A rule aimed at ‘conflict minerals’ hurts economies in 10 nations—and harms U.S. public companies.
Reminiscent of the racially discriminatory practice of “redlining” neighborhoods, a little-known measure in the 2010 Dodd-Frank law, designed to stop the trafficking of “conflict minerals” from the Democratic Republic of Congo, is not achieving that goal. The measure also discriminates against the DRC’s regional neighbors and is hurting U.S. companies and consumers.
The minerals tantalite, tin, tungsten and gold reportedly are trafficked by armed groups. The Dodd-Frank measure calls on publicly traded U.S. companies who purchase these minerals from the DRC to voluntarily disclose to the Securities and Exchange Commission the specific sourcing of the four minerals. But the provision also targets Angola, Burundi, the Central African Republic, the Republic of Congo, Rwanda, Tanzania, South Sudan, Uganda and Zambia as potential sources of the minerals for no other reason than their shared border with the DRC.
In addition to being discriminatory, the Dodd-Frank measure has a highly debatable effect on the flow of conflict minerals, given that private U.S. companies and foreign firms and their subsidiaries are not covered by the provision. Indeed, the law hands those companies a distinct competitive advantage over public companies in the U.S.
The chain reaction of unintended results does not stop there.
U.S. companies subject to Dodd-Frank already are saddled with heavy compliance requirements governing complex anti-corruption and export-controls risks. Many of the companies are voting with their feet, leading to a de facto boycott of mining in 10 African countries by some of the world’s largest consumer-goods companies. African governments, eager to attract investment in their mineral sectors and integrate their primary products into global supply chains, now turn instead to Asian partners.