Search Results for ‘"conflict minerals"’

Good riddance (if they’re indeed going) to the Dodd-Frank conflict minerals rules

President Trump is said to be considering an executive order suspending for a time the Dodd-Frank law’s provisions on conflict minerals, which have harmed American companies and consumers and also plunged many communities further into impoverishment in some of the poorest sections of Africa. Congress should rise to its part by repealing the provisions, I argue at Cato at Liberty. More: Hans Bader/CEI, Kevin Drum/Mother Jones, earlier, and as part of a wider look at securities regulation, Wallace DeWitt/National Affairs. More: Dominic P. Parker and Bryan Vadheim, JAERE; Tate Watkins, WSJ.

Study: Dodd-Frank conflict minerals rule worsened Congo bloodshed

We’ve covered this story repeatedly, but now there’s further confirmation:

The 2010 Dodd-Frank Act increased violence in the Congo by 143 percent (and looting by 291 percent) through its “conflict minerals” rule, which has backfired on its intended beneficiaries. So concludes a new study by Dominic Parker of the University of Wisconsin and Bryan Vadheim of the London School of Economics.

As we noted earlier, Dodd-Frank conflict minerals regulations have also caused starvation in the Congo, harmed U.S. businesses, and resulted in increased smuggling—even as they punish peaceful neighboring countries in Africa just for being near the Congo, whose civil wars have killed millions over the last 20 years. They have inflicted great harm on a country that was just beginning to recover from years of mass killing and had the world’s lowest per capita income. The new study is consistent with a 2013 paper by St. Thomas University law professor Marcia Narine that criticized the conflict minerals rule for its dire consequences for the Congolese people.

That’s from Hans Bader’s write-up at CEI; more, Stephanie Slade, Reason. The Parker-Vadheim paper is here.

Dodd-Frank conflict minerals fiasco, cont’d

[reposted from Cato at Liberty]

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.

Congress added the provisions to Dodd-Frank in a fit of moral self-congratulation over making sure Americans had the chance to be ethical and thoughtful consumers of such products as jewelry and cellphones (as well as thousands of other products, as it turned out, from auto parts to the foil in food packaging). Publicly held companies would be required to report on their supply connections to “conflict minerals” such as tin, tungsten, and gold mined in war-torn areas of the Democratic Republic of the Congo. Lawmakers assigned enforcement of the law to the Securities and Exchange Commission – a body with scant discernible expertise in either African geopolitics or metallurgy – and barbed it with stringent penalties for disclosure violations, to which are added possible liability in class-action shareholder lawsuits.

Reactions to this morning’s Post account frequently employ words like “unintended” or “tragic” to describe the effect on miners of the law, which people in the Congo soon came to call “Loi Obama” – “Obama’s law”.  Unintended and tragic? Maybe. But not unforeseen, because the signs that the law would backfire this way have been in plain sight for years now – as in this 2011 account by Prof. Laura Seay (via) of how “electronics companies now have a strong incentive to source minerals elsewhere, leaving Congolese miners unemployed.” Or this 2011 account by David Aronson in the New York Times of the “unintended and devastating consequences” that he “saw firsthand on a trip to eastern Congo.” Or this more recent paper by law professor Marcia Narine.

But although the evidence has been there for years, the will to believe in the law was too strong – a will fueled by anti-corporate campaigners who take it on faith that when brutalities in the underdeveloped world occur within two or three degrees of separation of the activities of multinational businesses, the right answer must be to blame and shame the businesses.

You might call it an expensive lesson for Americans too, if you assume that anything has been learned. A recent Tulane calculation found that the costs in business compliance have already topped $700 million, with billions more ahead should nothing change. Just this September, the U.S. government conceded that it “does not have the ability to distinguish” which refiners and smelters around the globe are tainted by a connection to militia groups. That is to say, the government has demanded of business a degree of certainty that it cannot achieve itself.  Courtesy of UCLA corporate law professor Stephen Bainbridge, here’s a flowchart of what complying might involve for a given business.

If the new Republican Congress wants to be taken seriously about fixing counterproductive regulation, it should make the repeal of this law an early priority. (& Bader)

Coo coo for conflict minerals

The U.S. government has conceded that it can’t actually tell “which refiners and smelters around the world are financially fueling violence in the war-torn Congo region.” However, under a law passed by Congress in a fit of moral self-congratulation, publicly held companies are still going to be subject to stringent penalties for disclosure violations if they screw up on the reporting of these ultimately untraceable connections. Time for repeal [Bainbridge, Emily Chasan/WSJ CFO Journal blog; earlier] Update: Cost of disclosure reported by Tulane study at $700 million [Bainbridge]

Dodd-Frank and conflict minerals: the law’s wide reach

Some expected that the big new SEC regulations on industrial users of tin, tungsten, tantalum and gold would mostly affect electronics and jewelry makers, but the actual net being cast is far wider. Manufacturers in general must investigate the supply chains of their products in order to comply with the disclosure requirements, no small matter at a firm like Kraft with 40,000 products and 100,000 suppliers. (Kraft found that the minerals may turn up in pouch packaging of juice products.) No wonder the SEC’s absurd initial estimates of a mere $70 million economy-wide compliance cost have given way to estimates a hundred times higher or more. In an echo of the infamous CPSIA statute, “the rule provides no de minimis exemption for trace amounts.” [Melissa Maleske, Inside Counsel, earlier here, here, and here] (& Bainbridge)

More: the Dodd-Frank conflict minerals provision and the Democratic Republic of the Congo [Marcia Narine, Conglomerate via Bainbridge]

Banking and finance roundup

Banking and finance roundup

  • Bank of England deputy governor: banks have incurred an estimated $275 billion in legal costs since 2008 and that’s been a drag on economic growth [Katy Burne and Aruna Viswanatha, WSJ]
  • Economist Ken Rogoff proposes doing away with most large-denomination paper money so as to stifle crime, tax evasion and the like, and George Selgin of Cato pushes back;
  • “M&A Lawsuits Plunge As Delaware Judges Make Them Harder To Settle” [Daniel Fisher]
  • CFPB keeps pushing to expand its authority, but on lending rate caps it runs into a direct statutory limit [Thaya Brook Knight]
  • House Financial Services Committee votes to repeal the awful conflict minerals rule [Marcia Narine via Bainbridge and more, earlier] And maybe the rest of Dodd-Frank too? [Mark Calabria]
  • How the Swiss–American Chamber of Commerce sees FATCA, the overseas banking law vexing expats and legitimate business overseas [American Swiss Foundation]

Banking and finance roundup

Banking and finance roundup