Tony P. Hall-Testimony Before the Trade Subcommittee

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Statement of the Honorable Tony P. Hall, M.C., Ohio

Testimony Before the Subcommittee on Trade

of the House Committee on Ways and Means

Hearing on Trade in African Diamonds

September 13, 2000

Mr. Chairman, Mr. Levin, and Members of the Subcommittee: I appreciate your focus today, and the opportunity to testify to you.

My focus is on the human cost of the trade in conflict diamonds. I have seen it in Angola, in Liberia, and in the DRC – but it has never been clearer or sadder than in Sierra Leone, where Congressman Wolf and I traveled last December.

Frank Wolf speaks eloquently about the people who lost their arms, and ears, and lives to machetes wielded by rebels trying to overthrow this small country’s democratic government, so I’ll let him tell that story. And Cynthia McKinney can tell you what she and other members of the International Relations Committee are trying to do to stop the diamond wars and repair the damage they have caused.

What I want to focus on is the role diamonds play in butchery of people whose nations are blessed with a resource that has become a grotesque curse.

Industry and People

1999 was a very good year for the diamond industry. DeBeers, the monopoly which controls 65% of the market, posted profits nearly 90% higher than in 1998. Lazare-Kaplan, the largest American player in the industry, earned nearly 40% more.

As a rule, 30% of these profits come from conflict diamonds (even though these stones make up between 5 and 15% of the total supply) because they tend to be large and disproportionately valuable stones. In Sierra Leone, diamonds average two carats in size.

1999 was an unspeakably bad year for the people of Sierra Leone, and little better for many in Angola and the Democratic Republic of Congo. The billion-plus dollars brought in by these countries’ diamonds last year was used to buy the machetés that severed their limbs, and the weapons that have turned rag-tag gangs into serious military forces their neighbors and international troops will reckon with for years to come.

The year 2000 hasn’t changed the equation much – except in Sierra Leone. Now UN peacekeepers, whose deployment is costing $1.5 million per day, have joined on the misery side of the equation. In May, 500 were kidnapped and held for weeks. Today, 13,000 are virtually holed up in fortified areas – unable to open the country’s main road, much less protect civilians. The force’s commander blames diamond profiteering both for rebels’ broken promise to disarm, and for in-fighting that has paralyzed his peacekeepers.

Incentives All Wrong

Unfortunately, until very recently, the diamond industry hasn’t considered any of this to be its problem. For most manufacturers, war threatens their workers and factories. For oil companies, war jeopardizes their pipelines and equipment. For the diamond industry, though, the economic incentives are backwards. War favors traders who can deliver weapons and supplies , and war increases the supply of diamonds available. In recent years, war has been great for the diamond business.

The niceties of international law haven’t been much of a deterrent to the diamond industry’s participation in these wars either. For eight years, traders dealt gladly with rebels who tried to overthrow Sierra Leone’s elected government, and briefly succeeded.

The business partners of a generally respectable industry there were rebels who used the profits from their trade to turn children into their parents’ murderers, and then into soldiers and sex slaves. . . rebels who spent their earnings on drugs to make their young fighters fearless, and to buy the weapons that make this one of history’s uniquely brutal wars on civilians. Traders reported these as Liberian diamonds – six million carats a year worth, when they knew full well that Liberian mines can produce just 2% of that.

There are similar stories in the Congo and in Angola, whose people are now beginning to starve and whose land has been turned into a minefield. In Angola, DeBeers bragged in a recent annual report about its prowess in being profitable enough to buy enough rebel diamonds to keep prices from collapsing.

Consumer Opinion

So economic and legal incentives for peace failed. For most businesses, a third factor often is reason enough to do the right thing: customer opinion. The diamond industry would seem to be particularly sensitive to any link between its product and savage wars that might stain its glittering image.

Industrial diamonds (most of which are man-made) have a real value — but diamond gemstones’ worth is in what they symbolize: love and commitment. This image was created and is sustained by an advertising campaign worth hundreds of millions of dollars a year. . . but it is only an image. Fur, another luxury product with an image problem, does keep you warm. Diamonds have no intrinsic value: their worth depends wholly on consumer sentiment.

American consumers – who buy two-thirds of all the world’s diamonds – have a very different understanding of diamonds than Sierra Leonean, or Angolan, or Congolese people. And with the increase in media focus on the horrors of the diamond wars, reality is almost certain to reveal these conflicting views.

As the situation now stands, though, there isn’t much American consumers can do to cut off their support for the diamond wars. Most diamonds are mined in South Africa, Botswana, and other countries that — aided by a geological quirk of nature that makes it easier to control their diamonds — have used these resources for their people’s benefit. And most diamonds are cut in India, a poor country with a long history of democracy, or Israel – two more places we would be loathe to hurt.

The people of these countries should not have to pay for the diamond industry’s greed, its arrogance, or its refusal to follow accepted norms of responsible behavior. But in fact, they probably will be the ones who will get burned once any spark ignites this tinderbox.

Whether Congress likes it or not, American consumers simply will not be a party to this blood trade once the Benetton ads showing diamond bracelets on Sierra Leone amputees start to run. That is the challenge we face. That – and not the industry-backed Antwerp plan, or other approaches – is the real threat. Just ask the fur industry.

Industry Response

I was encouraged to see the diamond industry finally do something to end its assistance to this blood trade two months ago. Last year, when I came up with a more traditional approach – giving consumers information to make their own decisions – I urged the industry to either support my approach or counter with something better. I had hoped to introduce legislation implementing their counterproposal, but the industry has not yet finalized its approach.

