companies have already reported payments to the EU and Canada, without giving away the family jewels. Ask Exxon-Mobil and Chevron—are they going to town against Shell and BP because of all the juicy stuff they learned from those disclosure reports?

The other argument, laid out in a letter to the SEC this week by some Republican Senators, is essentially that U.S. companies would suffer by being the good guys.  Corrupt countries would either bar them from operating there by law, or simply refuse to deal with them, “leaving those markets to the unfettered advantage of their foreign competitors,” as the letter puts it. Presumably, this means companies that are not required to report.  But just who are these other “foreign competitors” that would flock to the kleptocrats, promising to keep their secrets? Remember, 30 western countries now have mandatory reporting laws, thanks to Cardin-Lugar, covering not only their own firms but other firms listed there, including state-owned giants from Russia, China and Brazil.

When Cardin-Lugar was being developed, this issue of the U.S. going out ahead was carefully considered by the Senate Foreign Relations Committee staff because the Big Oil lobby, including Exxon, argued strongly they didn’t want to have to be the first good guys. We concluded that American companies’ superior technology and scale would make them attractive to most developing countries, regardless of the disclosure requirement, and we expected that other countries would follow our lead—as they did. Instead of being an outlier, the U.S. reporting requirements are now mainstream.

The fact is that Cardin-Lugar and subsequent actions by the EU, Norway and Canada have in effect created an anti-corruption cartel comprising most of the major oil companies that compete internationally. Developing countries almost have to do business with one of them because now, nearly everyone who counts is a good guy, not just the U.S.-listed firms. Most of the big names outside this virtuous circle don’t compete internationally, they only operate within their own borders.  (Saudi Aramco isn’t bidding against Exxon in Guyana.) We have passed the tipping point—with most of the major firms now reporting, the solution to the good guy problem is not to let the U.S. majors go back to being the bad guys they want to be. It’s to expand the anti-corruption cartel by using our leadership to recruit other countries that host globally active extractive industries (Australia and South Africa come to mind). It is going to be a lot harder to convince other countries to join an anti-corruption crusade that we have abandoned.

As in the case of the compliance costs, the alleged “price” of Cardin-Lugar in terms of hurting U.S. competitiveness was grossly over-inflated, and the value of fighting corruption completely ignored.

Friday’s vote was deeply disappointing because, as Sens. Lugar and Cardin said in their op-ed earlier this week, it put the special interests ahead of the American national interest.  But it only struck the SEC rule. Cardin-Lugar remains part of the Dodd-Frank legislation, and certain segments of the extractives industry, particularly the hard-rock mining companies and some enlightened oil companies, remain enthusiastic about disclosure because they believe it actually helps their business. Investor groups still back public disclosure of payments as an important way to measure the risk companies are taking in unstable areas. Most economists still believe that less corruption leads to greater stability and more prosperity in poor countries, with significant benefits to the oil companies operating there. Corruption has negative financial impacts on companies. It’s like a massive tax on the private sector and impedes broad-based economic growth. That’s why the EU, Canada and Norway still stand strong against corruption.

As Thursday’s Senate debate showed, there is too much enthusiasm for Cardin-Lugar and too much value for our national priorities simply to accept Congress’ ill-considered decision. The debate will resume. And when it does, let’s hope that it focuses on not only the cost—the true cost based on evidence, not inflated costs based on hype—but also the tremendous value to the American people of asserting our fundamental principles of combating corruption, aiding the less fortunate, and strengthening our national security.

Jay Branegan is a Senior Fellow at The Lugar Center.