Blood diamonds and do-gooders

Tim Worstall on conflict minerals – good economics, bad politics.

Earlier this week, Global Witness, the organisation behind restrictions on blood diamonds, called for an EU law to restrict the use of conflict minerals. This would match a US law, called the Dodd-Frank Act, which requires companies to trace the origin of certain metals through their supply chain to ensure they don’t come from known conflict zones.

To be clear, conflict minerals are both horrible and, unfortunately, in most of our electronics. Few would defend them, but the call for a new law was immediately met by criticism. "There are times when the actions of do-gooders makes [sic] me want to kneel down and weep bitter tears of pain," exclaimed Tim Worstall in Forbes, who wrote a riposte to the call for the new law. This isn’t because Worstall supports conflict minerals – he doesn’t – but because he thinks that we can prevent conflict minerals from being used for 300-400 times less money. Fundamentally, this is a debate about how best to create supply chain transparency, an essential component of resource resilience.

In essence, Worstall’s solution is to regulate smelters rather than manufacturers. Because the mineral ores used to create metals have a unique "fingerprint", they can be tested prior to smelting to ensure the fingerprint doesn’t match that of mines from known conflict areas. As there are only around 500 smelters capable of processing the majority of conflict metals, it would only cost around $10m to set up a certification scheme. In contrast, supply chain transparency is expensive: the Dodd-Frank Act is expected to cost $3-4bn.

It’s a neat idea, and the economics certainly stack up. But the politics and policy don’t. Here’s why:

First, public concern matters. As "do-gooders" know, regulation creates the risk of buck-passing. At worst, it invites unethical consumer companies to accept tick box certification and look the other way when this proves meaningless. This disadvantages ethical companies and doesn’t chime with public opinion about the responsibility companies should bear for their supply chains: when the issue of suicides at Foxconn or sweatshop labour arose, the response wasn’t to call for regulation of manufacturing facilities in China or elsewhere, but to put pressure on Apple and western clothing brands. A regulator’s job is infinitely easier when they know that a company breaching regulations will face consumer backlash. The activities of smelters are effectively invisible to the public.

Second, the location of the smelters matters. As Worstall admits, the vast majority are outside the EU and, therefore, outside the jurisdiction of European regulators. Because it’s economically advantageous to smelt conflict minerals, there’s a strong incentive for fraud. We have a readymade example of what this might look like: in Shetland, a fish processor fraudulently avoided EU fishing quotas by using a "secret specially-built underground pipeline which allowed illegally-landed fish to be pumped into the factory from fishing boats, undetected by regulators." If we have difficulty policing illegal fish processing in the UK, it’s hard to believe that EU protestations will affect non-EU smelters. In contrast, business relationships span regulatory boundaries. It makes sense to regulate at the consumption end.

Tim Worstall suggests that we should adopt "the vastly cheaper way that the industry is already addressing the problem." What he doesn’t say is that this programme doesn’t "require members or their supply chains to purchase from the compliant smelter list." This isn’t a conspiracy to promote conflict minerals. Instead, it stems from the fact that smelters are invisible and without public pressure, it’s easier and cheaper to not have to reconfigure sourcing and supply chain relationships. The inability of voluntary regimes to deliver sustainable outcomes across a whole host of globalised supply chains is feeding a wider change in consumer preferences. As one of the company members of the Circular Economy Task Force said, "Five years ago, our customers where asking for recycled content in packaging. Today, they’re asking about the origin of the materials in our products."

Supply chain traceability may not be cheap, but it’s increasingly a condition for good business. Global Witness could bolster its campaign by pointing to the upside of traceability: businesses that understand their supply chains can foresee resource constraints. There’s already evidence that mining companies which report their water use across their supply chains outperform those which don’t. Indeed, much of the economic opportunity in the circular economy lies in better connections across supply chains. Rather than trying just to minimise costs, we should be designing regulation with an eye to the opportunities of more visible supply chains.

Photograph: Getty Images

Dustin Benton is a senior policy adviser at Green Alliance, leading the Resource Stewardship theme.

Getty
Show Hide image

The 11 things we know after the Brexit plan debate

Labour may just have fallen into a trap. 

On Wednesday, both Labour and Tory MPs filed out of the Commons together to back a motion calling on the Prime Minister to commit to publish the government’s Brexit plan before Article 50 is triggered in March 2017. 

The motion was proposed by Labour, but the government agreed to back it after inserting its own amendment calling on MPs to “respect the wishes of the United Kingdom” and adhere to the original timetable. 

With questions on everything from the customs union to the Northern Irish border, it is clear that the Brexit minister David Davis will have a busy Christmas. Meanwhile, his declared intention to stay schtum about the meat of Brexit negotiations for now means the nation has been hanging off every titbit of news, including a snapped memo reading “have cake and eat it”. 

