Conflict Minerals: Riddle Us This

Now that Kate’s back in town, we’re working on a longer joint post about our position on this whole OMG-DRC-Conflict-Minerals kerfuffle.

Until then, we have a question for our readers who believe that regulating Congolese minerals would be likely to have a positive impact on the conflict situation there:

How?

We’re serious. We want to know what you think the mechanism for improvement would be. Because to us, this is sounding like so much underpants gnome logic. (Phase 1: Steal Underpants; Phase 2: ??; Phase 3: All Armed Groups Pack Up and Go Home.)

So, Cblatts, Jason, Team Enough, Nell Okie, and anyone else: we are genuinely interested in learning how you think this would play out. Please walk us through the steps we are missing between “restricting the market for minerals from the DRC” and “improvement in the lives of those affected by conflict in the Kivus.”

(Those of you who think it is not a good idea can explain that too if you’d like. But we’re not having as much trouble figuring that side out.)

10 thoughts on “Conflict Minerals: Riddle Us This

  1. Maybe the question should include the condition, "under current conditions." A lot of the arguments I've seen rely on theoretical technology, state capacity, and/or individual behavior.

  2. Doesn't this at least allow people to know that they are not directly financing the conflict in their electronics purchases — and how is this not a step in the right direction?

  3. TexasinAfrica-

    Agreed, let's all pretend we included that, okay?

    Cosmo-

    I certainly see how it would allow purchasers of electronics to feel better about themselves, but I'm still not seeing how it actually works towards ending the conflict.

    My understanding is that much of the income that the major armed groups operating in the region get from the mineral trade is obtained through taxation. This suggests to me that restricting the mineral trade is unlikely to have a major impact on their revenue streams, as any locals who are forced by the regulations to switch to other economic activities will be taxed just the same.

    Additionally, it's not clear to me that this legislation would have any effect on black/grey market actors in the mineral economy. I am not sure how much of the mineral trade operates through informal channels, or even whether this is measurable, but I'm guessing it's a significant percentage. Can anyone who knows more about it speak to this issue?

  4. I have to be honest and say I don't understand the purpose of the law. I'm actually an advocate of government regulation of the extra-territorial obligations of MNCs and other businesses, but those regulations need to come with consequences for violations of the regulations. From what I've read (which, admittedly, is mostly this blog and things this blog has linked to and then the links that those things linked to…), this law doesn't provide for consequences. It requires audits to determine if the minerals/metals actually fund armed group and it requires disclosure of those actions. But, it doesn't impose fines or criminal sanctions or the rights of shareholders to sue or the rights of members of the DRC public to sue in US courts. It provides nothing more than disclosure obligations, which, of course, is what you get in a financial regulations bill. But, that leaves this bill ineffective.

    The point of the bill – and the extraterritorial regulation of MNCs by home states – is that instead of gnome underwear logic, you get this:

    1. Home state imposes code of conduct for MNC.
    2. Home state enforces said code of conduct by imposing fines, providing criminal sanctions, or providing civil redress for violations of those codes of conduct.
    3. The threat of administrative, criminal or civil judgments resulting in huge financial losses alters the behavior of MNC to ensure that the MNC does not participate in undesireable acts (like bribing foreign officials, a'la the FCPA).

    But, this bill instead alters that scheme so it looks like this:

    1. Home state imposes code of conduct, which actually isn't a code of conduct because it's actually just disclosure of whether certain types of people benefit from the corporations' actions;
    2. Home state makes knowledge about MNC's compliance with said activity available to the public through SEC disclosures;
    3. Home state lets the public and shareholders determine if these actions are reprehensible to drop the stock prices or require a change in MNC management/board of directors;
    4. Activists hope people read and care about the disclosures (which really means they read the disclosures for everyone and then try to make a big deal out of it when a company's disclosures don't report what they want, which is total compliance);
    5. Everyone hopes that this will dissuade people from engaging in bad behavior.

