[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE UNINTENDED CONSEQUENCES
OF DODD-FRANK'S CONFLICT
MINERALS PROVISION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
MONETARY POLICY AND TRADE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 21, 2013
__________
Printed for the use of the Committee on Financial Services
Serial No. 113-23
----------
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
GARY G. MILLER, California, Vice MAXINE WATERS, California, Ranking
Chairman Member
SPENCER BACHUS, Alabama, Chairman CAROLYN B. MALONEY, New York
Emeritus NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina CAROLYN McCARTHY, New York
JOHN CAMPBELL, California STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota DAVID SCOTT, Georgia
KEVIN McCARTHY, California AL GREEN, Texas
STEVAN PEARCE, New Mexico EMANUEL CLEAVER, Missouri
BILL POSEY, Florida GWEN MOORE, Wisconsin
MICHAEL G. FITZPATRICK, KEITH ELLISON, Minnesota
Pennsylvania ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia JAMES A. HIMES, Connecticut
BLAINE LUETKEMEYER, Missouri GARY C. PETERS, Michigan
BILL HUIZENGA, Michigan JOHN C. CARNEY, Jr., Delaware
SEAN P. DUFFY, Wisconsin TERRI A. SEWELL, Alabama
ROBERT HURT, Virginia BILL FOSTER, Illinois
MICHAEL G. GRIMM, New York DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois DENNY HECK, Washington
DENNIS A. ROSS, Florida
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Subcommittee on Monetary Policy and Trade
JOHN CAMPBELL, California, Chairman
BILL HUIZENGA, Michigan, Vice WM. LACY CLAY, Missouri, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma GWEN MOORE, Wisconsin
STEVAN PEARCE, New Mexico GARY C. PETERS, Michigan
BILL POSEY, Florida ED PERLMUTTER, Colorado
MICHAEL G. GRIMM, New York BILL FOSTER, Illinois
STEPHEN LEE FINCHER, Tennessee JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina DANIEL T. KILDEE, Michigan
ROBERT PITTENGER, North Carolina PATRICK MURPHY, Florida
TOM COTTON, Arkansas
C O N T E N T S
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Page
Hearing held on:
May 21, 2013................................................. 1
Appendix:
May 21, 2013................................................. 35
WITNESSES
Tuesday, May 21, 2013
Aronson, David, freelance writer, editor of
www.congoresources.org......................................... 5
Dizolele, Mvemba Phezo, Visiting Fellow, Hoover Institution on
War, Revolution and Peace...................................... 7
Goss, Rick, Senior Vice President of Environment and
Sustainability, Information Technology Industry Council (ITI).. 10
Pickles, Sophia, Policy Advisor, Global Witness.................. 12
APPENDIX
Prepared statements:
McDermott, Hon. Jim.......................................... 36
Moore, Hon. Gwen............................................. 38
Aronson, David............................................... 40
Dizolele, Mvemba Phezo....................................... 49
Goss, Rick................................................... 54
Pickles, Sophia.............................................. 60
Additional Material Submitted for the Record
Campbell, Hon. John:
Written statement of The Institute of Internal Auditors (IIA) 64
Clay, Hon. Wm. Lacy:
Written statement of the Atma Foundation..................... 67
Written statement of Bishop Nicolas Djomo, Bishop of the
Diocese of Tshumbe in the Democratic Republic of the Congo,
and President of the Catholic Bishops' Conference of the
Congo...................................................... 69
Written statement of the Responsible Sourcing Network........ 75
THE UNINTENDED CONSEQUENCES
OF DODD-FRANK'S CONFLICT
MINERALS PROVISION
----------
Tuesday, May 21, 2013
U.S. House of Representatives,
Subcommittee on Monetary
Policy and Trade,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:01 p.m., in
room 2128, Rayburn House Office Building, Hon. John Campbell
[chairman of the subcommittee] presiding.
Members present: Representatives Campbell, Huizenga,
Pearce, Posey, Grimm, Stutzman, Mulvaney, Pittenger, Cotton;
Clay, Moore, and Peters.
Chairman Campbell. The subcommittee will come to order.
Without objection, the Chair is authorized to declare a recess
of the committee at any time, and I will note that we are
expecting votes on the Floor sometime prior to 2:30. So I
expect that we will be recessing when those votes come. And the
vote series should last about 45 or 50 minutes. So we will take
a recess, and then we will come back and continue and conclude
the hearing after that time.
I also want to remind our audience that disruptions of
committee business constitute a violation of the District of
Columbia code. And I want to thank you in advance for your
cooperation in facilitating an orderly and respectful hearing
this afternoon.
The Chair now recognizes himself for 3 minutes for an
opening statement.
Thank you to our distinguished panel for appearing today
before this subcommittee. The Democratic Republic of the Congo,
or the DRC, has been in a near-constant state of civil war
since it obtained independence in 1960. Some experts have
argued that the Congolese army and various armed militias are
fighting for control over mineral-rich areas in eastern DRC and
that the sale of minerals in this region finances weapons
purchases.
By extension of this logic, cutting off the mineral trade
from the conflict areas of the DRC would starve the militias of
their funding, and therefore end a long and brutal civil war.
That narrative was inserted into the Dodd-Frank Act as
Section 1502, which requires public companies to certify to the
U.S. Securities and Exchange Commission that their supply
chains are free of any and all tin, tantalum, tungsten, and
gold originating from the eastern DRC. The SEC issued its final
rule implementing Section 1502 just last year.
The reason for this hearing is to evaluate the consequences
of Section 1502 as implemented. Congress has an obligation to
conduct regular oversight on the laws it passes and the
agencies that implement them. It is important that we regularly
assess laws such as Section 1502 in order to see if they are
working as they were intended.
There is another narrative that I believe we will hear
today from some of our witnesses. Many Congolese activists
remain concerned that Section 1502 has had a significant
adverse effect on innocent bystanders in the DRC and that the
result has been a de facto embargo on all minerals originating
from the DRC and from surrounding areas.
As much as 17 percent of Congolese rely on the mineral
trade, with a majority of the revenues accruing to artisanal
miners unaffiliated with the conflict. Many of these people
have seen their livelihoods eliminated as the market for
legitimately mined minerals has evaporated. The consequences
have been so impactful that the Congolese now refer to Section
1502 as ``Loi Obama'' or ``Obama's law.''
Despite the economic consequences, there is no indication
that the violence is subsiding. Just yesterday, the Associated
Press reported that M23, a rebel group being funded by Rwanda,
opened fire on Congolese military forces north of Goma. M23
soldiers are from the Tutsi ethnic group, who are upset that
the United Nations intervention brigade has been sent into the
DRC with authority to engage the rebel groups. That narrative
is premised upon claims that minerals will cause this conflict.
So what we are evaluating today is, to put it simply, if
this law was intended to improve the lives of millions of
Congolese, has it had that effect? If it hasn't, what should
Congress or the Administration be doing differently?
I yield back the balance of my time. I would like to
recognize the ranking member of the subcommittee, the gentleman
from Missouri, Mr. Clay, for 3 minutes for his opening
statement.
Mr. Clay. Thank you, Mr. Chairman. And thank you for
conducting this hearing.
Today, the subcommittee will hold a hearing on the
unintended consequences of Dodd-Frank's mineral provision. This
hearing focuses on the Democratic Republic of the Congo's
activities in the mineral trade industry.
The Republic of the Congo is home to vast reserves of gold,
tin, and other minerals critical to the production of many
items such as iPads, cell phones and others. Also, the Congo
has a long-running civil conflict between the national
government and a cast of warlords and local gangs. This
conflict is due to which group controls the land and has the
minerals.
The minerals help fund the conflict, as the warlords force
locals into the mines either at gunpoint, or through rape and
murder campaigns. The warlords then sell the minerals on the
black market, giving them the money they need to buy weapons
and to subjugate locals and fight against the national army.
To address this issue, former U.S. Senators Sam Brownback
and Russ Feingold, as well as current U.S. Senator Dick Durbin,
introduced a bill requiring companies to disclose their
sourcing efforts. The bill was adopted into Dodd-Frank by
unanimous consent, and a companion to the minerals measure won
by partisan support in the House and Senate, and President
Obama signed the Dodd-Frank Act into law in July of 2010.
So, Mr. Chairman, I look forward to the witnesses'
testimony. And before I yield back, I would like to ask
unanimous consent to submit 3 letters from different groups on
their positions on this aspect of Dodd-Frank.
Chairman Campbell. Without objection, it is so ordered.
Mr. Clay. And I yield back, Mr. Chairman.
Chairman Campbell. The gentleman yields back his time.
Now, for the purpose of an opening statement, I would like
to recognize the vice chairman of the subcommittee, the
gentleman from Michigan, Mr. Huizenga, for 4 minutes.
Mr. Huizenga. Thank you, Mr. Chairman. I appreciate your
efforts here today, as well as those of Ranking Member Clay.
I know this often gets said, but this truly is an important
hearing. And I wish there was more attention paid to this
particular issue because it is so important not only for the
western world, but probably, frankly, more important for the
African world and what this means in the long run as we are
trying to make policy in this world economy.
My Spanish is better than my French, but Mr. Aronson, you
had put a traditional Congolese saying on there, and my
pronunciation of the French will sound like Spanish. So I am
just going to stick with the English translation, but, ``For
us, without us, it is against us.'' And that is exactly what I
am trying to capture, I guess, as we are looking into these
issues.
We are here today to discuss Section 1502 as it applies to
these minerals sourced in these conflict regions, such as the
Congo. And I have asked for a map of the DRC to be put up as
well, because I know so often, we kind of get lost as to where
this is and what the implications are. And frankly, how huge
the country is, and how far away Kinshasa would be from some of
these other areas.
I would ask our witnesses, as you are going through this,
to please point out where on the map you see the problems and
the solutions coming from so that we may all have a better,
fuller picture of what is going on.
But I think we can all agree on protecting the citizens of
the Congo and condemning all human rights violations. That is
something we can agree on, regardless of party affiliation or
where we are from. But my concern is that this overly
burdensome regulation has really done nothing to improve the
lives of those in the mining community, but has only led to
more violence in the region.
In fact, these efforts to ensure that the minerals do not
enter the supply chains have resulted in a de facto embargo
against the DRC. And according to the extractive industry's
transparency initiative, as many as 12.5 million Congolese,
approximately 17 percent of the DRC's population, depend on
mineral trading to make a living. And most of the money
generated by mineral trading goes to artisanal miners, rather
than soldiers and rebels.
Dr. Laura Seay, assistant professor of political science at
Morehouse College, who testified before this committee last
year, reported that, ``Despite ending most of the trade in
Congolese conflict minerals,'' the de facto embargo has ``done
little to improve the security situation or the daily lives of
most Congolese.'' So I am looking forward to investigating
that.
