Thursday, February 23, 2012

Quote of the Day

From a press release announcing Nokia is joining AVX's "Solutions for Hope" initiative:
Because there currently is no recognized system to verify that the sources of minerals from the DRC are conflict-free, efforts to secure supply chains have led to a de facto embargo of minerals from the region while such systems are being developed. Tens of thousands of people in the DRC depend on artisanal mining, many operating in regions where conflict is not present. Their livelihoods and the economic stability of the region have been threatened by the de facto ban. 
This is what some of us have been saying for a long time now, and why we've suggested it would have been much wiser to put the systems in place before the de facto embargo came into effect.

Tuesday, February 21, 2012

Three Strikes

Three important new peer-reviewed articles on Dodd-Frank 1502 have been published in the last month or so. The first is Dangerous Tales, by Severine Autessere, from African Affairs. The second is What's Wrong with Dodd-Frank 1502? by Laura Seay, at the Center for Global Development; and the third is Conflict Minerals and SEC Disclosure, by Celia Taylor, in the Harvard Law and Business Review. They argue that DF-1502 misdiagnoses the problems facing the Congo, has had disastrous consequences for those it was meant to help, and may end by undermining the integrity of other disclosure and transparency initiatives. Below are excerpts from each.

From African Affairs: Dangerous Tales:
Three narratives have dominated the discourse on the Congo and oriented the intervention strategies. These narratives focus on a primary cause of violence, the illegal exploitation of natural resources; a major consequence, sexual abuse against women and girls; and a central solution, reconstructing state authority. … The use of these three narratives has enabled advocates to put the Congo on the agenda of some of the most powerful states and organizations, and thus prompted action to end what remains a “forgotten conflict.” However, I argue that the well-meaning international efforts have also had unintended ramifications that have prevented the intervention from achieving its stated goals, and that have even, at times, contributed to the deterioration of the situation in eastern Congo. … Because of these exclusive focuses, the international efforts have exacerbated the problems that they aimed to combat.

From the Center for Global Development: What's Wrong with Dodd-Frank 1502?
Although its provisions have yet to be implemented, section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is already having a profound effect on the Congolese mining sector. Nicknamed “Obama’s Law” by the Congolese, section 1502 has created a de facto ban on Congolese mineral exports, put anywhere from tens of thousands up to 2 million Congolese miners out of work in the eastern Congo, and, despite ending most of the trade in Congolese conflict minerals, done little to improve the security situation or the daily lives of most Congolese. In this report, I trace the development of section 1502 with respect to the pursuit of a conflict minerals-based strategy by U.S. advocates, examine the effects of the legislation, and recommend new courses of action to move forward in a way that both promotes accountability and transparency and allows Congolese artisanal miners to earn a living.

From The Harvard Law and Business Review: Conflict Minerals and SEC Disclosure:
While I am an advocate of disclosure and of the use of disclosure requirements to increase corporate social responsibility, the conflict minerals provision of Dodd-Frank poses serious risks to the integrity of such efforts. The provision and the rules drafted to promulgate it go far beyond disclosure and may impede issuers’ ability to conduct business in the DRC region. The Securities Exchange Commission (“SEC”), which pursuant to Dodd-Frank is charged with promulgating rules to implement § 1502 (the conflict minerals provision), lacks knowledge of the issues surrounding conflict minerals, a fact its Chairman freely admits.[5] The rules that the SEC has currently proposed are overly draconian, and strict enforcement of them will put the SEC into the position of dictating not only rules of corporate governance but of indirectly dictating daily corporate operation themselves, as the proposed provision will likely drive companies to stop dealing entirely in minerals from the DRC region.[6] Although the conflict minerals provision is framed as a disclosure requirement and thus seemingly falls within the purview of the SEC, the provision in fact is a back-end run around which indirectly imposes a trade embargo on the DRC and an attempt to require action, through SEC regulation, that Congress has previously refused to authorize. As such, the conflict minerals provision as proposed exceeds the mandate of the SEC and the intent behind disclosure requirements of the securities laws.[7] If the aim is to block the trade of conflict minerals, there are more appropriate mechanisms to do so. If the provision is revised sufficiently, it may be a useful disclosure tool and could serve as the model for future requirements aimed at improving corporate social responsibility.

