March 13, 2017

Letter to the Editor: Conflict-free university contracts increase militia-led violence

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To the Editor:

Yesterday, four of my colleagues coauthored a letter raving against Dodd-Frank’s Conflict Minerals Rule, §1502, which is in President Trump’s crosshairs after a leaked Executive Order allegedly advocated its suspension. Specifically, my colleagues believe §1502 decreased militia-led violence in the Democratic Republic of Congo. It did not. They correctly judged the intent of §1502 — and I agree with the statute’s intent — but not its result. My response will explain the regulation, expose its failure, and argue against their mandate that Cornell University waste its endowment and our tuition on useless audits.

My colleagues asserted that §1502 “prevents American companies from purchasing conflict minerals.” Well, that’s a very simplified picture of what the statute does. A more nuanced view is this: the statute requires companies using conflict minerals, or companies contracting the procurement of conflict minerals, spend millions of dollars on costly disclosures and independent audits to ensure their conflict minerals are “conflict-free.” The contracts my colleagues talk about are really company disclosures to the Security and Exchange Commission. Companies spend extra money to comply with these regulations and charge us more for their products as a result.

Speaking for myself, I’d pay that extra price if it meant preventing child labor in the DRC. That’s what this is for, isn’t it? The intent of the statute was to prevent militia-led violence within the mines — and I wish it did, but it doesn’t. The Government Accountability Office published a 2015 report with a telling title: “SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies Were Unable to Determine the Source of Their Conflict Minerals.” Even after these expensive, independent audits, most companies still don’t know if they’re funding the DRC militias. A 2015 quantitative study from the University of Wisconsin goes even further: “Instead of reducing violence, the evidence here indicates the policies increased the incidents in which armed groups looted civilians and committed violence against them.” This costly statute did more than cost American companies billions of dollars — it cost DRC citizens their lives.

Why did the incidents of violence increase? Well, when Dodd-Frank’s Title XV regulations came into place, companies reduced the amount of conflict minerals they bought. How did militias respond? They moved to unregulated mines, killed civilians, looted innocents’ homes and sold conflict minerals to European companies without our regulations. §1502 is an utter disaster, albeit well intentioned, which deserves repudiation and revocation.

Now let’s apply these facts to Cornell University. According to an S.A. resolution passed to make our campus conflict-free, Cornell University allocates $50 million to purchase technology from companies that use conflict minerals in their supply chain. In 2010, when this resolution was passed, I would have completely agreed with the intent. I still agree with the intent. But as we’ve seen since the statute was passed in 2010, we have no way of knowing whether or not the company’s conflict minerals are actually conflict-free. That’s what the GAO report shows — and those are companies that are doing their due diligence! Even more worrying, the referenced study concludes that this policy is actually contributing to a spike of civilian murders and lootings in the DRC.

I don’t want my university to waste its endowment and our tuition by paying KPMG or EY for a useless audit supporting a policy that increases violence in a country we should be helping.

I admire my colleagues’ intent, but that doesn’t mean any of us will like the result.

 

Irvin McCullough ’18

Vice President, Cornell Republicans

3 thoughts on “Letter to the Editor: Conflict-free university contracts increase militia-led violence

  1. This is an excellent assessment of §1502, Mr. McCullough. I tend to agree with every point that you made, with perhaps one small exception. You said that you would “pay that extra price if it meant preventing child labor in the DRC.” However, I would argue that in nearly all cases, child labor is much preferred to the obvious alternative, which is nearly always, without exception in these countries, starvation of said children. Child labor at least provides a mean to put food on the tables until the economy can grow to the point where parents can do what nearly all would much prefer to do, and keep their children out of the work force and provide for their families themselves.

  2. Thank you, sir, for a very logical and well-informed summary of the situation. I am at my desk now, researching the Conflict Minerals status of the products I have sold during 2016. Instead of doing something productive to help keep my company stay in business, I am collecting (mostly unverifiable) data from suppliers, and inserting it into (equally unverifiable) reporting spreadsheets for my customers. The whole thing is a mess, as even Sen. Frank admitted in a weak moment many months ago.
    Another point; bogging our commerce down with such onerous gyrations, when the rest of the world’s businesses are exempt, is an economic suicide pact. Minerals are nearly as fungible as water, and it is frankly a joke to pretend that we can verify where tin, etc. has been mined, when procured in products which we import from China, Malaysia, South America, and on and on.

  3. “The U.N. stated in 2010, the year that Dodd-Frank became law, that nearly every mine in the Kivu provinces was controlled by a military group, but according to an October 2016 study by the International Peace Information Service, 79 percent of miners at tin, tantalum, and tungsten mines surveyed in Congo now work at conflict-free mines.” Enough Project.
    If this law indeed falls short of resolving the problem of violence in the Congo, the law should not be repealed. Rather, we should work together with the Congolese people to ascertain what they need in order for them build a thriving economy of fair-trade minerals. And until something stronger and better is in place, Section 1502 should not be repealed.

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