And for any policymaker, I think this is probably going to
ring true. It becomes disheartening if we really realize that
well-intentioned but misguided policy doesn't have the impact
for which it is intended. And we have to remember that this was
never once, Mr. Chairman, debated in Congress. It was certainly
not--I wasn't here for the creation of Dodd-Frank, but I am
here for the echo effects of it. We know that this was one of
those provisions that was slid in, in the conference committee.
And this unprecedented use of securities regulation as an
instrument of human rights policy fails to help end the civil
war in the DRC, and instead only exacerbates the problem that
it was intended to combat.
I look forward to hearing from our witnesses today on ways
to protect the citizens in these conflict regions. That is very
important to me. And Mr. Chairman and Mr. Clay, I again
appreciate you holding this hearing today. Thank you.
Chairman Campbell. The gentleman yields back his time.
And now, we will recognize for his opening statement the
gentleman from Indiana, Mr. Stutzman, for 1\1/2\ minutes.
Mr. Stutzman. Thank you, Mr. Chairman, and thank you for
calling this hearing today.
As others have already said, we all share the goal of
bringing peace and stability to the Congo. We are fortunate to
live in a country where the rule of law is observed. Our police
and military do not act with impunity, and entrepreneurs, such
as those in my home State of Indiana, are able to build
businesses and contribute to this country's prosperity.
The Congo is rich in resources, and the prosperity we enjoy
in this country is possible in the Congo. Unfortunately,
however, the entrepreneurial spirit of many Congolese has been
crushed by instability, feuding over land ownership,
corruption, and a lack of clear governing authority in large
parts of the country, among other problems.
The good intentions of those who push for the inclusion of
Section 1502 of the Dodd-Frank Act are easy to understand. They
see minerals in the Congo as the source of the violence, and
are, therefore, trying to cut off profits to war lords.
I look forward to hearing from our witnesses as to how well
Dodd-Frank is achieving that objective of denying funding to
violent groups. Based upon the written testimony from our
witnesses, I am concerned it is not working. The question I
have, then, is whether using the American security's disclosure
process is the right way to reduce violence in the Congo. Like
many of my colleagues, I have significant reservations about
this. What competence does the SEC have with the complex supply
chain management in the mineral trade in the Congo?
I also have a difficult time understanding how imposing a
massive paperwork burden on U.S. companies, such as
manufacturers in my district, is likely to help reduce violence
in the Congo. I look forward to hearing an update from these
witnesses.
And I yield back the balance of my time.
Chairman Campbell. The gentleman yields back.
I believe the final opening statement will be the gentleman
from North Carolina, Mr. Pittenger, who is recognized for 1\1/
2\ minutes.
Mr. Pittenger. Thank you, Mr. Chairman. The purpose of
today's hearing is to get at the truth of Section 1502 and to
see how the conflict minerals policy is working on the ground
today in the Democrat Republic of Congo.
As we consider the conflict minerals policy, it is
important to understand that the mission of the SEC is to
protect investors, maintain fair and efficient markets, and
facilitate capital formation. Section 1502 pushes the SEC into
non-mandated and uncharted territory, changing it from an
enforcer of the Nation's securities laws into an international
human rights cop in Central Africa.
Is this the proper role of the SEC? Is Section 1502 the
best policy prescription to end the violence in the DRC? Even
though some have estimated that Section 1502 has cost as many
as 2 million people their livelihoods, the violence in the
eastern DRC persists, as armed militias continue to terrorize
local populations.
I don't question the merits or the intentions of those who
formed the policy, even in the quiet of the night, writing this
in the Dodd-Frank bill in conference. But there seems to be a
very strong indication that the impact has been
counterproductive.
Therefore, I look forward to hearing the witnesses and
their testimony on the ongoing crisis in the DRC and how we can
responsibly address this tragedy and yet remain focused on the
SEC's stated mission.
Thank you. I yield back the balance of my time.
Chairman Campbell. The gentleman yields back. And that
concludes the opening statements.
We will now move to our distinguished panel of witnesses.
And we will begin with Mr. David Aronson, who is editor of
Congoresources.org. He is a freelance writer and editor who has
lived in central Africa and written about the Congo for nearly
25 years. He previously served as the senior editor for the
U.S. Institute of Peace; served as a spokesman for the U.S.
Commission on Civil Rights; was assistant director of the
Southern Poverty Law Center; and served as the editor of the
Carnegie Endowment for International Peace. He has a Bachelor's
degree in Anthropology from Wesleyan University and a Master's
of Fine Arts in English from the University of Florida.
Mr. Aronson, you are recognized for 5 minutes.
STATEMENT OF DAVID ARONSON, FREELANCE WRITER, EDITOR OF
WWW.CONGORESOURCES.ORG
Mr. Aronson. Thank you, Chairman John Campbell, Ranking
Member William Lacy Clay, Vice Chairman Bill Huizenga, and
members of the subcommittee for holding this hearing on the
unintended impacts of Dodd-Frank's Conflict Minerals Provision.
My name is David Aronson. I am a freelance writer and
editor who has lived and worked on and off in central Africa
for 25 years.
Dodd-Frank Section 1502, the conflict minerals provision of
the 2010 Dodd-Frank Wall Street Reform and Consumer Act, is a
case study in how good intentions can go awry, particularly
when a compelling activist-sponsored narrative substitutes for
considered and timely analysis.
As I will make clear, the law imposed a de facto embargo on
mineral production that impoverished the region's million or so
artisanal miners. It also drove the trade into the hands of
militia and predatory Congolese army units. The military
situation on the ground has considerably worsened since passage
of the law, and the SEC's promulgation of the implementation
guidelines.
Advocates for the law disregarded the consensus opinion of
Congolese experts who repeatedly warned them of the dangers the
campaign posed to their people. The case for Dodd-Frank Section
1502 rested on some dubious and misleading assumptions, which I
will be happy to discuss in the question-and-answer session.
Finally, a dozen respected scholars and NGOs have
independently studied this issue in the past 18 months. They
have all concluded that the law is imposing unacceptable costs
on the Congolese, while doing little to diminish the violence.
First, a little background. In early 2011, in response to
negative publicity from activist groups and in anticipation of
the eventual implementation of Section 1502, the Electronic
Industry Citizenship Coalition (EICC), stopped accepting
minerals from central Africa that were not certifiably clean.
The resulting de facto embargo of Congolese minerals went into
effect on April 1, 2011 and had an immediate impact on the
artisanal mine sector and on the broader economy of the region.
To understand the extent of that impact, consider this open
letter addressed to President Obama and SEC Chairman Mary
Schapiro from 50 South Kivu civil society organizations, dated
July 5th, 2011:
``The abrupt cessation of the trade has had devastating
impacts on our people. Millions of our artisanal miners have
suddenly had their livelihood cut from under them. They find it
increasingly difficult to pay school, health, or maternity
fees. Some even report having difficulty providing food for
their families. Mining enclaves have emerged over the past
decade in places so remote that only planes can access them.
The world's sudden refusal to buy these minerals means that the
planes no longer service these communities. With nothing to
trade, they are unable to provide themselves with basic
necessities.
``Because artisanal mining was one of our own engines of
growth, secondary economic impacts are being felt throughout
the province. Even in our large towns, economic activity has
diminished. Construction has slowed, and trade in everything
has fallen. People with very little to begin with are now doing
with less.''
I would add one more reason for concern. Near-epidemic
levels of livestock and crop diseases are currently devastating
agricultural production in the region. Families who dispersed
their risk by sending some members out to mine, while keeping
others at home to farm, are being hit on both counts. And they
have nothing else to fall back on.
Today, the de facto embargo factor of Congo's tantalum,
tungsten, and tin, the ``3 t's,'' is still in effect. And
Section 1502 continues to depress the economy of eastern Congo.
There has been some resumption in the trade overall; however,
the trade has by no means reached its pre-embargo level, and
miners receive significantly less than they used to for each
kilo of mineral that they produce.
In contrast, the gold trade continues unabated, with
virtually no procedures in place to formalize, let alone
control it. While a number of efforts are under way to
establish conflict-free gold supply chains for boutique
jewelers, gold is so valuable, so easy to smuggle, and so
fungible, that it is hard to imagine how the trade could ever
be brought under control.
As I said, over the past 18 months, a dozen independent
scholars and NGOs have published reports on the impact of the
conflict minerals campaign. Strikingly, they have all reached
similar conclusions. Section 1502 is harming ordinary people,
helping entrench militia and war lords, and in no way
significantly reducing conflict. To my knowledge, not a single
independent analysis has concluded that Dodd-Frank Section 1502
has had a positive impact on development in eastern Congo.
Finally, I would ask the subcommittee to listen to the
voices of some Congolese who have been affected most directly
by the law.
This, just very quickly, too. Serge Malumbo writes, ``We
cannot give you exactly the number of lives that are lost each
day following the cessation of artisanal mining in the DRC and
yet even if a child died or who is hungry or do not go to
school because his father digger lacked money, that is a
tragedy, it is a sad news that should challenge our humanity.''
I see that my time is up. Thank you very much, Mr.
Chairman.
[The prepared statement of Mr. Aronson can be found on page
40 of the appendix.]
Chairman Campbell. Thank you, Mr. Aronson.
Next, we will hear from Mr. Mvemba Dizolele, who is a
distinguished visiting fellow at the Hoover Institution. He
also serves as a policy adviser for the Eastern Congo
Initiative; lectures at the school of Advanced International
Studies at Johns Hopkins University; served as an election
monitor with the Carter Center in the Congo in 2006 and in
2011; and is a veteran of the United States Marine Corps. He
earned a Bachelor of Arts in Political Science and French from
Southern Utah University, and has a Master's of Business
Administration and a Master's of Public Policy from the
University of Chicago.
Mr. Dizolele, you are recognized for 5 minutes.
STATEMENT OF MVEMBA PHEZO DIZOLELE, VISITING FELLOW, HOOVER
INSTITUTION ON WAR, REVOLUTION AND PEACE
Mr. Dizolele. Chairman Campbell, Ranking Member Clay, and
distinguished members of the subcommittee, thank you for the
invitation and honor to testify before your subcommittee today.
A little over a year ago, I had the privilege, along with
other colleagues, to share with members of the subcommittee my
perspective and insights about Section 1502 of Dodd-Frank and
its consequences for the people of the DRC. I would like to
note, however, that the views expressed in this statement today
are mine and mine alone.
A year is enough time for emotions to cool off and reason
and honesty to prevail, as we monitor and evaluate Dodd-Frank
Section 1502. It is then quite appropriate for us to look at
the unintended consequences of this legislation with the
informed vantage point of time.
A week ago, I returned from a working trip in the
Democratic Republic of Congo, where I participated in a
conference about the Peace, Security, and Cooperation Framework
for the Democratic Republic of Congo and the so-called
``conflict minerals.'' The conference brought together
Congolese academics, political leaders, and representatives of
civil society organizations in a memorable moment of reflection
about ways and means to usher lasting peace in Congo and end
the illicit and illegal trade and looting of natural resources.
