President Trump Should Waive Dodd-Frank Provision Harming Vaccine and Ventilator Production and Distribution

The announcement by Pfizer that the vaccine it is developing with German firm BioNTech may be 90 percent effective against COVID-19 is worth celebrating. If the initial test results pan out, the innovative corporate cultures of the two firms that enabled creation of this vaccine should be praised and emulated. And President Trump also deserves credit for the deregulatory approach his administration instituted to clear away to red tape to developing effective vaccines and therapeutics.

But there is still an urgent, yet relatively simple, task the president must do to quash a particularly destructive rule that could hinder production and distribution of vaccines, as well as medical equipment such as ventilators needed in the fight against COVID-19 as it surges. As CEI Research Associate Seth Carter and I urged in our October 27 Wall Street Journal  op-ed, President Trump must waive the conflict minerals disclosure mandate from Dodd-Frank that “has shrunk the medical supply chain for components of everything from ventilators to vaccine needles and syringes.”

The conflict minerals mandate was a last-minute addition to the 2010 Dodd-Frank financial overhaul, even though the provision had nothing to do with investor protection. The rule requires U.S publicly traded companies to disclose if their products contain traces of certain designated minerals that might have been mined in areas controlled by warlords in Africa’s Congo region.

The cost of the mandate, and possible criminal penalties for inadvertent use of conflict minerals, has resulted in U.S. manufacturers avoiding the Democratic Republic of the Congo and its nine adjoining countries. This has caused shortages and spikes in the prices of crucial components of medical supplies needed to fight the surge of COVID-19. This has led to a substantial reduction in the supply of materials utilized in production of vaccine accessories and medical equipment in the U.S.

For instance, capacitors made from tantalum, one of the minerals designated by Dodd-Frank for the burdensome disclosure mandates, are essential for ventilators to function properly. Tantalum and the three other conflict minerals specified by the law—tin, tungsten, and gold—are used in compressors vital to the refrigeration of vaccines, which it looks like will be especially important in the delivery of COVID-19 vaccines. The minerals are also used in the production of vaccine needles and syringes.

In our op-ed, we compiled statements from medical manufacturers and experts that conveyed the urgency of the shortages and price spikes the conflict minerals mandate is causing. A spokesman for the medical device trade association AdvaMed, which represents U.S. medical device makers, told us the group hasn’t changed the views it stated in a 2011 comment to the Securities and Exchange Commission  (SEC) that “it is unavoidable that conflict minerals will be used” in medical devices, and that “as there are currently no substitutes for these minerals, the continued sourcing of these minerals is necessary to ensure the safety and efficacy of medical devices.”

Similarly, the oxygen concentrator maker Inogen warned in a recent filing with the SEC that the conflict minerals mandate could cause price spikes and shortages of its products. “Costs could significantly increase and our ability to meet demand for our products could be impacted,” the company wrote.

Fortunately, Dodd-Frank contains an escape clause from this destructive provision that allows the president to issue a two-year waiver of the mandate for national security reasons. Section 1502(b) of Dodd-Frank [officially 15 U.S.C. § 78m(p)(3)] states that the SEC, which enforces the mandate, “shall revise or temporarily waive the requirements … if the President transmits to the Commission a determination that such revision or waiver is in the national security interest of the United States and the President includes the reasons therefor, and establishes a date, not later than 2 years after the initial publication of such exemption, on which such exemption shall expire.”

Although issuing this waiver may attract some controversy, this should be a relatively simple action to take and to justify. It would be difficult to argue that COVID-19 is not a national security threat when President-elect Joe Biden and other Democrats argue for using the Defense Production Act, which gives the president broad ability to influence industry in the interest in national defense, to ramp up production for COVID-19. The Biden transition web site calls for “fully us[ing] the DPA to “so that the national supply of personal protective equipment exceeds demand”  Similarly, a letter to Trump from House Democrats invokes World War II and the U.S. production of “mass quantities of bombers, tanks, and many smaller items,” and concludes: “We know what the demands of these times are, and we must now act to meet these demands.”

President Trump can also invoke World War II to emphasize the urgency of waiving the Dodd-Frank mandate to ensure that the U.S. has all the resources it needs to fight the deadly Covid-19. As we wrote in the Journal, “For the World War II-like efforts to ready billions of doses of Covid-19 vaccines, as well as medical devices to tackle new surges in Covid-19 cases, American manufacturers will need untrammeled access to the world’s resources.”

In addition to the pandemic, there are other strong national security reasons for President Trump to waive the conflict minerals mandate. The minerals designated by Dodd-Frank are utilized in several types of military equipment, from computer imaging systems to aircraft. But the most compelling reason for the waiver may be that the Dodd-Frank mandate has caused further instability, poverty, and violence in the region and has harmed the very residents of the Congo region it was intended to help.

As we noted in the Journal: “When mining dropped off due to Dodd-Frank’s effects, Congolese villages were hit by reductions in education, health care and food supply. In 2014, 70 activists, academics and Congolese government officials signed a letter blasting initiatives like the Dodd-Frank provision for “contributing to, rather than alleviating, the very conflicts they set out to address.”

There are other ways to help alleviate the suffering of the Congo region, such as sanctions on bad actors (which the Trump administration has done), international treaties, and legislation that would task U.S.-Congo relations to an agency with foreign policy expertise, rather than the SEC. But the urgency of combating COVID-19 to America should compel President Trump to waive the law’s conflict minerals mandate. Doing so would cement his record of clearing away the “never needed” red tape and opening the pathway to a COVID cure.

CEI Research Associate Seth Carter contributed to this post.