Speech: Conflict Minerals: The Need to Act

European Commission

Karel De Gucht

European Commissioner for Trade

Conflict Minerals: The Need to Act

BDI Event: Responsible Sourcing of Minerals from Conflict-Affected Regions/Brussels

3 September 2013

Ladies and Gentlemen,

If there is one thing that all of us in this room can agree on, it is that international trade is good for an economy.

Exports stimulate demand, directly boosting growth. Imports broaden supply, making economies more productive, innovative and competitive and giving consumers more products and services to choose from.

The growth trade generates keeps millions of people in work - around 30 million in the European Union alone.

That is all well and good.

And demonstrates why trade is a vital element in development strategies of countries around the world…

… and why it is such an important part of Europe's own recovery strategy.

But if you agree with me on that point, I hope you will also agree with me on my next one:

There's no such thing as free lunch.

Everything we do has consequences: some intended, some unintended.

And when we in Europe open the borders of the world's largest market, the effects reach far and wide, creating opportunities for people across the world

Most of the people who take up those opportunities contribute to the communities around them - by creating better paying jobs or by paying taxes that fund development.

But not everyone who benefits from trade is a good-neighbourly citizen.

Some companies are happy to pollute the environment around their factories. Others are unconcerned about their workers' safety.

The simple fact is that when we engage in trade we unavoidably come into contact with unscrupulous practices.

So our constant challenge in trade policy is how to harness trade's economic benefits while creating systems to discourage negative consequences.

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The issue of conflict minerals is a glaring example of this challenge:

On the one hand, we need a global, market-based approach to raw materials - including the main ores we are talking about in this context - those which are used to produce tin, tantalum, tungsten and gold.

Open export and import policies in this area are crucial for security of supply in the European Union and for all resource importing economies.

We also need to allow developing countries to trade in natural resources. If they are properly managed they offer developing countries a vital and rare source of income, which can form the basis of wider development strategies. So we need to keep trade open for this reason too.

On the other hand, we cannot have a policy on trade in minerals that ignores the great hardship caused when mining revenues are captured to fund needless wars and all the abuses of human rights that go with them.

The most obvious example of this - one which you highlight in the interesting report you are launching today, is the conflict in the Great Lakes Region of Africa.

It is a deadly situation, with millions killed and millions more injured and traumatised since the outbreak of the first Congo War in the mid-1990s.

And it is a highly complex situation, with many different factions representing many different interests.

But what is undeniable about the conflict is that trade in minerals has played an important role in both its intensity and its length.

Put simply, if armed groups can capture a mine they have easy access to international demand for its production, and therefore easy access to funding for more violence.

And while Congo is the most dramatic example of the phenomenon it is not the only one.

The guerrillas of the FARC operating in Colombia and Venezuela are just one other example, using production of both gold and the tantalum ore, coltan, to continue their campaign as cocaine production has become more restricted.

A serious effort to eliminate conflict minerals from the supply chain would deliver a triple benefit in situations like these.

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  It would keep money out of the hands of rebel groups - meaning they have less capacity to disrupt stability.

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  It would ensure that revenues from natural resources instead go to the government, strengthening the rule of law and improving the provision of vital services like health and education.

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  And all if this would in turn encourage the economic growth that provides conflict-affected regions with hope for a better future.

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These facts are indisputable. They have been recognised time and again by the international community - who have called for action through the United Nations, the OECD and the G8.

Europe also has experience of dealing with this kind of problem. We have acted before on diamonds and forest products. There is no principled reason why we cannot do so again here.

This is why I believe that the European Union must take action.

But of course the next step is much harder. What can actually be done?

As you know, the European Commission is currently assessing what form our action should take.

I hope that the Commission will make its decision on that form before the end of the year.

But whatever we do, it needs to follow six important principles:

First, we have to acknowledge - as today's study clearly does - that trade is just one factor among many that have created these conflicts.

It would be great news if trade policy could provide a simple solution to war, but it cannot.

So any action we take needs to support wider peace and development strategies…

… which is why I will be presenting my proposal with the support of Cathy Ashton…

...and why, I intend - with her help - to frame this initiative in the wider context of a comprehensive approach to break the link between conflict and raw materials.

Second, our action must support existing efforts to tackle the issue. I am very conscious that many European companies are already setting high due diligence standards for themselves as part of their corporate social responsibility agenda. Also, many must comply with reporting requirements on conflict minerals in their supply chains either because they are listed on US stock exchanges and are therefore subject to Dodd Frank Section 1502 or because they supply large US businesses who are.

You will agree with me that these significant efforts should be recognised, encouraged and even facilitated with an appropriate instrument. That is what I intend to do. I can therefore reassure you that we want to make sure that this European initiative builds on existing obligations and approaches, rather than coming into conflict with them.

That’s why I am also looking very closely at the OECD's Due Diligence Guidance, which provides a pre-existing “how-to” guide for companies wanting to make sure they are doing the right thing when sourcing their minerals from conflict regions.

Third, we need to follow the doctor's maxim: do no harm. We have to avoid creating incentives for companies to stop sourcing minerals from conflict regions altogether. This would have disastrous development consequences. Our approach must provide incentives for companies - to work with primary producers in conflict regions to provide guarantees that they are above board.

Fourth, we need a broad geographical scope. While it is true that the Great Lakes region remains the most terrifying example of the problem it is certainly not the only one, as we have seen with other examples in Latin America, and we cannot exclude other regions in future either. In fact, the Heidelberg Institute estimates that some 20% of global conflicts are linked to natural resources. So we need broad coverage if we want to be effective. Broad coverage will also help avoid the potential negative consequences I already mentioned. We should not stigmatise certain regions and risk shutting them out of global markets.

Fifth, we need a targeted approach. If we want to be effective we need to focus on where we can have most impact. And that means providing smelters - the narrowest point in the supply chain - with incentives to carry out due diligence on their upstream suppliers.

And finally, this kind of approach allows us plenty of room to take effective action without another unintended consequence - damaging the European economy at a time of instability. If we can do it in the right way, we avoid any risk to security of supply for the European Union, which is crucial given the importance of these minerals for a whole range of industries, from electronics to machinery to cars.

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Let me finish by talking about how this relates to you as companies. You will agree with me on one final point I think: nothing that the Commission proposes will be successful if it does not have public widespread support - and that includes businesses like yours.

That is why I was so pleased with the broad participation in the consultation we organised earlier in the year. We received 280 replies, three quarters of which were from business. What I found particularly encouraging was that over 80% of the respondents indicated that business is interested in responsible sourcing.

And that over 30% were already doing some due diligence either voluntarily or because they are required to.

So I think that on this point companies understand the moral questions at stake. You as much as any other are affected by the dilemma I outlined at the beginning. You need trade to survive but sometimes it brings you into contact with practices you would not justify for a moment at home.

This is why we need to work together over the coming months to put in place an effective but reasonable EU system to encourage responsible sourcing of minerals produced in conflict areas.