Throughout the conference, I think Kinshasa could not help
but marvel, as I have done many times before, at the
determination and commitment of our friends who promoted
Section 1502.
They mobilized thousands of people in a campaign that
raised awareness of the continued conflict in eastern Congo.
The high-level zeal is the campaign's main strength.
Section 1502 seeks to bring peace to the eastern Congo by
regulating mineral trade through U.S. law, cleaning up the
supply chain, and reducing militias' access to financial means.
The spirit of the law supposes that such a regulation will
de facto curb the violence and human rights abuses.
This campaign, however, has a serious weakness. Proponents
of Section 1502 built their case on an erroneous premise that
claimed that minerals were either the source or at the center
of the conflict. Cutting militias' access to mines will lead to
peace, the argument goes.
Let me suggest then, that the best way to evaluate the
consequences of Section 1502 would be to look at its premise,
claims and impact on institution-building and on the Congolese
people.
Mineral trade in eastern Congo is part of a wider economy
which can only be regulated either by the most powerful armed
groups working in collusion, the biggest armed group imposing
its way on the smaller ones, or by their backers seeking to
maximize profit and preserve their own interests.
As such, Section 1502 builds on a weak foundation and
requires the buy-in of the very negative actors it seeks to
tame.
This approach perverts basic peacemaking models and rewards
criminals and would-be spoilers. This premise led to a law with
the following results. First, the U.S. Congress passed
legislation that ignores the will and agency of the Congolese
people and imposed an outside solution to a problem that is
best understood by the Congolese.
This approach to peacemaking undermines DRC's strong civil
society, which has been working hard over the years to end the
looting of natural resources. Their actions include the audit
of mining contracts, the revision of the mining code, and the
call for security sector reform and a respect for the
transparent and credible electoral process.
Second, the U.S. Securities and Exchange Commission, which
is entrusted with the implementation of this law, is not
qualified to carry out such a task. The SEC has neither the
expertise nor the money to conduct a cost-and-benefit analysis
of the impact of Section 1502 on the Congolese and U.S.
businesses.
Thus, the SEC had to decide on such a complicated matter
affecting the livelihood of millions of people without adequate
assessment of the situation on the ground in Congo.
It was inappropriate to ask the SEC to serve as the primary
agency to enforce this law. This work is simply outside the
agency's scope and mandate.
Third, Section 1502 perpetrates the dominant, but wrong,
narrative that casts the Congolese people as incapable of
solving their problems and in constant need of outside
guidance.
The truth is that no one understands mining in Congo better
than the Congolese. By failing to engage the Congolese in an
honest dialogue on the relationship between conflict and
mining, proponents of Section 1502 failed to spur a national
ownership of the initiative through a true partnership with the
Congolese.
Fourth, Section 1502 creates what is known as ``Congo
fatigue.'' Staffers in both Chambers of Congress work hard to
help steer U.S.-Congo policy in the direction that best
benefits the Congolese people. House Members and Senators
invest their political capital to do the same.
It is, therefore, disappointing to hear that the
legislation they passed did not yield the anticipated result
because they were misled. Such a realization makes it difficult
to engage Members of Congress the next time around.
Fifth--
Chairman Campbell. Mr. Dizolele, if you could--number five,
and then wrap up.
Mr. Dizolele. I am almost done, Mr. Chairman.
Fifth, there is no evidence that Section 1502 has reduced
violence in the targeted region. In fact, the emergence of the
M23 militia last spring, which has escalated tensions in the
Great Lakes, has proved that this law has little bearing on war
entrepreneurs.
The Congo may be a dysfunctional state, perhaps, or even a
weak state, but this does not mean the Congolese society is
weak.
Thank you very much.
[The prepared statement of Mr. Dizolele can be found on
page 49 of the appendix.]
Chairman Campbell. Thank you, Mr. Dizolele.
Next, we have Mr. Rick Goss, senior vice president of the
Information Technology Industry Council, where he directs the
development of policy related to green product design,
renewable energy, and responsible supply chain management.
He previously worked for the Electronic Industries Alliance
as the vice president, environmental affairs, on policies such
as electronics recycling, green procurement, and product
materials content.
He has a Bachelor of Arts in political science from the
University of Rochester and a Master's of Science and
Environmental Management from Rensselaer Polytechnic Institute.
Mr. Goss, thank you for being here. You are recognized for
5 minutes.
STATEMENT OF RICK GOSS, SENIOR VICE PRESIDENT OF ENVIRONMENT
AND SUSTAINABILITY, INFORMATION TECHNOLOGY INDUSTRY COUNCIL
(ITI)
Mr. Goss. Thank you very much, Chairman Campbell, Ranking
Member Clay, and members of the subcommittee for the invitation
to testify today on this very important topic.
ITI, my employer, is a global trade association
representing 50 of the world's most innovative companies in the
information and communications technology sector.
Our members have an abiding commitment to sustainability
and corporate social responsibility, a commitment we have again
demonstrated through our strong leadership on conflict
minerals.
While the minerals and metals covered under Section 1502
are routinely used by every industry across the global economy,
tech companies have taken the lead to drive private sector
initiatives and secure measurable progress. ITI and our members
are dedicated to being responsible actors within the context of
comprehensive, government-led strategies for Central Africa.
First, we are committed to ethical sourcing throughout our
global supply chains. Second, we want to source cleanly from
Central Africa to help provide critical economic benefits to
local populations.
With these twin objectives in mind, our sector has made a
conscious choice to remain engaged in the region. Our
initiatives include launching the conflict-free smelter
program, establishing clean, in-region sourcing channels in
Central Africa, developing and promoting supply chain
transparency and reporting measures, and, finally, joining with
governments and civil society in the Public-Private Alliance
for Responsible Minerals Trade.
Based on a long history of credible engagement and concrete
achievements, the tech sector can bring unique judgments and
perspectives on the impacts of Section 1502 and on the broader
policy debate.
Let me begin by relating the positive outcomes that Section
1502 has yielded. First, the public debate on conflict minerals
has brought desperately needed attention to an outright
humanitarian crisis that had been largely ignored by the
international community.
Second, the enactment of Section 1502 drove other sectors
to join with tech to drive policies and transparency measures
throughout global supply chains.
And, finally, Section 1502 helped convince regional
governments to engage more fully in mining sector reforms.
Section 1502, however, has also created obstacles for
companies that want to remain responsibly engaged in Central
Africa.
Simply put, the mechanism contained in Section 1502
encourages companies to avoid the region, while layering
regulatory burdens and costs on those that stay.
This has led to a de facto embargo on minerals from the
covered region, with serious consequences for local
populations.
Major smelters report that a majority of their direct
customers are demanding metals that are Congo-free rather than
conflict-free.
Likewise, most companies expend the bulk of their time and
resources establishing that they are not sourcing from the
region, rather than on developing programs that build clean
sourcing capacity.
Also, because of endemic security and corruption
challenges, the volume of materials processed through
legitimate in-region programs to date has been modest. The
United Nations reports that even as security has improved at
some major mining centers, exports of tin, tantalum, and
tungsten from the eastern DRC have all but halted. The prices
for uncertified minerals have plummeted, with impoverished
artisanal miners earning mere cents on the dollar, while
brokers and exporters secure huge profits.
The societal impacts can be measured in reduced family
incomes, limited availability of and rising prices for food and
medicines, and falling school enrollments.
The United Nations has also documented black market
activities on conflict minerals and has determined that
militias and ``criminal, mafia-type networks'' within the
Congolese army are exploiting other sources of revenue through
products such as timber, charcoal, cannabis, ivory, and basic
supplies, and through practices such as human trafficking,
illegal roadblocks, and extortion.
Section 1502, by focusing almost exclusively on the role of
the private sector, has diverted critical attention away from
the indispensable role of governments in addressing the endemic
political security and humanitarian crises in the region.
Private sector initiatives alone cannot succeed in a region
beset by rampant conflict and corruption and destabilized by
chronic interference and intrusions from neighboring countries.
The underlying causes of this regional war are political,
not economic, and are linked to entrenched ethnic enemies and
disputes over political power, land rights, and citizenship.
While control over natural resources is in part responsible
for fueling violence in eastern Congo, it is striking to note
that adjacent areas that are equally rich in resources are not
plagued by conflict.
Ultimately, corporate efforts alone are no substitute for
comprehensive international engagement. In the absence of this
international will, the status quo will reign in the Congo.
In closing, ITI and our members urge Congress to consider
ways to overcome the deterrent effects of Section 1502 and to
provide incentives to companies that responsibly source from
Central Africa.
These efforts could include lowering the regulatory burden,
offering a Federal procurement preference, enacting tax
incentives, and providing public recognition to those companies
that source through approved in-region programs.
The U.S. and other governments can also support in-region
transparency and governance initiatives, and can place
collective pressure on foreign smelters to participate in our
audit program.
Finally, the tech sector will continue to embrace our role
as part of the solution, even as we join with governments and
civil society to press for more concerted and lasting action
from the international community to resolve the unfolding
calamity in Central Africa.
Thank you again for the invitation to testify today.
[The prepared statement of Mr. Goss can be found on page 54
of the appendix.]
Chairman Campbell. Thank you, Mr. Goss.
That buzz means there is a vote on the Floor, but we will
complete the testimony of our witnesses, and then I will recess
the committee. We will be gone probably about 30 minutes, and
then we will come back for the questioning phase of the
hearing.
So, Ms. Sophia Pickles, a conflict resources campaigner for
Global Witness, which focuses on the eastern Democratic
Republic of the Congo and the wider Great Lakes region of
Central Africa, has worked on DRC issues since 2004. She lived
in Manono from 2006 to 2008, and coordinated an all-party
parliamentary group focused on the Great Lakes region in the
U.K. Parliament.
Ms. Pickles, you are recognized for 5 minutes.
STATEMENT OF SOPHIA PICKLES, POLICY ADVISOR, GLOBAL WITNESS
Ms. Pickles. Thank you.
I would like to thank the Subcommittee on Monetary Policy
and Trade, in particular Chairman Campbell and Ranking Member
Clay, for the opportunity to speak with you today.
My name is Sophia Pickles. I work for Global Witness, a
nongovernmental organization that campaigns to break the links
between natural resources, corruption, and conflict.
I lead our campaign on eastern DRC and conflict minerals.
My work has focused on the African Great Lakes region since
2004, and I lived for 2 years in Manono, a mineral trading town
in Congo's Katanga province.
I travel frequently to eastern Congo to carry out in-depth
field investigations. These involve visits to mining areas and
interviews with all stakeholders in the trade, including
artisanal miners, and mineral traders, mining authorities,
representatives of the army, and local civil societies. I also
meet regularly with ministers and other senior officials in the
DRC, Rwanda, and Burundi.