Sunday, February 19, 2012

Predictions: What Are They Good for?

Over the past few months, I and a few other opponents of DF 1502 have made a number of predictions about the impact DF-1502 will have on the ground in Congo. It occurred to me that it would be worth assembling them in one place, to establish a sort of marker for future reference. Social policy isn't physics, of course. A few correct or incorrect predictions don't prove or disprove a theory. But they can help establish a baseline of credibility. So here are six predictions we made about DF-1502 and some preliminary evaluation of their validity.

1) The conflict minerals campaign would frighten Western firms into quitting the Congo, resulting in a de facto embargo of the minerals.
2) Miners (of the three Ts) would suffer a severe economic set-back as a result of the embargo.
3) The volume and value of the gold trade in e. Congo largely would be unaffected by DF-1502, because there's simply no viable way to control it.
4) The bad actors and militia would find ways to get around the embargo while the legitimate actors and businessmen would be shut down (or shut themselves down).
5) The conflicts in the region would be largely unaffected by the law a) because the "bad" actors would smuggle their product out or find other ways to get around the embargo and b) because there are other sources of financing available to the militia and c) the wars are not fundamentally "about" the minerals. So even if the minerals could be taken out of the equation (which of course they can't be), the wars would go on.
6) Chinese firms would eventually move in to buy up the minerals as Western-oriented firms closed down.

So what does the evidence tell us about these predictions, at least so far?

1) has already been proven right.
2) is a matter of dispute and is in desperate need of serious, objective research from respected social scientists. Advocates say that mineral exports from the Kivus have been cut from 75 to 90 percent, but deny that this has caused artisinal miners any serious difficulties. They say the miners can always go back to farming or move to other areas to mine. I say that's bullshit. You can't wipe out people's livelihoods in one of the poorest countries in the world without causing them severe harm. Nor is it a simple matter to change careers: Let's try giving the advocates a pack of seeds and see how well they do farming. In any case, miners told me during my visits to mining sites in South Kivu last summer that they were hurting--and that they blamed Dodd-Frank for their suffering. Still, I admit my own information was more impressionistic than data-driven, which is why I've repeatedly called on the major advocacy groups and their funders to dispatch a team of competent social scientists to find out what has happened to the miners. Unfortunately--and you can make of this what you will--this is something the advocates and funders have categorically refused to do.
3) So far this one is completely undisputed: the gold trade continues to flourish. (I would add that it seems to me like a bad strategy for the advocates to insist that gold be treated like the other minerals in the SEC regulations, because none except a few boutique jewelry companies is ever going to be able to say with any certainty that their gold products don't include conflict gold. And if every company that uses gold admits that they are unable to certify that their products are conflict-free, that dilutes the power of the rules to shame any one company's reputation.)
4) So far, with Bosco Ntaganda and whats-his-name dominating the mineral trade in North Kivu, this one is looking pretty good.
5) It seems to me that there is little evidence that the conflicts are diminishing because of the embargo. Time will tell, of course, but the fact is that it's been nearly a year since the embargo went into effect and I don't hear any of the advocates claiming that there has been an appreciable diminution in conflict as a result.
6) There is some evidence that this prediction is coming true: There are now three active Chinese comptoirs trading in e. Congolese minerals, up from one a year ago [1]. But I admit I'm surprised this process isn't happening faster than it has, and I'm not sure why it hasn't.  China is said to be in a bit of an economic lull at the moment, and maybe when it picks up speed again we'll see more Chinese jump into the trade. One thing seems clear: Chinese firms are not terribly afraid of Western moral disapproval.

So there they are, my six predictions about DF-1502 and the mineral trade in Congo. Twenty years from now, we'll be able to review the record dispassionately and determine what impact the conflict minerals campaign had. That, of course, is one of the luxuries that belong to us.

[1] I think there was only one, but I haven't been able to verify that yet. So consider this tentative.

Friday, February 17, 2012

Does the SEC Matter?