    I think the legislation could have had a positive impact on the behavior of corporations and the human rights situation in Kivus IF:

    (1) It imposed an actual code of conduct for businesses acting in a conflict region (additionally, I don't think this should be limited to the DRC, either, as there are other resource conflicts out there that could benefit from a similar act, but that's another issue); and,

    (2) There were consequences to using "conflict minerals".

  5. If I understand this right, Kate and Amanda are genuinely puzzled about why anyone would even think that this legislation might be a good thing. I'm puzzled about why they are puzzled.

    The intention of the law seems pretty simple and straightforward. It is thought that rebel groups derive revenue from the sale of various minerals and that by denying them an outlet to sell these minerals the international community would take some money away from them. This would appear to be good if it can be achieved.

    If anything, the arguments against the legislation are more complicated and must puzzle a lot of people. These seem to boil down to saying that this well-intentioned law won't actually have the hope-for effect. For example, thatthe rebels will figure out ways to disguise who is benefitting from their mineral sales while honest people will end up out of jobs because their bosses aren't as good as the rebels are at beating the restrictions. Or moral suasion won't work without real punishment. Or that selling this legislation as a silver bullet will distract from more important intitiatives, etc.

    I don't mean to endorse the legislation here. I'm just saying that it does seem to have a pretty clear rationale behind it.

  6. Hi Mike,

    No, we're not puzzled by the intent of the legislation. We understand what its purpose is. We just don't understand how the measures it imposes are likely to achieve that purpose.

    Meanwhile, we'll be posting tomorrow to try to give a clearer picture of the arguments against.

  7. I have a supplementary question. Given that a number of neighbouring countries with governments that are at least passably democratic and are committed to reducing poverty (e.g. Tanzania, Zambia) also rely heavily on mineral exports, is this measure going to penalize them or advantage them? And if it penalizes them, for example by making it more expensive and difficult for them to earn foreign exchange from minerals, how are they to be compensated?

  8. This could POSSIBLY work if the "conflict minerals" supply chain was transparent, direct and rigid. But my guess is that it's none of those things. This is an embargo, and embargoes have a mixed record of success even under the best circumstances. They work best as symbols of action, and rarely produce intended effects. Could it motivate actions that break links in the supply chain? Possibly, but the mechanism by which that may happen is opaque.

    So, the question I have is: what is the most effective thing(s) the U.S. government can do? If not enact a conflict minerals embargo, then, what? And what is the evidence that any alternative action would be a better use of time, money and effort? And politically sellable? Because at the end of the day, it's about persuading those who hold the levers of power, including politicians, businesses, NGOs, activists, celebrities and anyone else who can muster positive resources. And symbols, in the absence of clear action, are probably better than nothing.

  9. By the way, this is a spectacular blog. Brilliant writing, excellent analysis and an absolutely wicked sense of humor. Way smarter and funnier, but every bit as professional and tightly structured, as "The Economist." You really should be paid large sums to produce this.

  10. Conflict Minerals on the Blogs: Correcting Misperceptions

    Posted by David Sullivan and Laura Heaton on Aug 06, 2010

    In the two weeks since President Obama signed the conflict minerals bill – a landmark moment after two years of advocacy to press the U.S. government to address the issue – one corner of the blogosphere has been subsumed with posts pointing out the merits and the perceived flaws of the new law.

    Let’s be clear: Congo is a vast country with an intricate history, and the current conflict in the Kivu provinces is among the most complex in the world. There is ample room to debate the relative importance of different drivers of the conflict, and the potential policy levers that might help contribute to peace. We welcome this conversation, in which we have been an active participant, both on the ground in eastern Congo and here in the United States.

    But much of the criticism of our work on conflict minerals implies otherwise, suggesting that activism around the U.S. legislation and the wider campaign portrays the U.S. bill as sufficient to break the links between illicit resource trafficking and violence in Congo, and that breaking that link would be sufficient to end the conflict. This is simply inaccurate.

    Continues: http://www.enoughproject.org/blog

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