For the last 15 years, armed groups and members of the
Congolese national army have used profits from the trade in
tin, tantalum, tungsten, and gold to finance themselves and
their operations in eastern DRC. Minerals are not the root
cause of this conflict, but competition for control of
lucrative mine sites has been an incentive for warring parties
to continue fighting.
The local population in North and South Kivu provinces has
borne the brunt of a war characterized by murder, rape,
pillage, and mass displacement. Section 1502 has generated
unprecedented scrutiny of supply chains from eastern DRC by
requiring U.S.-listed companies to check whether the minerals
they use are funding armed groups.
While some industry associations claim that implementing
the law is too burdensome, company compliance over the past 3
years paints a different picture. Collective industry
initiatives to support due diligence, such as the Conflict-Free
Smelter Program launched by the electronics industry, emerged
as early as 2010.
SEC-listed companies not previously engaged in the region
have invested in closed-pipe sourcing initiatives in DRC. Two
examples are: Solutions for Hope settled in Katanga in 2011;
and the Conflict-Free Tin Initiative launched in south Kivu in
October 2012.
A number of companies like Hewlett Packard, Phillips,
Intel, and Apple have made progress tracing their supply chains
as far as the smelters and refiners.
Section 1502 has also catalyzed changes in DRC's domestic
mining sector well before the law's first implementation year
began just 5 months ago. The passage of Section 1502 prompted
the Congolese government to introduce domestic legislation in
2012, obligating companies operating in its mineral sector to
undertake supply-chain due diligence, complementary to that
required under Section 1502. The government has since suspended
two trading houses operating in eastern Congo for failing to do
due diligence. In eastern Congo, mineral traders who had
previously turned a blind eye to the conflict minerals trade
have formed a local coalition that promotes the implementation
of due diligence and the development of conflict-free supply
chains. Traders told me that this initiative and others like it
were developed in response to Section 1502.
Local oversight and whistle-blowing groups are also
emerging. Congolese civil society organizations such as
Observatoire Gouvernance et Paix (OGP) train local communities
in how to monitor mining areas and trading routes and report on
military or armed group involvement. This tie to civil society
and community engagement is key to disrupting and preventing
armed groups from accessing illegal revenues from the minerals
trade.
Proper implementation of Section 1502 has the potential to
substantially improve the socioeconomic situation of artisanal
mining communities. These communities are extremely vulnerable
to the activities of rebel groups and to the abusive factions
of the Congolese army.
Insecurity caused by the presence of armed groups that prey
on the mines and trading routes is one of the main drivers for
sustained poverty in artisanal mining communities, limiting
access to agricultural fields and markets and impacting
household incomes, and the ability to pay for things like
school fees.
Challenges remain. The number of companies doing due
diligence and sourcing from eastern Congo is still limited,
largely as a result of the uncertainty created by the SEC's 16-
month delay in publishing the law's final rule.
It is too early to measure the impact of due diligence on a
wide scale. But opportunities for conflict-free sourcing from
eastern DRC are emerging. The law has led to changes in how
companies approach supply chain management. It has catalyzed
reform as DRC's domestic mining sector and spurred development
of a regional mineral certification system.
Increased scrutiny of certain mines and mineral trading
routes is gradually creating opportunities for transparent and
conflict-free sourcing.
Thank you, and I look forward to your questions.
[The prepared statement of Ms. Pickles can be found on page
60 of the appendix.]
Chairman Campbell. Thank you, Ms. Pickles.
We will now recess the committee. We should be back from
these votes in about 35 minutes or so.
The committee is in recess.
[recess]
Chairman Campbell. I tried to hit the gavel a little softer
that time, so I didn't startle any of you out there.
Thank you for your patience. The votes are over, and the
committee will now return to order and be back in session.
So with the testimony of the witnesses having been
completed, we are now into the questioning phase of the
committee. I will now recognize myself for 5 minutes for
questions.
And my first question will be to Mr. Aronson, Mr. Dizolele,
and Mr. Goss. Ms. Pickles mentioned several different
activities that large companies--Apple and some others that you
mentioned--were taking in the Congo to try and distinguish in
the DRC between the minerals that might fund some of the rebel
activities and so forth versus others.
Are any of the 3 of you aware of those activities? Do you
agree that those things are happening? Are they effective? Are
they non-effective? I would just like some comments from the
three of you on what she said.
Mr. Aronson. Thank you very much, Mr. Chairman, for that
question. I would say two things. First of all, there are, in
fact, a plethora of initiatives under way. In fact, as the Poly
Institute has written, the number of different international
initiatives to deal with Congolese minerals is astounding and
itself becoming increasingly problematic. There are so many
initiatives under way and they are all sort of dealing with the
same actors. And they are all trying to apply similar but not
identical standards.
And so the Poly Institute, which is a Goma-based local
Congolese-owned think tank, said that the multiplication of
uncoordinated visits from many different purposes are generally
regarded by economic operators on the ground as auditing
activities with related increase in audit fatigue. Participants
warned against the increase in conflict minerals tourism that
fails to deliver concrete results.
I would say that some of those initiatives under way are
having very mixed results. As, in fact, Ms. Pickles
demonstrated in her excellent report on recent developments in
eastern Congo under--with Global Witness. For example, she
pointed out that a project in Yabibwe that has produced a few
hundred tons of product and that is being, I think,
underwritten by the Dutch, perhaps in conjunction with the
United States, is widely viewed as a test case for responsible
sourcing.
However, there are increasing allegations that it is being
exploited by a military-led smuggling racket. So these
initiatives that are under way, there are a large number of
them. They are to some extent redundant and to some extent they
are already deeply compromised.
Chairman Campbell. Mr. Goss?
Mr. Goss. Thank you, Mr. Chairman.
Obviously, ITI represents a great number of the tech
companies that are involved in Central Africa. I would also
mention the Solutions for Hope initiative and the Conflict-Free
Tin Initiative here.
I mentioned in my testimony the public-private alliance
that the U.S. State Department and the USAID have put together.
Two-thirds of the private corporations participating in that
effort are tech companies here.
And what I would say is, yes, we have had some limited
success in terms of putting together so-called ``closed-pipe''
systems to generate conflict-free material, mostly tantalum and
tin, that can then go into our conflict-free smelter program.
But the volumes are modest and the challenges are most of the
programs are being run in non-conflict areas within the DRC or
within neighboring countries covered by Section 1502.
And so there is a foothold there, but really what is
lacking are the broader security efforts in the Kivus and in
neighboring countries here to try to bring more conditions of
peace and security to allow these programs to expand.
Chairman Campbell. Okay.
Mr. Dizolele?
Mr. Dizolele. Mr. Chairman, there are a lot of initiatives
that have taken place now, but the challenge is these
initiatives from the Congolese side, at least, on both sides,
actually, is that they do the bare minimum to fit the
narrative, what is demanded of them from this side of the
world.
That also means the networks are still controlled by the
same elements, meaning war criminals who often control even
those mines that are supposed to be clean. So I think we have a
challenge where we are looking at the process, looking at the
appearance of the process, and not digging deep into the
substance of what is happening or not happening.
If the goal is in fact to reduce violence, and these
criminals are still bypassing the system, as we see from the
emergence of the M23 militia, then we are still at ground zero.
Thank you.
Chairman Campbell. Okay. Thank you.
And I was going to turn next to Ms. Pickles, so I will just
mention this, and then maybe we will get to it later. And I was
going to ask you, conversely, versus what the 3 of them had
mentioned about how many groups or companies, which seemed
pretty easy--the easiest way to do this is just avoid the DRC
or perhaps even avoid the African continent completely when
acquiring things, and your comments on that.
But my time has expired, so I will yield now to the ranking
member of the subcommittee, the gentleman from Missouri, Mr.
Clay, for 5 minutes.
Mr. Clay. Thank you, Mr. Chairman.
Mr. Dizolele, according to your testimony, violence has
increased due to the Dodd-Frank Act. And in one part of your
testimony, you say Section 1502 has reduced violence. There is
no evidence that this section has reduced violence in the
targeted region. In fact, the emergence of the M23 militia last
spring, which escalated things in the Great Lakes, is proof
that this law has little bearing on war entrepreneurs.
And you talked about how in the Congo, businesses are not
the enemies. Armed groups and their international local backers
are. Give me examples of who local backers are.
Mr. Dizolele. Thank you, Ranking Member Clay.
I start in my testimony by saying there is a premise to
this legislation. The premise was very clear, that by cutting
funds to the militias, we will see a downward trend in
violence. We have not seen it. We have seen the emergence of a
set of militias. We can go through the alphabet soup of their
names, but they are there. The M23, which is the biggest that
has emerged, if we have been following the reports documented
to the U.N. group of experts, to the U.S. intelligence and the
State Department itself, is a group that receives a lot of
outside backers. The country that has been pointed to mostly
has been Rwanda, and sometimes Uganda. These countries have
denied involvement, but those are some of the outside backers
that I am talking about.
Mr. Clay. And you also say that this section perpetrates
the dominant, but wrong narrative. It casts the Congolese
people as incapable of solving their problems and in constant
need of outside guidance.
Do you want to expand on that for me?
Mr. Dizolele. Very much so, Ranking Member Clay.
There is a narrative that has emerged on Congo, which is
always a mess. There is always war and the entire place is in
chaos. What is lost in that narrative is that you have a very
resourceful people who are holding the country together. They
have been doing this through a set of initiatives. And I am
talking particularly here about the civil society organizations
have been at the forefront of reforms in DRC. So they really
don't need people to come and push them in a direction that
often doesn't benefit them.
What they need is partnership with outside groups that
care. Because, after all, advocacy needs to be in solidarity
with the affected people.
Mr. Clay. And I find it intriguing in one part of your
statement where you say the campaign, however, has a serious
weakness. Proponents of Section 1502 built their case on an
erroneous premise that claims the minerals were either the
source or at the center of the conflict. Cutting militias'
access to them will lead to peace, the argument goes. And that
has not happened?
Mr. Dizolele. Yes, sir. That has not happened. That is the
example I have given. If you live in the far reaches of North
Kivu, if you are a woman--let's use the case of women--the
statute has not changed your chances of being raped when you go
to the field, because the field has been infested by armed
groups.
So what difference does it make to a 17-year-old who lives
in village X in North Kivu when she goes to the field? She pays
the same consequences. If you go to post-Section 1502 Africa,
if you go to Ponzi, you see that the number of rapes has not
decreased. Those are some of the indicators we should be
looking at.
Mr. Clay. Expound for me on the statement where you say
this approach perverts basic peacemaking models and rewards
criminals and would-be spoilers.