So the SEC may be about to promulgate its final rules on how to implement section 1502 of Dodd Frank. I can't imagine that any of the decisions it is being asked to make will have much of an impact on conditions on the ground in eastern Congo. The passage of the law and the accompanying publicity about conflict minerals have accomplished exactly what the advocates set out to do: Discourage Western companies from buying minerals from the region.  The details of how companies are to prove their compliance with the law may be of profound interest to corporate lawyers, but I doubt very much that Bosco Ntaganda is awaiting word on whether companies need to "file" rather than "furnish" their reports, or that commanders of the 85th Army Battalion are keeping their fingers crossed that de minimis exemptions be granted to Tiffany's.

Advocates, of course, insist on the opposite: They say that the SEC's delay has enabled armed groups to continue to prey upon the Congolese people [1]. But nowhere do they explain how the SEC's rules will put a stop to those depredations, given that the rules are aimed at firms that have already withdrawn from the region.

I asked the advocates to explain what they anticipate the rules will accomplish on the ground, given that all legitimate commerce from the region has ceased. They've refused numerous requests to respond on point. So I'm left to speculate. One answer is that they see some continuing "leakage" from the smuggled mineral trade back into the supply flow feeding public firms. The rules might then force the companies to further tighten up their sourcing requirements. I think there's a bit of truth to that: certainly a fair amount of Congolese minerals continue to make it into the supply chain under false Rwandan or Ugandan labeling. How much I don't know. But I doubt that stopping that flow will significantly affect the conduct of the wars; it's more likely that the minerals will flow to other, non-Western buyers.

Alternatively, it could be that advocates believe that once the rules are in place Western companies will be eager to return to the region to source conflict-free minerals from it--and that the growth of the legitimate trade will help put an end to the wars. (Of course, a lot of us argued from the beginning that it would be better to put mechanisms in place BEFORE the embargo came into effect rather than after, if only for humanitarian reasons.) I have my doubts that Western companies, having pulled out of the region, will be in a hurry to return. Why should they? They can honestly tell anyone asking questions that they're doing all they can to prevent conflict minerals from entering their supply chain [2].

It's possible I'm wrong. It's possible that Western companies may chose to start buying again from the region, particularly if they are strongly encouraged by advocates to return and given assurances that they won't have their reputations savaged. But that will be a slow, incremental process at best, and it's hard to imagine how a trickle of licenced commerce will have much effect on the main actors competing for economic and political supremacy in the region.

[1] Full sentence from Amol Mehta, on behalf of several advocacy groups, 12/22/11 letter to the SEC: "Most importantly, for the Congolese people, further delays mean armed groups can continue for longer to prey upon and draw financing from the minerals sector, while fuelling instability and committing human rights abuses against civilian populations."

[2]  I doubt, furthermore, that setting up the sort of system envisioned by the law will be easy technically or politically. For example, imagine if one of the more highly regarded army units camp along a transport route, and in the usual way of things set up a few road blocks to levy a little improvement tax on the side. Does that cast an inviolate taint on any conflict mineral that passes through, since an armed group profited off it? Or what about a situation the latest GoE describes, where the militia don't so much tax the outgoing minerals but the incoming material the diggers and their families need to live on? Who gets to decide what to do in these cases and how will they make these decisions in the rapid time-frame that events demand?

Wednesday, February 15, 2012

Image of the Day

France begins to crack down on African leaders ill-gotten gains: Story in the Guardian. We need a lot more like this.

Eleven supercars worth up to €5m have been seized from outside an
African leader's Paris mansion as part of money-laundering investigations.
Photograph: Alexsmolik 

Sunday, February 12, 2012

The Moral Obligation to be Accurate

So it's official: Dodd Frank has had a "considerable but not disastrous impact" on local livelihoods in eastern Congo. So says the UN Group of Experts on the DRC, which gave a long, two-part interview to Jason Stearns at Congo Siasa last week. 

