The Unintended Consequences of Regulating ‘Conflict Minerals’ in Africa’s Great Lakes Region

Tin, tantalum, tungsten, and gold— “3TG” minerals—are common inputs in popular products, such as mobile phones, laptops, medical equipment, and jewelry. The extraction of these minerals, however, serve as key sources of revenue for armed rebel groups in the Democratic Republic of Congo (DRC) and other surrounding countries. Therefore, a popular narrative suggests that the continued use and international trade of 3TG minerals mined in the DRC and surrounding countries fuels violence and conflict in the region.

Intending to break the link between consumers and armed rebel groups, the United States Government regulated the international trade of 3TG minerals mined in the DRC and surrounding countries. This legislation—included in the Dodd-Frank Wall Street Reform and Consumer Protection Act—requires publicly traded companies in the US to report on the presence of “conflict minerals” in their supply chain.

In his job market paper, Jeff estimates the impact of this policy.

The Dodd-Frank Act Doubled the Prevalence of Conflict in the DRC

To estimate the effect of the passage of the Dodd-Frank Act, in July of 2010, on the prevalence of conflict he used data from the Armed Conflict Location and Event Data (ACLED) project and estimated the effect by comparing the prevalence of conflict over time in the DRC to other sub-Saharan African countries not included in the legislation. Estimates suggest that the passage of the Dodd-Frank Act roughly doubled the prevalence of conflict in the DRC.

A number of qualitative studies examine the effects of the Dodd-Frank Act on livelihoods in the DRC and suggest that the legislation largely fails to deliver its intended effects. Although these studies provide sharp insight, they struggle to pin down the causal relationship between the Dodd-Frank Act and conflict. Several quantitative studies make a considerable contribution by comparing the prevalence of conflict between administrative areas with and without 3TG mines within the DRC and find that the Dodd-Frank Act may do more harm than good in the DRC. 

What Went Wrong? An (Incomplete) Theory of Change

The core idea behind the theory of change of the US “conflict minerals” legislation is that revenue earned from the extraction of 3TG minerals cause conflict. Although this could be true, conflict is also caused by a complex combination of socio-economic inequality, poverty, land use, political corruption, social frustrations, among other things. Importantly, each of these factors may be influenced by the passage of the Dodd-Frank Act.

Now What? Reducing Conflict in a Globalized World

Most recently—in April 2017—the United States Government suspended enforcement of this policy after a failed attempt to overhaul the entire Dodd–Frank Act. Unfortunately, supplemental analysis suggests that the suspension of enforcement has had essentially no effect on the prevalence of conflict in the DRC.

One potential reason for this null effect is that some companies—such as Apple, Intel, and Tiffany & Co.—have publicly stated that they intend to follow requirements of the legislation even if it is officially removed from US law. This implies that some companies perceive a market expectation for “conflict free” products and presents challenges for the future.

Many likely support the transparency of the international trade of natural resources. Coupled with the existing literature, his analysis suggests that although transparent trade across national borders seems beneficial at face value, policymakers, citizens, and consumers must be aware of the potential unintended consequences of economic regulations aimed at cutting access to resources in the most impoverished areas of the world, where deep social and political challenges exist.   

This article is adapted from its original posting on the World Bank’s Development Impact Blog

Jeffrey R. Bloem is a Ph.D. Candidate at the University of Minnesota. Here is a link to his website. Follow him on Twitter @JeffBloem.