Mr. Dizolele. Sir, in order for us to bring peace in the
Great Lakes region, especially in the Kivus, we need a justice
component. If there is no justice component to go after these
militias or these leaders, some of them wear the Congolese
general stars, at these controlled mines. Some of them are
sitting happily in Kigali and were receiving them here.
So whatever we do does not affect them. That is what I mean
by they are above this labeling, above all the law, all this
legislation. They are not affected.
Mr. Clay. Okay. And you are also very critical of the
Securities and Exchange Commission. According to you, it has
neither the expertise nor the money to conduct a cost-and-
benefit analysis of the impact of this section. Give me your
thoughts behind that.
Mr. Dizolele. Part of the arguments about the unintended
consequences of Section 1502 is what impact does it have. And
nobody has been able to carry out this study. Now, this is an
international affairs issue we are talking about. We are
talking about a sovereign country with a government that may or
may not be on board with what we are doing. And then we are
asking a U.S. agency that doesn't deal with international
affairs to carry out legislation that is affecting a sovereign
government and a sovereign people.
The discussion--some people think the costs rise up to
about $71 billion. If that is true, then we should have some
studies to fall on, so we can have a sensible discussion.
Mr. Clay. Thank you for your response, and my time is up.
Mr. Chairman, I want to submit for the record one more--
Chairman Campbell. No, you have reached your limit of
submissions to the record. No, just kidding.
[laughter]
What do you have?
Mr. Clay. Mr. McDermott of Washington State would like to
submit his statement.
Chairman Campbell. Without objection, it is so ordered.
Mr. Clay. Thank you.
Chairman Campbell. I now recognize the vice chairman of the
subcommittee, the gentleman from Michigan, Mr. Huizenga, for 5
minutes.
Mr. Huizenga. Thank you, Mr. Chairman.
I am going to try and move quickly. Obviously, this is very
jarring and chilling testimony, I think, of anybody who has
seen either video or read some of the accounts of what is going
on. And I am hoping for some help unpacking a few of the
players and getting some opinions, Ms. Pickles and Mr.
Dizolele, and the others as well.
One of the questions is, would there be a conflict if there
was no minerals present? And, I don't want to put words in your
mouth, so I would just like to hear, maybe just right down
the--Mr. Aronson, if you don't mind. Do you believe that there
would be a conflict in the DRC right now if there were no
minerals that were being fought over?
Mr. Aronson. I guess I get to start.
Yes, clearly, there would be a variety of not just a
conflict, but a variety of different conflicts under way. These
conflicts are--
Mr. Huizenga. I am assuming religious, ethnic, tribal,
and--
Mr. Aronson. Right. Over citizenship, over chieftancy
issues, over succession issues, over land issues--all of these.
And the enabling context is that there is such a weak governing
structure in place that the government is unable to do the sort
of the minimum necessity of a state, which is to impose order.
Mr. Huizenga. Yes, okay. And does everybody sort of agree
with that? Mr. Dizolele? Mr. Goss?
Mr. Dizolele. I agree.
Mr. Huizenga. Okay.
Mr. Goss. I agree, as well.
Ms. Pickles. I agree, but I think it is important that we
recognize the role that minerals have played in perpetuating
the conflict for 15 years.
Mr. Huizenga. Okay. I am not dismissing that. I just want
to try to get that.
And I am also curious--was the government really consulted
or brought in as a partner on this when it was passed into
Dodd-Frank? Ms. Pickles, if you care to address that? You are
pretty critical of any sort of--sour on any sort of discussion
about repealing this or rolling it back. So if you could maybe
address that, and then we can kind of quickly work back the
other way?
Ms. Pickles. The Congolese government has made public
statements in support of Section 1502, and has submitted those
to the SEC, to the public record.
Mr. Huizenga. But is that universal? Because we were
hearing testimony from Mr. Dizolele that that was not
necessarily the view.
Ms. Pickles. I think there is a divergence of views in
Congo, as there would be in any country in the world over any
piece of legislation. When I go to Congo, I meet people who
very strongly support Section 1502 in the Congolese government
and in provincial mining authorities in North and South Kivu
and in the artisanal mining community.
At the same time, there are other people who don't support
the legislation.
Mr. Huizenga. And quickly, do any of the other three of you
care to address that notion of government involvement and
approval--the Congolese government adding its stamp of
approval?
Mr. Dizolele. Actually, I can--I think when I talked about
Congolese not being consulted, this is something that affects
the future of Congo and the people of Congo's livelihood. Just
to give you an example, the SEC held a roundtable 2 years ago
it was, or a year ago--right before the vote. You had 16
panelists, and among those panelists, there was not one single
Congolese.
The main person--the foremost expert of the DRC government
is a fellow by the name of Paul Margolia. Paul Margolia and the
chief of staff of the Ministry of Mine had flown from Congo.
They were not on the panel. They sat in the audience with
everyone else.
So the Congolese voice, as far as we are concerned, was
never heard in any official way.
They were maybe given a chance to submit letters, but we
don't know what those letters say.
Mr. Huizenga. Okay.
Mr. Dizolele. So the fact that you discussed the future of
a country's wealth without any Congolese voices is very
disturbing.
Mr. Huizenga. In my remaining minute, I am curious, what
constitutes a ``clean'' mine? What makes it acceptable, kosher
to the world market? And, as I think Mr. Dizolele pointed out a
little bit, that who is in charge, it might be peaceful, but it
might not be the right people that we want in charge.
And, Ms. Pickles, I don't know if you would care to address
that, and we will work back as well here? We have about 40
seconds.
Ms. Pickles. For a mine to be conflict-free, we have to
apply principles of due diligence, so companies have to make
sure that they are not supporting armed groups or rebels who
are in the mine site. And the communities have to be involved
in that as well as the Congolese government.
Mr. Huizenga. Mr. Dizolele?
Mr. Dizolele. I think there is another problem. I have
visited some of the mines. Not every mine has militias in it.
Some mines have children. So when we have children in mines,
what do we call it? Is it conflict-free, because there are no
armed groups? Are there child labor issues?
Does it fit in a green color or does it fit in the red?
This is part of the challenge with this characterization of
the mines.
Thank you, sir.
Mr. Huizenga. I appreciate that.
I know my time has expired, and, Mr. Chairman, I, again,
just want to say thank you for exploring this. And I hope at
some point, we can maybe put together a trip that actually goes
and explores this firsthand as well. So, thank you.
Chairman Campbell. I thank the vice chairman.
And now we turn to the gentlelady from Wisconsin, Ms.
Moore, for her questions. You have 5 minutes.
Ms. Moore. Thank you so much, Mr. Chairman.
And I want to thank each and every panelist for taking the
time and staying here while we went out to vote, because this
is a very complicated subject. And it is hard to know what to
do.
You said in your testimony, Mr. Dizolele, it is just--what
does that mean? It is for us, with us, it is between us.
I think that with Dodd-Frank, as you all have stipulated,
there was a sincere effort to try to make sure that we did
something to promote transparency and about these conflict
diamonds. And so, as we look at it from a cost-benefit
analysis, there may be a cost to these companies which Ms.
Pickles has pointed out has with the short period of time that
this regulation has been in place--has self-complied with this
regulation and our ability to stabilize, to Mr. Dizolele's
point to stop slavery, because many of these miners were just
mining at gunpoint.
And so, I guess the question I can start with is, Mr.
Aronson, you say that this is misplaced. Do you think Ms.
Pickles made a good point when she said that maybe we haven't
had enough time to see whether or not this is good policy?
Mr. Aronson. I guess I respectfully disagree with Ms.
Pickles.
There is no evidence that it is going to have a positive
impact. There have been a dozen independent studies and reports
by independent and respected NGOs and scholars, all of which
have concluded that it has had negative impacts--
Ms. Moore. So if we were to just repeal this law, do you
think that the violence would be eliminated and that these
criminals would go away?
Mr. Aronson. I don't think it would have any significant
impact on the law--on the ground either way--I think--in terms
of the violence. I think it might restore their livelihood to a
bunch of miners, and that would be a net positive.
Ms. Moore. We had heard from the bishops, I think that has
already been put in the record, that this is a smaller part of
the economy than we think, and the people who were involved in
the economy were doing so at really meager, not even wages,
near slave wages.
Is that a mischaracterization of the kind of income
opportunity that was provided through mining, even before Dodd-
Frank?
Mr. Aronson. I believe it is. Certainly, at the mines that
I went out to see, miners were making $13 to $15 per kilo. That
translated to about $2 to $3 a day. That sounds awful, but--
Ms. Moore. It does sound awful.
Let me ask some more questions--I don't mean to be rude.
I want to ask some questions of Mr. Dizolele.
You have said that the army has been--that we are outsiders
who are doing things. But this has had a very deep impact on
what the military has done. They have not--they are not allowed
in the mine. The Congolese government has introduced domestic
legislation requiring companies to operate its sectors and to
identify the supply chain.
A group of mineral traders in North Kivu, NGOs, they
founded an organization that promotes the use of OECD.
Did you think that these are not beneficial in the long
run? I know short run, it has been a terrible thing, but don't
you think--see where the government and military and NGOs in
the area are taking some responsibility toward transparency?
Mr. Dizolele. Thank you very much, Congresswoman.
No, I think you misunderstand a couple of things.
One, go back to the premise that minerals are not causing
the conflict. So as long as minerals are not the source or the
reason for the conflict, we are missing the point. We are doing
something very important and very commendable, so we do
appreciate the attention.
But, as I said earlier, if you are Sifa, living in North
Kivu, and you cannot plant your field because the militia is
still present, then this--
Ms. Moore. But we need some other sort of--
Mr. Dizolele. You need--most initiative.
Ms. Moore. Okay. Ms. Pickles, I have 2 seconds, so give me
your thoughts on why we ought to continue this initiative,
despite the objection from the other side.
Ms. Pickles. Because we have already seen progress. We have
already seen companies--sourcing--the conflict resourcing is
happening in the Kivus now. And it is already bringing
stability to communities where closed-pipe systems have been
set up, and that is bringing economic development.
I would say to the point about artisanal miners and their
livelihoods, as long as there are armed groups preying on the
trade and preying on the north trading routes, people will not
be able to access their fields; there will be instability. And
that will have a negative economic effect on the ground.
Ms. Moore. Thank you so much.
And thank you, Mr. Chairman, for your indulgence.
Chairman Campbell. Thank you.
The gentleman from Indiana, Mr. Stutzman, is now recognized
for 5 minutes.
Mr. Stutzman. Thank you, Mr. Chairman.
And thank you to the panel for being here, and this
interesting yet, I guess, sad situation at the same time.
I would like to ask a question regarding the market in
general and how has Section 1502--has it distorted the market,
has it manipulated the market at all?
Mr. Goss, or anyone on the panel, if you would like to
address that?
Mr. Goss, I guess I will start with you.