The CARAT Act

To encourage this process, I have joined Mr. Wolf and Ms. McKinney in introducing the CARAT Act, HR 5147. With your permission, I’m going to talk about it a little out of order.

Title III

Title III expresses the Sense of the Congress that our government should do all it can to implement the industry’s Antwerp proposal, or something like it. I believe it is critical that Congress weigh in on this early, because key countries and segments of the industry are dragging their feet. The United States is the largest market for diamonds; we have a moral obligation to speak out, and what we say will make a difference.

It is my understanding that some Members of this Subcommittee question the wisdom of this approach, and have particular concerns about its compliance with the WTO. I have a few qualms of my own, but I’ve been persuaded that – until technology advances – we need the industry’s cooperation to make any system work. This is what the industry’s leaders have agreed to; unless we have a better idea, I think we should support it.

Title II

Title II aims to add some encouragement to the Antwerp process, by requiring diamonds’ origin be certified as soon as that is technologically feasible and cost-effective. It permits the Treasury Secretary to waive this if the system Title III envisions is up and running.

I know the industry doesn’t like Title II; I hope that including it will motivate them to be sure it’s never needed. I also hope it will spur technologies that will let us determine the origin of a cut diamond because I sincerely believe that consumers have the right to know that. We know where our cars are from, and the parts in them; we know where are clothes and our cheese were made. Why can’t we know where a diamond, which represents a significant investment of money, was mined?

Title IV

Title IV requires the Administration to work more coherently on this problem. Under Ambassador Halperin’s leadership, more attention has been paid to it, and Ambassador Holbrooke’s focus probably has added momentum to this work. But, as your Subcommittee has learned, Mr. Chairman, there is apparently not the sustained commitment from senior Administration officials this issue merits.

And much more effort is needed: over the past decade, our government has sent more than $3 billion in humanitarian aid to Angola, Liberia, the DRC, and Sierra Leone. Over the same period, $10 billion in diamonds was smuggled out of these countries, turned into weapons, and turned against their suffering civilians.

As long as any criminal can capture diamond mines that generate that kind of money, we will be stuck in this vicious cycle. It is above all a human crisis; but it is a diplomatic and a financial one as well, and the Administration’s attention needs to be sustained.

Title I

Finally, Title I implements two United Nations embargoes, on Sierra Leone and Angolan rebels’ diamonds, and expands them to countries involved in the transshipment of diamonds banned by the United Nations. Congressman Wolf has taken the lead on this provision, so I’ll let him explain it fully.

Because the United States imports very few rough diamonds, Title I’s embargoes will only become as tough as they sound when the either Title II, or the system Title III encourages, is implemented. But we have an obligation as members of the United Nations to enact legislation to enforce these UN embargoes; doing so in the context of a system for targeting the roots of this problem signals our seriousness. And since more than ample waivers are included, this provision can remain current and fair.

Congress Needs to Act

The CARAT Act does not bind the legitimate diamond industry, but it does send a strong message that is urgently needed. Hopefully, it also will spur the technology needed to empower consumers if the industry fails to control this blood trade.

I am pleased this bill has won the support of the NGO community. I will look to the industry to demonstrate its sincerity by helping me to win your support for it. And I urge this Committee to mark it up in time for a vote by the House and Senate before we leave town. Time is short, but this is an unusual opportunity to make a difference. The media spotlight is on this problem; and human rights activists and the legitimate industry are on the same side – for now. We won’t have this happy situation if we wait.

NGO Response

Which brings me to the human rights community. Several months ago, more than 70 respected American organizations – led by Physicians for Human Rights – formed a coalition to press the industry to address the problem of conflict diamonds. I was not surprised to see activists’ enthusiasm for this work: this would make great TV, and it is one of the few straightforward ways to connect American consumers to a problem in Africa.

I am pleased to see that activists are proceeding in a responsible manner, though, and working out of the limelight for a lasting solution. Launching a boycott of diamonds would be the easiest thing in the world to do on this issue; this coalition has not done that. Instead, they are waiting to see whether the diamond industry will implement its ambitious proposal – which it promised to have in place later this month.

I don’t expect the coalition to wait forever, though. Christmas is coming, and with it a golden opportunity to educate consumers about where the money they spend on tokens of love goes. Before then, two networks are planning exposés of conflict diamonds that will be seen by tens of millions of Americans. It will be increasingly difficult for these thoughtful but powerful organizations to continue to wait for industry and Congressional action.

Congressional Response

I appreciate that time for the 106th Congress to act is short; that is why I tried to make the CARAT Act as flexible as possible. If the industry fulfills its promise to devise a workable system, there will be time next year to come back to debate how to implement that without running afoul of the WTO or prudence.

But this Committee and this Congress need to do something before we go home next month.

I do not want to face constituents who’ve just seen 20/20 or 60 Minutes if we haven’t done something. I do not want to face my local jewelers, who may be trying to explain the human rights activists’ pickets to their customers, with the excuse that we need to study the problem a little more.

And I do not want to tell taxpayers that we would rather spend billions of dollars to treat the symptoms of the diamond wars, rather than try to get to the root of the problem.

Thank you for your time, Mr. Chairman, and for your Committee’s work on this issue. I particularly appreciate the efforts Savitri Singh has devoted to this matter, and want to commend you for her diligence.

I would be happy to answer any questions.

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