Saturday, February 23, 2013

The Persistence of Folly

Over the past several years, more than twenty respected academics, researchers, and NGOs have published articles and reports critical of the conflict minerals campaign. They've argued that the campaign is a) irrelevant to the resolution of conflict in the region and b) damaging to the local people. I've posted many of these reports as they've come in, but I thought it might be useful to assemble them in one place. Here, then, are links and excerpts from those reports.

[a few recent articles pinned, then in chronological order]
Dominic P. Parker
Jeremy D. Foltz
David Elsea
United Nations University WIDER Working Paper 124/2016
Unintended consequences of economic sanctions for human rights
Conflict minerals and infant mortality in the Democratic Republic of the Congo
Are victims of human rights abuses better off with or without economic sanctions targeted at their perpetrators? We study this question in the context of a US human rights policy, Section 1502 of the 2010 Dodd–Frank Act. By discouraging companies from sourcing ‘conflict minerals’ from the eastern Democratic Republic of the Congo, the policy has acted as a de facto boycott on mineral purchases that may finance warlords and armed militias.
We estimate the policy’s impact on mortality outcomes of children born prior to 2013 and find that it increased the probability of infant deaths in villages near the regulated ‘conflict mineral’ deposits by at least 143 per cent. We find suggestive evidence that the legislation-induced boycott did so by stunting mother consumption of infant health care goods and services.
The findings demonstrate how sanctions and certification programmes for human rights can unintentionally harm the vulnerable populations they seek to protect.

July 24, 2017
The Institute for Security Studies
The DRC’s Natural Resources Still Awash with Blood
Mining-trade middlemen in Goma, interviewed by the Institute for Security Studies (ISS), say minerals sourced from non-compliant mines cost one and a half times less to buy than conflict-free-certified minerals. They therefore prefer to buy the former, eschewing regulatory measures such as the Dodd-Frank Wall Street Reform Consumer Protection Act (Dodd-Frank Act).   
It’s one thing for companies sourcing minerals from the DRC to subscribe to the requirements of the act, but a much bigger task to ascertain that the minerals they purchase are ‘DRC conflict-free’. This is because the DRC and the countries of the Great Lakes Region (GLR) lack effective enforcement mechanisms for regional mineral trade arrangements and so are infested with illegal networks involved in trafficking natural resources.

February 16, 2017
Judge Orders Status Report in Conflict Minerals Case
The appeals Court also stated “all of this presents a serious problem for the SEC because, as we have said, the government may not rest on such speculation or conjecture. Rather the SEC had the burden of demonstrating that the measure it adopted would “in fact alleviate” the harms it recited “to a material degree.” The SEC has made no such demonstration in this case and, as we have discussed, during the rulemaking the SEC conceded that it was unable to do so. This in itself dooms the statute and the SEC’s regulation.”

[chronological order]
Laura Seay
What's Wrong with Dodd-Frank 1502? Conflict Minerals, Civilian Livelihoods, and the Unintended Consequences of Western Advocacy 
Center for Global Development, Working Paper 284, January 2012
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.
Celia Taylor
Conflict Minerals and SEC Disclosure:
The Harvard Law and Business Review, January 2012
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.

Severinne Autesserre
Dangerous Tales: Dominant Narratives and their Unintended Consequences
African Affairs, Oxford University Press, February 2012
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.
Raymond Gilpin and Brett Boor
US Institute of Peace, August 2012
Wasn’t Section 1502 of Dodd-Frank supposed to “cut off funding to people who kill people”? Is the law working?As mentioned earlier, an underlying assumption of Section 1502 of the Dodd-Frank Act is that there is a close causal relationship between conflict minerals and violent conflict in northeastern DRC. According to Congressman Barney Frank, the express goal of Article 1502 was to use mining to achieve the “cut[ting] off of funding to people who kill people.” Though well-intentioned, such sentiments fail to address the root causes of conflict and grossly underestimate the resilience and adaptability of the warring factions. In recent months the armed groups have proven that they can quickly adapt, shifting from conflict mining to smuggling, racketeering (including ‘taxes’ imposed on coal and cattle) and bank robbery. Although strategies to stem the flow of funds to the warring groups are clearly critical in resolving this ongoing crisis, they can only be effective if they are part of a comprehensive solution that seeks to address the underlying drivers of the conflict; particularly security sector reform, socioeconomic inequality and poor governance.
Alexis Bouvy and Maria Lange
Ending the Deadlock: Towards a New Vision of Peace in Eastern DRC
International Alert, September 2012
The issue of conflict minerals has long been at the heart of the international debate about the priority steps to be taken for peace in eastern DRC. The links between mineral exploitation and the financing of armed groups were officially established by the UN panel in 2001. However, mining traceability and due diligence initiatives started gaining momentum in the run-up to the July 2010 adoption of the US Dodd-Frank Act/Section 1502 on “Conflict Minerals”. This law aims at stopping the exploitation and trade of minerals fuelling conflict and human rights abuses. Section 1502 requires companies reporting to the US Securities and Exchange Commission to disclose their use of minerals originating from DRC or neighbouring countries. This means that companies have to spend huge sums on audits to ensure minerals in their supply chain are not sourced from DRC; if they do source there, the companies have to provide evidence that they have done everything possible to avoid these minerals funding armed groups. ...
A major unintended consequence of Section 1502 has been to reduce the income of those generating a livelihood from the mineral trade (artisanal miners, transporters and traders), along with those working in other economic sectors that rely on the cashflow generated by the mining sector. The mining sector is a crucial part of the economy of North and South Kivu provinces, both in terms of provincial taxes and populations’ livelihoods. However meagre the income is, most people making a living in this sector do not have alternative sources of income or livelihood. This is in a context where insecurity continues to prevent the development of the agricultural sector which in the past – at least in North Kivu – was a more significant economic sector than the mining sector. Rather than addressing the funding of armed groups, the unintended result of the Act could be to reinforce smuggling networks and illegal economic activity, which undermines the implementation of traceability and certification initiatives.