Mr. Goss. Thank you, Congressman. The impacts of 1502, I
think it is clear from my fellow panelists here, are very
complicated in terms of the actual impact on the ground in the
DRC.
I will start my response by noting that I agree in part
with my colleagues to my right and also with my colleague on
the left here.
The core issue here is not over the minerals. Let's not
forget that in 1994, we had 800,000 people killed in 100 days
in and around Rwanda.
This was not over minerals. This was over politics. It was
over ethnic tensions. It was over generations-old disputes
here.
There are other equally rich areas of the Congo that are
not prone to this type of conflict. This is a political battle
that is going on in eastern Congo here.
The effects of Section 1502, yes, to some extent I would
agree with Ms. Pickles that, yes, part of this--and I said so
in my testimony--part of this is control over natural resources
in those areas is helping to fuel or prolong some of the
conflict there. I don't think that is at issue here.
The question is, will Section 1502, yes or no, solve the
overall conflict? It certainly has had the impact of
precipitously dropping the output in the Kivus in particular
here.
I would say that there is virtually no conflict-free
sourcing going on in the Kivus. Hardly any at all here, given
the ongoing conflict. Most of the--
Mr. Stutzman. So you would say, then, there is not even
another commodity that is--is there another commodity that is
causing violence? You are saying this is outside of any sort of
minerals, outside of any of the resources that are part of the
country? This is a deeper problem than just politically? There
is--it goes back to ethnic tension.
Mr. Goss. Yes. I would say that there is a far deeper, far
more comprehensive set of issues at play here than simply
control over minerals.
And there are certainly other things, other than minerals,
other commodities, such as the ones I mentioned in my
testimony, that are also being used for illegal gain and to
fund not only militias, but illicit bands within the government
military as well here.
I know from meeting with the European Commission most
recently, just a few weeks ago in Paris, they certainly see
Dodd-Frank, and this is their term, as a market distortion,
that it has forced responsible industries out of the region, to
the detriment of the local populations.
In fact, part of what they are considering as they move
forward on a potential legislative initiative is to look--and
again, this is their term, how do we restore the marketplace,
how do we restore balance, how do we encourage companies,
responsible companies, to engage or re-engage in the region?
Hence, some of the recommendations I made at the end of my
testimony.
Mr. Stutzman. If I could, Mr. Dizolele, would you agree
with that?
And then, also, do you know, was the Congolese government
consulted regarding Section 1502 when it was passed?
Mr. Dizolele. Thank you very much, Congressman.
The Congolese government reacted to Section 1502, so in
many ways, they were pushed into it. The first reaction, even
before the law was voted, was President Kabila suspending
mining in that region, which had a negative effect even before
the United States passed its law.
So, were they consulted? On the periphery. They were--it
was a very, very--consultation. Like I said, the foremost
experts of the Ministry of Mining in Congo were not even part
of the panel that discussed Dodd-Frank at the SEC. They sat in
the audience with the rest of us, when, in fact, those of us
who follow Congo, we had wanted to hear from them.
Because they live with this; they know their laws. They
have been engaged by the World Bank.
The World Bank has a good program in DRC called Promene.
I think the activists who want this thing need to join
forces with those groups in Congo to have something that is
much more comprehensive. And also, we cannot pass laws on one
section of Congo as if it was one country, when in fact there
are many areas which are much more mineral rich, but don't have
the same effect. There is no war in Kananga over mines. There
is no war in the Kasai province over diamonds. So this tells us
that the problem is bigger than what we are trying to address--
unfortunately.
Mr. Stutzman. Thank you, Mr. Chairman.
Chairman Campbell. Thank you.
Next, the gentleman from South Carolina, Mr. Mulvaney, is
recognized for 5 minutes.
Mr. Mulvaney. Thank you, Mr. Chairman.
And thank you to the witnesses.
It is sort of hard to know where to begin on this. I am
going to ignore my biggest concern here, and my biggest concern
is that this is the Financial Services Committee and that we
are dealing with Dodd-Frank, which was supposedly the response
to the financial crisis of 2008 and 2009, and for some reason,
we are sitting in here today talking about conflict minerals in
the Congo.
How we got here--I know exactly how we got here. You
shouldn't be here, by the way. We shouldn't be here. We
shouldn't be doing this. This committee should be--this hearing
should be taking place in the Foreign Affairs Committee or the
Energy and Commerce Committee or the Ways and Means Committee.
But we are here because somebody back during the last
minutes of Dodd-Frank thought they were smarter than everybody
else and really slick and could figure out a way to slip
something into a bill late at night that would pass into law,
somebody who thought that they knew better than everybody else
and didn't need congressional hearings, didn't need an
amendment process, didn't need the mining experts from the
country that is actually going to be impacted and decided that
their intentions were good enough to go ahead and slip this
into law.
And that is absurd. I think it is a test case, Mr.
Chairman, for exactly what is broken about the system. But,
again, I am going to ignore it and try and keep things really
simple for me as a new member of this committee. And my
question is really simple, which is, are the Congolese people
better off because of Section 1502 of Dodd-Frank? And what I
have heard so far from Mr. Aronson is that they are not; from
Mr. Dizolele, I have heard that they have not.
Sitting here, I am looking at some of the testimony from
the folks who actually live in the country--heaven forbid we
actually ask the people who were impacted--who said that,
``Even in our large towns, economic activity has diminished.
Construction slowed. Trade in everything has fallen. People
with very little to begin with are now doing with less.''
Ms. Pickles, I hear what you are saying. I have read your
testimony as well. I think I hear what your defense is, which
is that proper implementation of Section 1502 has the potential
to substantially improve socioeconomic--I will be perfectly
candid with you. My 13-year-old triplets have the potential to
improve the conditions in the Congo. That doesn't mean they are
going to, but they certainly have the potential to do that,
right?
You are telling us that we have to sit and wait. These
gentlemen are telling us the country is worse off. You are
telling us to sit and wait. So I only have one question: How
long do we have to wait? If we come back a year from now, and
these gentlemen are still saying things are worse, will that be
enough or will we have to wait longer?
How long do we have to wait before we repeal this? I would
repeal it today, because it is absurd that it is there in the
first place.
So just tell me that, how long do we have to wait?
Ms. Pickles. You don't have to wait, it has already
started, is my answer to that. If you look at the other parts
of my testimony, you will see that conflict-free sourcing has
already started in eastern Congo.
Mr. Mulvaney. Yes, you said sourcing. That is better for
the--for who, the fact that there are now secure supply lines?
I am looking at the actual impact on the people. I am looking
at the woman that Mr. Dizolele talked about who was getting
raped in the fields before Section 1502 and is still getting
raped in the fields afterward, and probably will after all the
secure supply chains in the world go in there.
I hear what you are saying. You said that there is
stability in economic development. Again, I go back to the
folks who actually live there who say that millions of
artisanal miners--I had to look that up, by the way; it means
subsistence miners--have suddenly had their livelihood cut out
from under them. They find it increasingly difficult to pay for
school, health or maternity fees. Some even have reported
difficulty providing food for their families.
How is that making them better?
Ms. Pickles. I think there are two sides to that story. I
have a quote here from a group in Congo that says for 15 years,
dire poverty and slavery-like conditions, exacerbated by the
nonexistence of basic social infrastructure and caused by the
trade in conflict minerals, has affected our communities and
made us worse off.
Mr. Mulvaney. Where is the next part of that sentence?
Where is the next part of the sentence that says, ``and now it
is better.'' Do you have that?
Ms. Pickles. No, sir, not--
Mr. Mulvaney. Everybody admits that things were bad in the
past. The question is whether or not Section 1502 is making it
better. Where is the evidence that it is making it better?
Ms. Pickles. When I was in Nabibwe, which is one of the
mining communities that has been--where conflict resourcing has
started--3 weeks ago, I spoke to individuals who told me that
their economic circumstances have improved because of the
conflict resourcing that has begun there.
For example, somebody told me that the could now start a
bakery because there was a consistent supply chain coming out
of Congo and that he could then use that economic base to start
his own business.
Mr. Mulvaney. And he couldn't start a bakery before?
Ms. Pickles. No, he couldn't, because there were armed
groups in the area who were preventing him from being able to
access the roads, for example.
Mr. Mulvaney. This is not going to get undone. I know that
it isn't. I appreciate you having the hearing. I hope that our
friends on the other side and our friends in the Senate
recognize that as important as Dodd-Frank is, and I know that
it is, and as important as this issue is, there was no reason
for this issue to be dealt with in Dodd-Frank. And if we were
going to do something this year, maybe we could at least move
this over to a committee that has some understanding of the
issue.
This is not what this committee is set up to do. It is not
what Dodd-Frank is set up to do. And I appreciate the
opportunity for the hearing.
Thank you, Mr. Chairman.
Chairman Campbell. Thank you, Mr. Mulvaney.
We now move up the road a piece to North Carolina, to Mr.
Pittenger. You are recognized for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
And thank you, witnesses, for your testimonies.
I would like to pick up a little bit on Mr. Mulvaney's
comments and questions. It seems to me, in our reports we have
heard that there are 1 million to 2 million people who are
displaced, they have lost their livelihood, because of what
they refer to as ``Obama's law.''
Mr. Dizolele, what are these people doing today? What are
those folks doing to take care of their families--to take care
of their children, their education? What is happening to them?
Mr. Dizolele. Congressman, it is a very important question.
They are surviving--some starving, some in IDP camps and
waiting for a handout. And I think this is my primary
contention. These are people who are very resourceful, who can
tend to their own field, who can feed themselves.
As long as the conflict continues, they are reduced to
pretty much asking for handouts. And until we address the
political side that is causing the conflict, legislation like
this will have minimal effect in changing the lives of those
who are in the condition you just described.
Mr. Pittenger. Mr. Dizolele, do you make the correlation
that Section 1502 translated into the displacement of these 1
million to 2 million people?
Mr. Dizolele. No, I do not make such a correlation. I think
Section 1502, as I said in my remarks, is operating outside the
realm of the violence in the sense that the network of war
criminals that benefits from this market-like illicit trade of
minerals, above Dodd-Frank. Congresswoman Moore had asked about
the mines being free of the military. Yes, they may be free of
people in uniform, that doesn't necessarily mean they are free
of military influences, because some of the generals are in the
mines.
Mr. Pittenger. But since the implementation of the bill, my
question is--there seems to be a timing that these people were
displaced and some connection to when this bill came into
effect.
Mr. Dizolele. Congressman, in eastern Congo, people get
displaced all the time, because the conflict has been quasi-
permanent. The conflict started in 1994 and has been going on
until today. Goma is about to fall as we speak today. Goma is
under pressure, so we don't know if Goma is going to last until
Saturday. If it does--if Goma falls to the militias, then there
will be more displaced people.
So displacement itself is not related to--
Mr. Pittenger. It is ongoing.