So, with confusion abounding, here is what we know from the Brexit plan debate: 

1. The government will set out a Brexit plan before triggering Article 50

The Brexit minister David Davis said that Parliament will get to hear the government’s “strategic plans” ahead of triggering Article 50, but that this will not include anything that will “jeopardise our negotiating position”. 

While this is something of a victory for the Remain MPs and the Opposition, the devil is in the detail. For example, this could still mean anything from a white paper to a brief description released days before the March deadline.

2. Parliament will get a say on converting EU law into UK law

Davis repeated that the Great Repeal Bill, which scraps the European Communities Act 1972, will be presented to the Commons during the two-year period following Article 50.

He said: “After that there will be a series of consequential legislative measures, some primary, some secondary, and on every measure the House will have a vote and say.”

In other words, MPs will get to debate how existing EU law is converted to UK law. But, crucially, that isn’t the same as getting to debate the trade negotiations. And the crucial trade-off between access to the single market versus freedom of movement is likely to be decided there. 

3. Parliament is almost sure to get a final vote on the Brexit deal

The European Parliament is expected to vote on the final Brexit deal, which means the government accepts it also needs parliamentary approval. Davis said: “It is inconceivable to me that if the European Parliament has a vote, this House does not.”

Davis also pledged to keep MPs as well-informed as MEPs will be.

However, as shadow Brexit secretary Keir Starmer pointed out to The New Statesman, this could still leave MPs facing the choice of passing a Brexit deal they disagree with or plunging into a post-EU abyss. 

4. The government still plans to trigger Article 50 in March

With German and French elections planned for 2017, Labour MP Geraint Davies asked if there was any point triggering Article 50 before the autumn. 

But Davis said there were 15 elections scheduled during the negotiation process, so such kind of delay was “simply not possible”. 

5. Themed debates are a clue to Brexit priorities

One way to get a measure of the government’s priorities is the themed debates it is holding on various areas covered by EU law, including two already held on workers’ rights and transport.  

Davis mentioned themed debates as a key way his department would be held to account. 

It's not exactly disclosure, but it is one step better than relying on a camera man papping advisers as they walk into No.10 with their notes on show. 

6. The immigration policy is likely to focus on unskilled migrants

At the Tory party conference, Theresa May hinted at a draconian immigration policy that had little time for “citizens of the world”, while Davis said the “clear message” from the Brexit vote was “control immigration”.

He struck a softer tone in the debate, saying: “Free movement of people cannot continue as it is now, but this will not mean pulling up the drawbridge.”

The government would try to win “the global battle for talent”, he added. If the government intends to stick to its migration target and, as this suggests, will keep the criteria for skilled immigrants flexible, the main target for a clampdown is clearly unskilled labour.  

7. The government is still trying to stay in the customs union

Pressed about the customs union by Anna Soubry, the outspoken Tory backbencher, Davis said the government is looking at “several options”. This includes Norway, which is in the single market but not the customs union, and Switzerland, which is in neither but has a customs agreement. 

(For what it's worth, the EU describes this as "a series of bilateral agreements where Switzerland has agreed to take on certain aspects of EU legislation in exchange for accessing the EU's single market". It also notes that Swiss exports to the EU are focused on a few sectors, like chemicals, machinery and, yes, watches.)

8. The government wants the status quo on security

Davis said that on security and law enforcement “our aim is to preserve the current relationship as best we can”. 

He said there is a “clear mutual interest in continued co-operation” and signalled a willingness for the UK to pitch in to ensure Europe is secure across borders. 

One of the big tests for this commitment will be if the government opts into Europol legislation which comes into force next year.

9. The Chancellor is wooing industries

Robin Walker, the under-secretary for Brexit, said Philip Hammond and Brexit ministers were meeting organisations in the City, and had also met representatives from the aerospace, energy, farming, chemicals, car manufacturing and tourism industries. 

However, Labour has already attacked the government for playing favourites with its secretive Nissan deal. Brexit ministers have a fine line to walk between diplomacy and what looks like a bribe. 

10. Devolved administrations are causing trouble

A meeting with leaders of Scotland, Wales and Northern Ireland ended badly, with the First Minister of Scotland Nicola Sturgeon publicly declaring it “deeply frustrating”. The Scottish government has since ramped up its attempts to block Brexit in the courts. 

Walker took a more conciliatory tone, saying that the PM was “committed to full engagement with the devolved administrations” and said he undertook the task of “listening to the concerns” of their representatives. 

11. Remain MPs may have just voted for a trap

Those MPs backing Remain were divided on whether to back the debate with the government’s amendment, with the Green co-leader Caroline Lucas calling it “the Tories’ trap”.

She argued that it meant signing up to invoking Article 50 by March, and imposing a “tight timetable” and “arbitrary deadline”, all for a vaguely-worded Brexit plan. In the end, Lucas was one of the Remainers who voted against the motion, along with the SNP. 

George agrees – you can read his analysis of the Brexit trap here

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.