Trump and the Extractive Industries

By Guillermo Otano, Conflict-Free Technology Campaign, ALBOAN Foundation

The extractive industries have traditionally been one of the least transparent sectors in today’s globalized economy, already opaque for the average person. Extractive industries include businesses and operations engaged in “the exploration, extraction, sale, processing and other significant activities relating to oil, natural gas or minerals”. Many of the companies that specialize in these activities are multinational organizations, that is, their business transcends borders. They may have a parent company in the United States, England or Canada while operating (directly or indirectly through a subcontractor) in third countries.

However, a country that has abundant reserves of these raw materials constitutes a powerful incentive for the corruption by elites or violence by armed groups, who can earn enormous fortunes dealing in these resources. Thus, the revenue earned through the sale of these materials is destined for other countries or lost along the way, while local communities are left only with the damages of environmental pollution, the threat of forced displacement or the silence imposed by targeted assassinations and repression.

Back in 2010, two years after the financial crisis hit, forcing the US government to use taxpayer money to bail out the banks, then President Obama approved the Wall Street Reform Act, also known as the Dodd-Frank Act. Its purpose was to protect consumers from financial industry abuse by providing tighter regulations and promoting corporate transparency.

The moment ripe for correcting market dysfunctions and fighting against lacks of transparency, lawmakers also took advantage of the Dodd-Frank Act to introduce two clauses that directly affect the extractive industries. Section 1504, which obliges the US gas, oil, and mining industries to publically disclose the payments made to foreign governments for access to these resources. And Section 1502, which requires companies that use four specific minerals (tin, tantalum, tungsten, and gold, also known as 3TG and in high demand by the electronics industries) to investigate and take action if these resources come from conflict zones in the Democratic Republic of the Congo and nine adjoining countries.

Despite their shortcomings, both regulations marked a major step forward on a global level. Not only did they make the OECD recommendations on due diligence legally binding, thus contributing to the legislative development of the UN principles on business and human rights; their implementation also made it possible to better understand how the global supply chains of these industries operate, providing important information in terms of both the fight against corruption and consumer awareness. As a result, the two sections have inspired similar laws in other countries.

However, the new Trump administration, in its pursuit of lost greatness, has decided to end this particular Obama legacy and is doing so in record time. Trump promised to repeal the entire law during his campaign, but doubts about whether he would be able to keep that promise or not became clear when he appointed Rex Tillerson, former executive director of oil company ExxonMobil and a vocal opponent of Dodd-Frank, as Secretary of State. The message to the extractive industries was clear: the days of wine and roses are back, let the party begin!

In less than fifteen days, the United States Congress has already overturned Section 1504, regarding transparency of payments to foreign governments, and Trump himself has signed an executive order to do the same with 1502, which affects the supply of “conflict materials” from the African Great Lakes.

Section 1502 was already attacked during its implementation by lobbyists from the affected industries, who tried to repeal the regulation before the Supreme Court by claiming that the obligation to disclose whether or not their products contain “conflict minerals” violated the First Amendment (that is, their freedom of speech, or rather, freedom to “not publicly state how I do my business”). If that argument seemed far-fetched, the one used now by the Trump administration can be directly categorized as a lie fabricated on random data and the exaggerated interest in the costs of implementing the regulation.

It is much easier to understand the resistance to this legislation from the words spoken by Obama shortly before he approved the Act. “The only ones who should fear the kind of supervision and transparency that we propose are those whose conduct would not pass this scrutiny”, he said. These are the same people, I’m afraid, who are now in charge.

Thus, while the United States seems intent on taking steps backward, the European Union has a unique opportunity to regain leadership in this type of legislation. Last May 17th, the EU approved a regulation on the responsible supply of “conflict minerals” which came into force after June 8^th 2017. Even though it establishes a transitional period of three years to let companies and Member States become familiar with their obligations, something that was sharply criticized by the European NGOs that have followed the process, there is no time to waste. It will be important to follow its implementation closely in the medium term.

Because if we do not demand transparency and supervision of the companies that trade in natural resources, money flows will continue to lack transparency, the elites of developing countries will continue to be corrupted and human rights violations will continue to go unpunished. At ALBOAN’s Conflict-Free Technology Campaign, we want to create a citizenship that deals critically with these issues, ready to help those who suffer the violence of conflict-affected mining activities and to fight on their behalf by demanding that our authorities regulate the supply chains of these minerals.

 

The first version of this article was published by El País on March 14^th, 2017; click the link for the Spanish version: http://elpais.com/elpais/2017/03/10/planeta_futuro/1489161724_873110.html