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Dodd-Frank’s Conflict-Minerals Rule Increases Violence in the Congo

The 2010 Dodd-Frank Act increased violence in the Congo by 143 percent (and looting by 291 percent) through its “conflict minerals” rule, which has backfired on its intended beneficiaries. So concludes a new study by Dominic Parker of the University of Wisconsin and Bryan Vadheim of the London School of Economics.

As we noted earlier, Dodd-Frank conflict minerals regulations have also caused starvation in the Congo, harmed U.S. businesses, and resulted in increased smuggling—even as they punish peaceful neighboring countries in Africa just for being near the Congo, whose civil wars have killed millions over the last 20 years. They have inflicted great harm on a country that was just beginning to recover from years of mass killing and had the world’s lowest per capita income. The new study is consistent with a 2013 paper by St. Thomas University law professor Marcia Narine that criticized the conflict minerals rule for its dire consequences for the Congolese people.

As David Aronson noted in The New York Times,

The “Loi Obama” or Obama Law—as the Dodd-Frank Wall Street reform act of 2010 has become known in the region ... has had unintended and devastating consequences, as I saw firsthand on a trip to eastern Congo this summer. The law has brought about a de facto embargo on the minerals mined in the region. ... The smelting companies that used to buy from eastern Congo have stopped.  ... For locals ... the law has been a catastrophe. … The pastor at one church told me that women were giving birth at home because they couldn’t afford the $20 or so for the maternity clinic. Children are dropping out of school because parents can’t pay the fees. ... Villagers who relied on their mining income to buy food when harvests failed are beginning to go hungry.

Meanwhile, the law is benefiting some of the very people it was meant to single out. The chief beneficiary is Gen. Bosco Ntaganda, who is nicknamed The Terminator and is sought by the International Criminal Court. Ostensibly a member of the Congolese Army, he is in fact a freelance killer with his own ethnic Tutsi militia, which provides “security” to traders smuggling minerals across the border to neighboring Rwanda.

As CEI’s John Berlau has discussed in the past, the conflict minerals rule has harmed American energy companies and put some of them at a serious disadvantage overseas. Its reporting requirements also raise serious First Amendment issues. For U.S. companies, attempting to comply with Dodd-Frank is a task of byzantine complexity, as this conflict-minerals flow chart illustrates. In September 2014, the government admitted it “does not have the ability to distinguish” between conflict and non-conflict minerals, so as Cato Institute legal scholar Walter Olson points out, effectively “the government has demanded of business a degree of certainty that it cannot achieve itself.”