Dodd-Frank Hits the Congo

Though Section 1502 of the Dodd-Frank Act seeks to create a more globally responsible corporate America, there is now evidence of negative consequences from this legislation. What is the next step for consumers when activists and economists take opposing sides?

Last week I discussed the various steps the United States government, both national and local, had taken to prevent American companies from purchasing conflict minerals from the Democratic Republic of Congo (DRC). While such government action appears to be a positive step forward, many journalists and economists are taking a stance against efforts like the Dodd-Frank Act. They are focusing on the fact that, as a result of this Act, smelters have begun to embargo Congolese minerals in order to be absolutely certain they do not purchase raw materials from conflict mines. Because these smelters currently have no way of evaluating which mines are conflict-free, they have stopped purchasing Congolese minerals altogether. They want to ensure they respond to the demands of electronics companies regarding social responsibility. After all, electronics companies are the ones purchasing mass quantities of minerals from smelters.

These electronics companies have acted largely as a result of consumer and activist demands, asking they solely buy minerals that have come from conflict-free mines in the DRC. In turn, smelters’ decision to purchase minerals from other countries—such as Canada, which they are certain has conflict-free mines—has caused economic hardship for many Congolese citizens who depend on mining to sustain their livelihoods. This unfortunate outcome, however, cannot simply be blamed on human rights activists. In overall advocacy and consumer education efforts, they have not only pressured the government to pass legislation such as Section 1502 of the Dodd-Frank Act; activist messages have also—for years—advocated for coupling this legislation with on-the-ground aid in Congo.

"President Obama Signs the Dodd-Frank Wall Street Reform and Consumer Protection Act President Barack Obama delivers remarks and signs the Dodd-Frank Wall Street Reform and Consumer Protection Act at the Ronald Reagan Building in Washington, July 21, 2010. (Official White House Photo by Lawrence Jackson)" Photo and Caption Courtesy of Nancy Pelosi / Flickr Creative Commons

David Aronson, a journalist and blogger focused on Central Africa, wrote an article for the New York Times called “How Congress Devastated Congo.” Aronson openly criticizes the Dodd-Frank Act in his article and describes the detrimental economic effects it has had on local Congolese—many of who depend on the activity of the minerals trade for their income. In an interview, Aronson explained the premature nature of the Act stating, “The problem with Dodd-Frank is entirely that [the U.S. government] put the restrictions in place before the mechanisms [to identify legitimate mines] were ready.” He explained the proper course of action would have been for the government to have spent “another extra couple of years to…certify the mines and the minerals as being clean” before enacting legislation such as Section 1502. With regard to human rights organizations, Aronson criticizes them for advocating for what he thinks is a faulty solution. He believes such “groups should have focused their advocacy on…clean[ing] up the evaluation system before restricting trade.”

Mine certification tags: As smelters leave the DRC, other efforts seek to establish legitimate mine evaluations Photo Courtesy of Sasha Lezhnev / / Flickr Creative Commons

Naama Haviv, Assistant Director of a Los Angeles based non-profit, Jewish World Watch (JWW), that seeks to combat instances of genocide and mass atrocities, commented in an e-mail regarding the perspective of individuals aligned with Aronson’s beliefs. Haviv clarifies, “The push for conflict minerals legislation always included a push for alternative livelihoods programs in the short term—in fact, Dodd-Frank also required the State Department to put a plan in place to support the development of a conflict-free supply chain politically and economically on the ground in Congo.” Thus, it is evident activist groups were fully aware of the economic implications of this restrictive mineral purchasing legislation, as well as what actions would remedy the negative side effect.

Mineral certification paperwork: An evaluation process that must be well established in order to bring smelters back to the DRC Photo Courtesy of Sasha Lezhnev / / Flickr Creative Commons

Thus, as a consumer, one may be asking which side to take and whether or not to continue pressuring electronics companies to be responsible for their supply chains. It appears a conscious conglomeration of both sides is necessary. Just because the U.S. government has responded to longstanding activist pressure does not mean the problem is solved. At the same time, simply because certain negative results have come from the Dodd-Frank Act does not mean, in the long-term, it will be solely harmful. In fact, because of these negative repercussions in the Congo, consumers now face the need to advocate even more strongly for “alternative livelihoods programs in the short term,” as Haviv describes. This is a complex matter with a complex solution; however, activists—and economists—can still create definitive change through targeted advocacy for a practical solution. It is in smelters’ best interest to eventually return to the DRC to increase their access to mineral supplies, thus driving down prices; however, it is not realistic to depend on them to establish their own mine evaluation systems based on their currently uninvolved response to the matter.

Daniel Hamermesh, Professor of Economics at The University of Texas at Austin, suggests Americans ought to “do something to mitigate the impact of our well-intentioned legislation on small producers in the Congo.” Such action is possible, starting from the consumer level. Consumers can write to government representatives expressing that the current outcome of the Dodd-Frank Act is only one portion of the solution, for local livelihood protection programs must too be utilized to solve the current Congolese economic stress.