Do you see any resolution, then, with the--if by chance
that this Section 1502 was removed? Are you an advocate of
that?
Mr. Dizolele. I am not an advocate of Section 1502.
Mr. Pittenger. Are you an advocate of it being removed from
the law?
Mr. Dizolele. I cannot speak to that. I think that is why
we are having this hearing. Your subcommittee will make that
decision. I do believe, however, that the best way to help
Congo is through a multidimensional approach. There have been
other countries that faced similar crises, like Sierra Leone
had conflict that was fueled by mining, by diamonds. But going
after diamonds alone didn't bring peace to Sierra Leone or
Liberia. We need more initiatives to bring peace to Congo. The
reinstatement of the authority of the state is key, not going
after small pieces of the crisis.
Mr. Pittenger. Thank you.
Would anybody else care to comment on that?
I yield the balance of my time.
Ms. Pickles. Yes, I would like to comment.
I think we have to be careful not to conflate the broader
conflict in Congo and breaking the link between minerals and
conflict. I agree with what you are saying, Mr. Dizolele, that
we do have to take a holistic approach if we want to find long-
term peace and stability in Congo. But breaking the link
between the minerals trade and the armed groups is a really
important way of preventing them from receiving funding from a
very lucrative revenue source.
And that is what Section 1502 is trying to do. We are
trying to create clean supply chains from Congo so that
American businesses can source from this area responsibly.
Mr. Goss. May I add to that? What we have seen in the tech
sector here is that our attempts to make a go in-region, to try
to create these closed-pipe sourcing have been, I would say,
minimally successful because of the ongoing and broader
security issues here, in the Kivus in particular, the conflict
regions here.
As the private sector, we clearly see that we have a role
as part of a solution here, but it really needs to be first and
foremost a solution that is led by the international community.
The international community needs to create the preconditions
to allow private sector programs to work in this area, and
right now we haven't seen that. What we have--in effect, the
U.N. has rated Congo absolutely last on the human development
index--187 out of 187.
We have a western-style disclosure regime and an OECD due
diligence guidance approach that we are trying to put in play
in that set of circumstances. And frankly, as hard as we try,
we are not able to get it to hold. There needs to be more
leadership from the international community to create those
conditions.
Thank you.
Chairman Campbell. Thank you, Mr. Pittenger.
With the indulgence of the panel, we are going to do one
more round of questions, which seems to be the consensus up
here. So if you all have another 20 or 25 minutes, we will take
one more round and go through.
So, with that, I will recognize myself again for a fresh 5
minutes on the second round, and I will go to what I addressed
Ms. Pickles about in the first round, and we didn't get around
to answering, which was your response to the 3 gentlemen at the
table.
Actually, I am going to back up. This artisanal, which I
have now heard pronounced about 3 different times, and I think
I have pronounced it two different ways myself--so I will say
artisan miners or subsistence miners, can someone actually
describe to us what that is? Just what is a person in the DRC
who is an artisan miner--what does that person look like, do,
et cetera?
Mr. Dizolele?
Mr. Aronson. I will take a stab at answering that question.
An artisanal miner is usually someone who lives in the--is
often someone who lives in the neighborhood; has some
relationship to existing local power relationships, power
structure. And they spend their day in extremely physically
arduous, to a certain extent highly dangerous activities. They
dig holes in the ground and--
Chairman Campbell. I'm sorry. Are they in a mine
underground that is owned by somebody else, as we think of a
miner in the United States? Or are they sitting on the ground
with a spade, digging around to see what they can find? Or are
they both?
Mr. Aronson. Both, I would suggest. I would suggest the
whole anthropology of sort of the local context is very
complicated, and it is important to sort of understand it
varies from mine to mine and from region to region and
subregion. But effectively, they are working the land of their
village. They may have to pay fees to the local chief. They may
have to pay fees to the local police.
Chairman Campbell. Pretty primitive stuff, in other words.
Mr. Aronson. Yes, yes.
Chairman Campbell. Okay. Now, if I can--
Mr. Aronson. And it is a hole that literally is about a
meter wide and it goes sometimes 100 meters or 200 meters into
the ground, at times.
Chairman Campbell. Okay. Now, if I can go to Ms. Pickles.
So what these 3 gentlemen are saying is that Section 1502
has actually hurt people in the DRC--these people, these
artisanal miners. And that it has hurt them by the fact that
many entities or businesses or companies or whatever in the
United States have decided rather than try and figure this
whole thing out, I am just going to avoid anything from
anywhere near the DRC, because that is the simplest way for me
to comply with Section 1502, and that these people have been
hurt.
Is there any legitimacy to that claim? What is your view on
their argument there?
Ms. Pickles. I think the first thing to say, just in
addition to the point about artisanal miners, is that I just
want to quote something that the African Union has written in
their 2015 mining vision, which is that it is important to
recognize that artisanal mining is both poverty-driven and a
poverty-alleviating finite activity.
So in DRC, we are talking about people who may not choose
to go artisanal mining, but may have to. But it also, in other
circumstances, is people who have been forced to by armed
groups. So I think it is a mixed picture, and we should bear
that in mind when we are talking about artisanal livelihoods
and artisanal communities, as a first point.
Chairman Campbell. Has the total sale, if you will, of
minerals from the DRC, particularly from those areas of the
DRC, as Mr. Dizolele said, that may be not--that are not in a
conflict area--has that dropped?
Ms. Pickles. There has been--exports have been depressed
over the last few years for a number of reasons. One of them is
a presidential mining ban that was introduced in 2010 by the
Congolese government. Another one is the long delay that the
SEC's--the 16-month delay the SEC took before publishing their
final rule, which caused uncertainty in supply chains, so some
companies aren't yet sourcing from Congo, in every sense of the
way.
And then also, recently, there have been export bans
introduced by the Congolese government again, since May of last
year, which have prevented people from exporting formally from
Congo.
So all of those things combined--
Chairman Campbell. Do you believe that will change then,
over time?
Ms. Pickles. Yes.
Chairman Campbell. For?
Ms. Pickles. If we take a slightly wider regional approach,
there are 21,000 tons of conflict-free tantalum material that
has been exported from Congo's--or, I am sorry, from the Great
Lakes region since regional--and this just started a few years
ago.
So we are already seeing an increase in the amount of
conflict-free material coming out of the region. And I think
that will only increase from now.
Chairman Campbell. All right. I will yield back my time,
and recognize the gentlelady from Wisconsin, Ms. Moore, for 5
minutes.
Thank you.
Ms. Moore. Thank you. I get to be the ranking member. It is
not often I get to do that.
Chairman Campbell. Okay. Let me rephrase that--Acting
Ranking Member Moore, the gentlelady from Wisconsin, is
recognized for 5 minutes.
Ms. Moore. Thank you so much, Mr. Chairman. I would just
thank this panel for sticking around for a second round.
I just wanted to point out that I deliberately chose to be
on this subcommittee, and much to the surprise of me and my
colleagues, I turned down a chance to be the Housing
Subcommittee, passed that over so I could be on this.
Chairman Campbell. Is it because you are so fond of the
chairman?
Ms. Moore. It is because I am so fond of the chairman.
And also so fond of the subject. And I just wanted to point
out--Mr. Mulvaney is not here--that we do deal with the Bank
Secrecy Act, the Foreign Corrupt Practices Act, the Iran
Sanctions Enabling Act, to deal with Iran nuclear weapons
program, the Bank Secrecy Act, which deals with suspicious
transactions, the Sudan Divestment Act. We deal with a lot of
international monetary policy.
So his statement about why is this hearing being conducted
in this subcommittee, this is one of our areas of jurisdiction.
So I just wanted to clear that up.
To the extent that we have American corporations that are
dealing in this region, it is one of the reasons that Global
Watch and others really rely on this committee to make sure
that the best practices and due diligence and so forth is taken
by us, so that our monetary policy doesn't support foreign
corruption.
And so, I am deliberately on this subcommittee for just
these kinds of hearings, on conflict diamonds, and so forth,
and Liberia. We have dealt with vulture funds.
This is your jurisdiction, Mr. Chairman. So don't let your
Members take it away from you.
I did want to get back to this whole discussion of the
artisanal workers and some of the choices that they have.
I have sort of heard the same argument with respect to some
other sad parts of the history here in America, where it was a
bad thing to free the slaves because they, then, would have no
source of income.
And so, I am wondering, a comment from you, about the real
status of these artisanal miners--we have heard conflicting
testimony here about how much better off they were before Dodd-
Frank.
And I guess, Ms. Pickles, I just want you to have an
adequate amount of time to tell us what their financial status
was before Dodd-Frank.
Ms. Pickles. I think that one of the positive impacts of
this legislation is that it has shone an unprecedented light on
exactly that, on the inhumane conditions and the terrible
working conditions that many artisanal miners in Congo have to
endure from day to day.
I think if we are looking on a longer term, before Dodd-
Frank, we are looking at 15 years of conflict that had been
funded by minerals in eastern DRC.
So 15 years of artisanal miners in many of the mines in
eastern Congo being taxed or inhumanely treated by armed groups
who are taking the revenues from those mines.
I don't think it is a question of saying that Dodd-Frank
has had a--of course, there have been negative impacts in the
sense that there have been changes in the way that trade has
happened over the last few years.
But now that we are seeing companies starting to source
responsibly, that will open up new, conflict-free supply chains
in the Kivus and provide economic stability for some of those
artisanal--
Ms. Moore. Is there any future with these workers really
having some dignity and some transparency with regard to wages
and hours worked and the kinds of things that we associate with
human rights in the workplace?
Ms. Pickles. I think so. But I think the first thing that
we need to consider is effectively getting the armed men out of
the mines. Once the armed men are out of the mines, then we can
start to address some of those other problems. Of course, it
has been a terrible--
Ms. Moore. And if you want to see where the conflict comes
in, you have to follow the money. And that is why this
subcommittee is hearing this is because, as you pointed out,
Mr. Dizolele, the minerals themselves may not be the source of
the conflict, but they generate a lot of money, and they fund
war. Would you disagree with that, Mr. Dizolele?
Mr. Dizolele. I will add to it, Congresswoman. There are
many other sources of funding war in the DRC. The minerals are
just an element of it.
An AK-47 in Goma doesn't cost much. All you have to do is
go and rob some women who are selling mangos when they are
going to market, and you will get cash to get an AK-47.
So this entire idea that the funding that come from mines
will be the one which will continue to bring the new pipelines
of weapons, is a bit overstretched.
Yes, they funded the big operators, what are called the war
entrepreneurs. But the average militia guy, who is 15 or 17
years old--and let's keep that in mind. We are not talking
about organized armies here. We are talking about kids. Those
are not tapping into the resources. They are living just on $2
like everybody else. But they still have the AK-47 or the
machete, if I can use the example that Mr. Goss used.
The genocides happen with AK-47s, and they happen with
machetes.