This would appear to settle the matter. The Group of Experts is a multi-national, disinterested body of experts on eastern Congo. Like Human Rights Watch, or the Centers for Disease Control, it provides the final word on the relevant facts in its area of expertise. As it rightly states:  
[We are] not in the business of making unsubstantiated allegations, but rather reporting information as objectively as possible to the Security Council and seeking to corroborate, document, and/or disprove information based upon what we’re able to obtain through first-hand observations, witness testimony, extensive interviews with current and former combatants, documentary evidence and government cooperation.

Still, I was curious to learn how the group had reached such a definitive conclusion on the impact of DF-1502, so I left a note on the blog asking what methodological tools the GoE used to gather its data on the well-being of the artisinal miners. I was delighted to be contacted by one of the GoE members soon thereafter and had the chance to put my question directly to them. (I am being ungrammatical here to disguise the person's gender.)

I learned that while the GoE’s last mandate did not include researching the well-being of the miners, its members had visited dozens of mining zones, interviewed hundreds of people, and followed the SC-approved methodological practices as outlined in the GoE’s interim report. 

Well, that’s great, I said, but what did all those visits and interviews and methodological practices reveal about the well-being of the miners? What data did the GoE gather on that question and what evidence could it share about its findings?

I should hit the pause button for a moment here and say that I am summarizing what was in fact a surprisingly lengthy and tiresome exchange of emails. Eliciting this much information required me to ask questions in a variety of ways and in a succession of emails, each of which received a quick, courteous, and for the most part unilluminating reply. For example, when I asked what methodology the GoE used, I was told they had used the one outlined in the interim report. When, after reviewing the report, I pointed out that it says nothing about gathering data on artisanal miners, I was told that the GoE had conducted interviews, visited sites, reviewed documents, and so on, as per the report's general methodological statement. And when I then asked, repeatedly, what all those interviews had taught them about the miners’ welfare, I received a promise of a personal visit--but nothing on the facts of the matter.

All of which left me wondering what is going on. Why was the GoE unable to present me with a straightforward account of how it had come to its determination about the miners' welfare?  After all, the obvious first question any journalist asks researchers is how they arrived at their conclusions. Does anyone doubt that if I were to ask the IRC how it determined that the wars in the Congo have resulted in 5.4 million excess deaths, or NASA how it concluded that global temperatures have increased by 0.3 degrees Celsius since 1980, they would give me all the information I would need?

I find the GoE's inability to do the same deeply troubling. The GoE is not some random collection of people who all happen to have opinions. It's an august and serious and authoritative body. Yet it doesn't appear to be behaving like one. You can't 1) make definitive statements about the impact of the embargo on the well being of the miners; 2) refuse to make clear the nature of the research you've conducted on the topic; and 3) expect to be taken seriously.

Perhaps everything will become clearer during the personal visit. I hope so. But in the meantime, it certainly appears to me as if the United Nations' Group of Experts has given a verdict on a matter it has not properly researched, and that it remains unable or unwilling to admit as much. That is troubling not only for the sake of the miners, but for the credibility of the GoE itself. After all, if it has rendered judgment on an important subject like the welfare of the miners without having made a serious effort to gather and consider the evidence, then on what other matters has it felt free to substitute its opinion for considered fact? And how will it respond the next time critics accuse it of making things up to suit its political agenda--and point to this episode as an example?

The miners, and the UN, deserve better. A GoE that has lost its reputation for doing precise and careful work is worse than useless; it becomes a liability, a shield for those who would exploit the Congo for their own ends. Let us hope that the GoE proves better than this exchange would lead me to believe.

Thursday, February 9, 2012

Transparency for Thee, but not for Me

Ten Questions Enough and Global Witness Refuse to Answer

Global Witness and The Enough Project pride themselves on their hard-hitting, pull-no-punches research into malefactors around the world, from African warlords to corrupt Western bankers. Central to their ethos is a belief in openness and transparency--in the idea, as the cliche goes, that sunshine is the best disinfectant.

Yet when I tried to find out what they knew about the potential harm Dodd-Frank 1502 might cause local populations, they clammed up faster than congressmen before a grand jury. (To see their "non-response responses" to my queries, click below the fold.) When I urged them to answer the actual questions I posed, they either stopped returning my emails and phone calls entirely or claimed that they weren't going to respond because the questions themselves were biased and intellectually unfair. The questions follow below; you can judge for yourself how unfair they are.

