Dodd-Frank imposed costly auditing and reporting requirements on
companies that use minerals such as tin, tungsten and gold, requiring
them to report on their use of minerals not just from the Congo, but
also peaceful neighboring countries like Tanzania, which are effectively
punished merely for being next to the Congo. At least 6,000 companies are affected, including Apple, Ford, and Boeing, costing them billions of dollars.
African smugglers have benefited from Dodd-Frank, notes a recent article in Politico, as “clean miners” in the Congo, the world’s poorest country, simply can’t afford to comply with Dodd-Frank’s certification requirements.
As Politico reported,
the boycott prompted by the Dodd-Frank Act
put thousands of eastern Congolese miners out of work. The World Bank
has estimated that 16 percent of Congo’s population is directly or
indirectly engaged in informal mining; in North Kivu in 2006, mining
revenue provided an estimated two-thirds of state income. But revenues
to the provincial government’s coffers fell by three-quarters in the
four years before 2012, in part because of what officials called the
“global criminalization of the mining sector” of eastern Congo, as
encapsulated in laws like Dodd-Frank. The state’s loss is the smugglers’
gain: When the official routes are closed, the clandestine trade picks
up the slack.. . .
Despite Dodd-Frank and the spate of
efforts to curb conflict mineral violence in the early 2000s, it appears
unlikely that the certification schemes will ever reliably cover the
whole of eastern Congo’s mining trade. Clean miners have been squeezed,
as the retreat of Western buyers has let Chinese competitors gain a
near-monopoly on Congolese coltan, allowing them to dictate prices.
The efforts to impose some control on the
mineral trade . . . .does so at the cost of weakening the already
precarious livelihoods of eastern Congo’s diggers and porters and their
dependents.
This harm was completely predictable. As Walter Olson noted earlier,
Economic sanctions, when they have an
effect at all, tend to inflict misery on a targeted region’s civilian
populace and often drive it further into dependence on violent
overlords. That truism will surprise few libertarians, but apparently it
still comes as news to many in Washington, to judge from the reaction
to
this morning’s front-page Washington Post account of
the humanitarian fiasco brought about by the 2010 Dodd-Frank
law’s “conflict minerals” provisions. According to reporter Sudarsan
Raghavan, these
provisions “set off a chain of events that has propelled
millions of [African] miners and their families deeper into
poverty.” As they have lost access to their regular incomes, some of
these miners have even enlisted with the warlord militias that were the
law’s targets.
A 2011 account by David Aronson in The New York Times
chronicled the “unintended and devastating consequences” off Dodd-Frank
that he witnessed “firsthand on a trip to eastern Congo.” His finding
was echoed by a more recent paper
by law professor Marcia Narine, which noted that “the conflict minerals
rule is a poor choice for human rights legislation” because of its
“unintended and devastating consequences for the very beneficiaries it
intends to help- the Congolese people.”
As Aronson noted in The New York Times,
The “Loi Obama” or Obama Law — as the
Dodd-Frank Wall Street reform act of 2010 has become known in the region
. . . has had unintended and devastating consequences, as I saw
firsthand on a trip to eastern Congo this summer. The law has brought
about a de facto embargo on the minerals mined in the region, including
tin, tungsten and the tantalum that is essential for making cellphones.
The smelting companies that used to buy
from eastern Congo have stopped. . . .For locals . . . the law has been
a catastrophe. In South Kivu Province . . . The pastor at one church
told me that women were giving birth at home because they couldn’t
afford the $20 or so for the maternity clinic. Children are dropping out
of school because parents can’t pay the fees. Remote mining towns are
virtually cut off from the outside world because the planes that once
provisioned them no longer land. Most worrying, a crop disease
periodically decimates the region’s staple, cassava. Villagers who
relied on their mining income to buy food when harvests failed are
beginning to go hungry.
Meanwhile, the law is benefiting some of
the very people it was meant to single out. The chief beneficiary is
Gen. Bosco Ntaganda, who is nicknamed The Terminator and is sought by
the International Criminal Court. Ostensibly a member of the Congolese
Army, he is in fact a freelance killer with his own ethnic Tutsi
militia, which provides “security” to traders smuggling minerals across
the border to neighboring Rwanda. . .
In September 2014, the government admitted it itself “does not have the ability to distinguish” which refiners and smelters around the globe are tainted by a connection to militia groups. In short, notes Olson,
“the government has demanded of business a degree of certainty that it
cannot achieve itself.” For U.S. companies, attempting to comply with
Dodd-Frank is a task of byzantine complexity, as a recent conflict-minerals flowchart posted by UCLA law professor Stephen Bainbridge illustrates.
As CEI’s John Berlau has noted in the past,
the conflict-minerals rule has harmed American energy companies and put
some of them at a serious disadvantage overseas, while also raising serious First Amendment issues."