Ms. Moore. Thank you so much.
And thank you, Mr. Chairman.
Chairman Campbell. The gentleman from Michigan, Vice
Chairman Huizenga, is recognized for 5 minutes.
Mr. Huizenga. Thank you, Mr. Chairman. I appreciate that.
Mr. Dizolele, I was thinking sort of very similar along the
lines that you were just discussing. And I am a student of
history, I love history.
And I have no doubt, Ms. Pickles, that minerals have a role
in this conflict, but so do agricultural products. So does the
sex trade. So do a number of other things that drive economic
activity, illicit or legal, and certainly we are not even
talking about religious or ethnic or tribal differences. And it
seems to me, we can't dismiss that, and somehow think that
Section 1502 solves it. Because it--to me, the question isn't
so much are we better off--or were we--I think as my friend
from Wisconsin said, were we better off before Section 1502,
and somehow, Section 1502 has made the Congo--the DRC--fall
apart and go into internal conflict? Pretty clearly, that is
not the case.
My question is, are we worse off than what we were? And I
think that is a subtle difference, but it is a big difference.
Because if we are worse off, then that means we are going
backwards. And I am concerned that Section 1502 is putting us
in the wrong direction. And I am concerned that we will think
we have solved the problem with Section 1502. In many ways, the
West--not just the United States, but at some point, maybe the
West just sort of washes its hands of the issues that really
are underlying the conflict because we say, ``Wow, we solved
it.'' We have made sure that everybody is going to establish
some sort of supply chain here.
And, a trip I have talked about, Mr. Chairman--I am looking
forward to visiting the SEC office in Kinshasa. I am sure there
must be one, because they are now in charge of tracking all of
these supply chains. And when we had Mary Jo White here--
Chairman White here earlier--I am not convinced, and she seemed
to indicate, as well, that the SEC is not equipped to do this.
Ms. Pickles, one of the things that you talked about was
that part of this drop in exports was caused by a delay of the
SEC's ruling, because that uncertainty caused these folks who
need to establish these supply chains--they weren't sure, so
then they just--they stopped.
That may be part of it, but what I am hearing from those
end-users is that there is the difficulty of establishing that
supply chain that is being required of them under Section 1502
and by the SEC. That is a huge part of their delay, and that is
why they are desperately looking for other sources, and that
they are trying to figure out where else in the world
marketplace they can go to get these essential minerals for
their processes and for their products without having to deal
with this.
So, I will open it up. We have a minute-and-a-half. I would
love to hear the conversation from--Ms. Pickles, you can start,
and anybody else who cares to comment.
Ms. Pickles. Okay, so touching on what was said right there
in the beginning--yes, of course, we do need to take a holistic
view of the conflict in Congo, but that doesn't mean that we
shouldn't be sourcing minerals from Congo that are outsourced
responsibly, and that U.S. companies buying from Congo
shouldn't be so--in how they respond to conflict.
Mr. Huizenga. Can I ask you one quick question?
Ms. Pickles. Yes.
Mr. Huizenga. Do you have any concern that we may just sort
of say, ``Okay, we are done. We passed Section 1502. It is now
being implemented. Whew. Good. That is off the table. Now we
can walk away?''
Ms. Pickles. No, I don't. And I think that there is
evidence to prove the contrary. I have already talked about
some of the closed-pipe fighting that is starting up in Congo.
And I think--you mentioned before, ``Are we going in the right
direction? Are we seeing positives?'' Yes, we are. We have seen
a Congolese law that has passed that requires everybody in
domestic mineral sectors to use due diligence. We have seen a
similar law passed in Rwanda. We have seen traders in Congo now
seem to understand what due diligence is, and taking steps to
establish the supply chains themselves. And perhaps most
importantly for this committee, we have seen U.S. companies
investing directly in Congo to source responsibly.
Mr. Huizenga. I have one other quick question. Do you
believe that would have happened at all on its own--
Ms. Pickles. No, we have--no.
Mr. Huizenga. --as Mr. Goss seemed to indicate?
Ms. Pickles. We have 15 years of proof to show--
Mr. Huizenga. Okay, but you just mentioned Rwanda?
The law doesn't cover Rwanda, does it?
Ms. Pickles. Yes, Dodd-Frank Section 1502 covers Congo and
its adjoining countries, so yes, Rwanda is covered.
Mr. Huizenga. So you believe that this is the only
solution, though, passing Section 1502, and that this would not
have happened without that?
And, Mr. Goss, I don't know if you care to comment on that?
Ms. Pickles. I would just say that the momentum generated
by Section 1502 and the requirement that it is made on
companies to source responsibly has changed the dynamic
completely--15 years of companies sourcing irresponsibly from
Congo has been changed by this piece of legislation.
Mr. Goss. If I may, I would add, I find myself in the
middle of the conversation here, clearly. The tech industry
seems some positives from Section 1502 and some distinct
challenges with the mechanism in Section 1502, but I think the
overriding point I am trying to make here is that the mineral
sourcing, while it is part of this, is not going to bring a
solution or a resolution to genocide in Central Africa, because
it is politically based; it is ethnically based, et cetera, all
the points that we have made before here.
Yes, our companies in particular--the tech industry in
particular has tried to remain in the region, and to try to
source responsibly, and we are at the lead of almost every one
of these in-region sourcing programs here. The challenge is
that they are generating minimal amounts of clean material.
Most other industries are basically saying, if we cannot
source from the region, we will avoid it, and I think that is a
major point that the subcommittee needs to look at here, which
is, is the mechanism facing in the right direction, or does the
mechanism discourage investment? We would certainly like to see
a mechanism in U.S. law that encourages investment and makes
that easier to invest.
But frankly, no due diligence system is going to work in
this country without the preconditions of security and
stability. We see the U.N. Security Council just authorizing in
March an intervention brigade to go in and try to neutralize
M23, which is being funded by Rwanda, which is being provided
with military assistance and arms from Rwanda, and potentially
from Uganda.
You have foreign states that are providing arms and
assistance to these rebel groups. I will repeat my testimony.
This is not about economics; this is about politics. When you
have foreign states, or adjoining states who have a stake in
the outcome in eastern Congo, this is a job for the U.N.; it is
a job for the international community.
I would agree with Ms. Pickles, that yes, minerals and
other commodities, not just minerals, and the funding
associated with those, have fueled violence; they have
prolonged certain elements of this conflict.
But the conflict is not going to go away just because you
take away the sourcing for the minerals, because there is a
deeper basis for it than that.
Thank you.
Chairman Campbell. Thank you. And our clean-up hitter for
today will be the gentleman from Indiana, Mr. Stutzman. You are
recognized for 5 minutes.
Mr. Stutzman. Thank you, Mr. Chairman.
My question is, are there other countries that are buying
minerals out of the Congo?
Ms. Pickles, do you know?
Ms. Pickles. Yes, I know it has happened.
When you say other countries, you mean other than the
United States?
Mr. Stutzman. Correct, yes.
Ms. Pickles. Yes, there has always been a broad market base
for minerals from Congo.
Mr. Stutzman. Do they have a rule similar to Section 1502?
Ms. Pickles. Section 1502 is a forerunner, so the American
Government is the first to produce a piece of legislation like
this.
Mr. Stutzman. But to me, as I listen to the situation here,
reading what has to happen if a company can't verify that the
minerals they use did not originate in the DRC, Section 1502
requires them to: one, exercise due diligence on the source and
chain of custody of these minerals; two, to hire an independent
third party to audit the due diligence measures; and three, to
report to the SEC on the due diligence measures they undertook.
This is all responsibility for a company in the third
district in Indiana. Is that correct, am I understanding that--
right, Mr. Goss?
Some people may pat themselves on the back and say, well,
we are making sure that we are not using their resources or
their minerals, but we are only hurting the people of the
Congo, because if we walk away, who else is going to take the
same sort of initiative and use the same integrity that
Americans should and we expect to use in the Congo. Are the
Chinese the same sort of standard? Are they going to operate
with the same sort of integrity with which we expect Americans
to operate?
Ms. Pickles. Is that for me?
Mr. Stutzman. For anyone.
Ms. Pickles. I think the first thing I would say is that
U.S. companies are not walking away from Congo. I mentioned in
my testimony in the beginning that--
Mr. Stutzman. But this will make it harder for them,
correct?
Ms. Pickles. It doesn't make it harder for them; it means
that they have to source minerals in a responsible way. So,
some U.S. companies who weren't buying from Congo before are
now sourcing there, which demonstrates that--
Mr. Stutzman. Do we know, are there any companies that have
walked away from the Congo since Section 1502?
Ms. Pickles. Also, as I said earlier, there has been
uncertainty because some companies didn't know what the final
rule was going to say and were waiting to make sourcing
decisions based on that.
Mr. Stutzman. I just think that if we want to help make a
difference in the Congo, the best thing to do is to be involved
economically and to share our best practices, to share the
system that we operate under with people there rather than
really restricting our own selves and tying our own hands.
Mr. Aronson, I have a question.
Some Section 1502 advocates compare the conflict minerals
campaign by civil society to the South Africa divestment
campaign in the 1980s. Is that an appropriate comparison, in
your opinion?
Mr. Aronson. Thank you very much for that question,
Congressman.
I think that is an important comparison because it is one
that the advocates themselves often cite. They say, well, look
we have--yes, there are temporary economic impacts, negative
impacts, but just as the South Africa divestment campaign had
temporary costs on many black South Africans, but ultimately
proved worthwhile, so this campaign will ultimately prove to be
worthwhile because it will help end the conflicts.
First, it is not helping end the conflicts, and second, I
think that we have to look at some of the key differences. For
one thing, in South Africa you had South African leaders
calling for the divestment campaign. There was no similar call
from Congolese society for a embargo that has happened.
Second, the divestment campaign targeted the right people.
It targeted the aging South African white elite. In this case,
it is targeting African warlords who really don't care what
Western leaders or Western audiences think of them.
And, finally, there was a clear mechanism in place for
change in South Africa; you pitted the political elite versus
the business elite which wanted to end the international
isolation and get back to making money.
In the case of Section 1502, what we have done is sideline
legitimate businesses. So we have inadvertently, but
predictably, put money and power into the hands of warlords and
armed groups in eastern Congo including the Congolese army,
which is often highly predatory.
Mr. Stutzman. I appreciate your answer, because that is my
fear, Mr. Chairman, that we really are keeping the businesses
that would operate appropriately out of the business. At some
point, we are going to continue to pile on more and more
regulations trying to fix a problem that is very difficult to
fix and really just engaging ourselves.
Chairman Campbell. Thank you, and I would like to thank
each of our witnesses for their testimony today and for your
indulgence with our recess during votes.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
And without objection, this hearing is now adjourned.
[Whereupon, at 4:25 p.m., the hearing was adjourned.]
A P P E N D I X
May 21, 2013
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