Opinion: Dodd-Frank Act Caused Violence In The Congo

By Dana Sanchez Published: February 13, 2017, 2:34 pm
Dodd-Frank Act caused violenceBoys pan for gold in Eastern Congo. Photo: Finbarr O'Reilly/Reuters

A leaked presidential memo suggests that Donald Trump is expected to suspend the 2010 Dodd-Frank Act rule discouraging U.S. companies from funding conflict minerals and human rights abuses in the Democratic Republic of Congo.

Debate around the expected suspension shows how polarizing the topic is. Human rights groups are appalled, but some business interests including tech manufacturers could benefit, The Intercept reported:

Advanced computer chips, including technology used in cell phones and semiconductors, contain minerals often sourced from war-torn countries in Central Africa. Firms such as Intel, Apple, HP, and IBM use advanced chips that contain tantalum, gold, tin, and tungsten — elements that can be mined at low prices in the the DRC

American tech companies, such as Intel, lobbied directly on the rule when it was proposed. But since passage, tech firms have largely used third party business groups to stymie the rule. Trade groups representing major U.S. tech firms and other manufacturers, including the U.S. Chamber of Commerce and the Business Roundtable, attempted to block the rule through a federal lawsuit. In 2014, a federal court struck down a part of the rule that forced firms to reveal DRC conflict minerals on their corporate websites.

The Dodd-Frank Act’s conflict-minerals rules backfired, causing malnutrition, violence, and misery in the Congo, according to Hans Bader, a Washington, D.C. layer who has practiced civil-rights law, international trade law, and constitutional law.

The rules were supposed to reduce violent militias in the DRC, but they actually helped make militias more violent, Bader said in a CNSNews report:

Destabilizing a war-torn country that is a source of key minerals is certainly not in America’s national security interest. So it is nice to learn that these harmful rules may be suspended.

Dodd-Frank’s conflict minerals rule increased violence in DRC by 143 percent, and looting by 291 percent, Bader said, citing a recent study by Dominic Parker of the University of Wisconsin and Bryan Vadheim of the London School of Economics.

Any effort by Trump to repeal conflict mineral regulations affecting DRC will lead to more corruption and human rights abuses there, according to anti-corruption NGO Global Witness, African Business Magazine reported.

“This is a shameless proposal which threatens to unravel years of progress in ending the trade in conflict minerals,” Amnesty International said in a statement.

Human Rights Watch said the suspension would “enrich abusive thugs,” Globe&Mail reported. Suspending it could lead to the complete repeal of the Dodd-Frank regulations.

The Barack Obama administration implemented Dodd-Frank after the 2007-2009 financial crisis to limit risky practices that caused the banking crisis.

Section 1502 — the conflict minerals law — requires companies to monitor the supply chain of minerals such as tin, tantalum, tungsten and gold — minerals crucial in manufacturing mobile phones, laptops,  jewelry and aircraft.

The law successfully held manufacturers accountable for the minerals they source, according to U.K.-based RCS Global, a raw material supply chain audit and advisory organisation.

However, some U.S. business groups complained that the regulation is complex and expensive. U.S.-trade body the National Association of Manufacturers estimates the law costs U.S. businesses $9 billion-to-$16 billion. This led to the suspension plan by Trump, who campaigned on a pro-business platform, according to African Business Magazine.

Tim Worstall, a fellow at the Adam Smith Institute in London, said he’s in favor of Trump’s executive order. “I should be,” he said in a Forbes report. “I once called Section 1502 the worst law of the year.”

The law, he said, does not achieve what it set out to do:

The Dodd-Frank Wall Street reforms insist that any listed company … on the U.S. capital markets … ask all of its suppliers whether they use conflict minerals. It doesn’t even say they cannot. It just says they should say so if they know they do. That’s really all it does.

Yes indeed let’s put the thugs and slave drivers out of business … which Section 1502 doesn’t achieve. What improvements there are on the ground, and they do exist, are coming from other initiatives, ones that existed before and currently exist independently of this law.

The argument is not to do nothing about conflict minerals. It’s to do something effective about them rather than this ridiculous part of Dodd Frank.

Trump’s expected decision coincides with a meeting he held with Brian Krzanich, CEO of Intel, one of the leading firms impacted by conflict mineral regulations, according to The Intercept. Krzanich appeared with the president at the White House to announce a new manufacturing plant in Arizona.

Intel announced it will invest $7 billion in a factory employing up to 3,000 people in Chandler, Arizona, CNBC reported.

 

 

 

 

 

 

 

 

 

 

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