Periodic Reporting for period 2 - GLONEXACO (The Global-Local Nexus of Armed Conflicts: The interlinkages between resource-fuelled armed conflicts and the EU’s raw materials supply)
Reporting period: 2017-08-01 to 2018-07-31
These illegally extracted natural resources are often exported to the international markets and enter the supply chain of industry actors all over the world. The political, social and environmental implications of this commerce make it imperative for the EU to look for ways to curtail this illicit trade. Besides these dimensions, there is also an economic element to this issue. As stipulated in the Horizon 2020 Programme, the EU’s industrial base faces the challenges of a high dependence of natural resources imports and often insecure supply lines. This project responds to this situation by developing an analytical framework for natural resource-fuelled conflicts that helps creating policies that curtail the trade in these commodities, without harming the EU’s competitive position by excessive and ineffective regulation.
On the global level, a so-called foreign accountability norm for natural resources has emerged, which can be defined as “the fact or condition of companies being legally required to disclosure information that allows holding them accountable for socially and/or environmentally harmful practices regarding natural extraction in their supply chain abroad”. The EU and the United States have adopted policies to comply with this norm. This norm is, however, not without criticism. While often hailed by western NGOs and states as an answer to the “Global Governance Gap”, many non-western states perceive the foreign accountability norm as a possible infringement of their natural resource sovereignty. Furthermore, there exists the fear that such policies will give states with more “market power” additional dominance over resource-export driven economies through the establishment of unilateral standards.
The European Union (EU) has embraced this norm and supports supply chain due diligence measures to trace the origin of some natural resources. These policies are also a response to enforcement problems of most existing multilateral and unilateral sanction regimes because of state weakness in the targeted regions. This approach results from the broader idea from the EU that transparency can improve resource governance and, therefore, safeguard both its political and economic interests in conflict zones, such as the eastern Democratic Republic of the Congo. However, when the issue becomes specific—as in the 2017 EU Conflict Minerals Regulation—translating this idea into concrete policies became more contentious as the different EU Institutions set different priorities for the final policy design. Economic interests of business groups and member states can influence the practical implementation of this norm.
These policies against so-called conflict resources are part of conflict management policies. Analyzing their local impact, however, some unexpected and undesired effects can sometimes be observed. Instead of decreasing violence between armed groups and against civilians, these policies can increase it. The reason is that they may be effective in cutting the funding of these violent groups, but the consequence is that they look for alternative sources of income. This can lead to violent confrontations for other pieces of territory that has become more valuable. At the same time, some armed groups turn to quick money and start to plunder from the civilian population.
The second main research question was to what extent the microdynamics of armed conflicts influence the global trade in natural resources. Most studies indicate that this effect is only limited. Whereas they may be an important source of income for armed groups, these resources are usually only a very small part of the global trade. A simple reason is that it is usually difficult to establish/maintain industrial extractive facilities under these conditions. As a result, the production capacity declines soon and buyers turn quickly to more stable production sites.
The third, and overarching, question of GLONEXACO was how the EU can influence these two dynamics to curtail the trade in natural resources that finance armed conflicts, without harming its competitive position. I will discuss the answer in the next section as it has also broader socio-economic implications.
If the aim of the restrictive measures is to constrain certain behavior, or coerce actors into something it is important to keep in mind that even if natural resources play a relevant role in the conflict dynamics, there are usually only one variable out of many to take into account. Turning this one screw can therefore contribute to achieving the aspired objectives, but only if these policies are part of a comprehensive approach to a conflict. If the objective is to signal a message, the effectiveness of the policy measures may be less relevant. However, in these cases the efficiency and impact is crucial. To spend billions of Euros to just send a message may be not the most efficient policy approach. To put the livelihood of the civil population in affected regions in peril for the sake of European ‘actorness’ is also morally questionable. In other words, in such cases, doing nothing with regards to conflict resources can be better than worsening the situation.
No policy is without flaws, but the findings of GLONEXACO suggest that it is recommendable to refrain from too complicated mandatory supply chain due diligence systems, but rather opt for voluntary systems with strictly established guidelines. These guidelines should not be limited to the conflict-free nature of commodities, but take a more holistic approach that also including other social and environmental criteria. By combining all these criteria in one certificate, the costs for producers can be lowered. To stimulate the use of this certificate, the EU and other European institutions should make them mandatory for public tenders. In the EU, the public sector spends around 50 percent of the GDP, and its consumption decisions have therefore a profound impact on producer behavior.