I find their refusal to answer my questions not just hypocritical, but troubling. Hypocritical, of course, because you don't get to demand that companies and governments open their books to you and then refuse to answer perfectly straightforward questions from your critics. Troubling, because their refusal undermines the legitimacy of an ideal I hold dear. If organizations whose foundational principle is transparency refuse to answer questions about their work, why should companies such as BP or Union Carbide, to take two companies not entirely at random? If transparency becomes a flag of convenience, to be hoisted at times and places of our choosing, what happens to its moral force?

We have a right to find out what Global Witness and Enough knew before they undertook this campaign. A million or so people in eastern Congo--among the poorest and most vulnerable on earth--have been affected by their work.  Though it was done in their name, they had no meaningful say in the elaboration of the law or in the public campaign that preceded it. Nor is there any authority, legal or moral, to which they can now appeal.

Here are the questions I posed the advocates. Some seek to establish a common frame of reference, others to determine--to coin a phrase--what they knew and when they knew it. I encourage other journalists interested in the "conflict minerals" controversy to see if they can get elicit answers from these self-appointed watchdogs.

1) It has been widely reported that electronic companies instructed smelters to cease accepting mineral shipments from eastern Congo beginning April 1 2011. Is that reporting correct, in your opinion? If it is correct, what do you think prompted the companies to do so?

2) What portion of the mining industry in eastern Congo is characterized by slavery and child labor, in your opinion? What research can you refer me to on that question, specifically?

3) What impact has the decline in mineral exports from eastern Congo had on the miners and their families, economically and socially? Have they been able to sustain themselves through alternate livelihoods, such as agriculture, for example? What research can you refer me to on that question? What research are you conducting on that question?

4) Why do you refuse to call for further research on the current economic well-being of miners? Surely you must want to know what is happening to the very sort of people your organization exists to defend. Do you think this question is either irrelevant or trivial?

5) When did you become aware of local and international voices warning that Dodd-Frank 1502 would have deleterious consequences for the local populations? What research did you conduct to examine the validity of that concern?

6) What consultations did you undertake with local actors in the Kivus before deciding to champion Dodd-Frank? Please give me as many of the names of the Congolese civil society leaders you spoke to as you can. Along those lines, did you speak specifically to researchers at the Pole Institute, OGP, or BEST? What did they tell you?

7) Did you anticipate the law would result in a decline in mineral exports? If so, what social and economic impact did you think such a decline would have on local populations?

8) Did you undertake any prospective economic/social impact assessment before supporting the law? If so, what were your findings? If not, why not? In retrospect, don’t you think it advisable to determine the likely impact of your advocacy campaign on local people before engaging in one?

9) What measures did you call for to support the people whose livelihoods would be undermined by the passage of Dodd Frank? Did you insist that these measures be put in place prior to or simultaneously with the passage of Dodd Frank?

10) Do you believe that the current economic conditions of local miners caused by Dodd-Frank demand any sort of exigent response from US policymakers? If so, what are you doing to ensure that one is forthcoming?

Finally, here's one extra question, in which I try to probe into whether there's any way to rectify the damage done:

11) Were companies to begin to accept minerals from eastern Congo now, without having first put in place adequate mechanisms to screen out minerals that profit warlords or rogue army units, would that elicit any protest from you?

Tuesday, February 7, 2012

Quote of the Day

Democracy appears when some large number of previously excluded, ordinary persons–what the eighteenth century called “the many”–secure the power not simply to select their governors but to oversee the institutions of government, as officeholders and citizens free to assemble and criticize those in office. Democracy is never a gift bestowed by benevolent, farseeing rulers who seek to reinforce their own legitimacy. It must always be fought for, by political coalitions that cut across distinctions of wealth, power, and interest. It succeeds and survives only when it is rooted in the lives and expectations of its citizens, and continually reinvigorated in each generation. Democratic successes are never irreversible.
--Sean Wilenz’s The Rise of American Democracy  (h/t Jay Ulfeder