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Amanda knocks it out of the park again.

"Welcome to Crazy Bob's House of Tantalum! What can I do you for today?"
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kearth reynolds's profile photoDouglas Barnes's profile photo
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But... don't people pay more for "fair trade" coffee? Why?
Why do we believe that the disadvantaged folks working in the mines of a country with significant conflict financed by their own labor wouldn't be better if there was a complete embargo? Certainly they would be, if enslaved by the receiver of the proceeds... (eg N Korea, Myanmar etc)

I'm not confident in an answer either way on these questions... So the arguments don't help me make a decision.

In general, I don't like unnecessary legislation, but I also don't like opaque markets since they are unlikely to be efficient even (or especially) for commodities. I'm suspicious of some other form of market manipulation, we are surrounded by many that are decidedly worse (eg sugar duties and corn subsidies) and we can't even stop those.

Most efficient market hypotheses require transparency... But like most things the cost of regulation can exceed it's benefit... Depends on how it's done.
Tantalum insurance default swaps anyone?
I'll sell you a $1B worth for only $30M now :D

Off topic: it's also possible for windfall monopoly profits to exceed the cost of regulation, and for transparency to lead to effective collusion and higher prices so... not sure there's a definitive answer to efficiency or utility there either.
 
Several things about this situation seem fairly straightforward:
- if statements about fair trade coffee were enforced by the SEC, it would have a similar chilling effect
- if you have two types of mine -- one run by ruthless warlords and the other run by average joe business guys, it's clear which mine will be put out of business first by a de-facto embargo
- the policy was politically palatable because of the relative powerlessness of the mine owners, the availability of substitutes and a general lack of scarcity -- while the same (albeit still wrong) moral premise & logic would justify similar rules around oil, for some reason we don't see that happening
- the collapse of the legitimate mining market has hurt a great many innocent people -- working in a primitive mine may not seem like your idea of a great job, but it beats subsistence farming
- there is no coherent story about how the policy has had any positive impact whatsoever
 
So If someone sells something as "Fair Trade" coffee (I'm not even sure it's a well defined term), and it turns out that they're lying about it...then rules (c/w)ould be enforced against them by the FTC.... and I think that's OK.

(Note: I haven't noticed that either the FTC or the SEC has been effective in enforcing much of anything against a larger corporation... ever.)

On the other hand I'll give you that warlords may be affected by "the rule of law" less than their honest competitors. That gets back to having laws and not actually enforcing them... and hoping that "the market" or some faceless bureaucrat will somehow automate the process for law enforcement. That seems like a different and very persistent problem with most laws.

Would it be better to just have laws saying that if you re-sell products produced by slavery (or financing "terrorism") without labeling them a such, then you are liable for False Advertising since a reasonable consumer will commonly assume products are not produced in despicable and internationally illegal ways? It doesn't seem much different.

Now a supplier could argue that they didn't know that a product was produced in such a way, but there is a significant duty to know your suppliers (what if it was radioactively contaminated?).
 
+kearth reynolds Here are a couple of excellent additional posts from a blogger I follow from time to time, who is an expert on the DRC:
http://texasinafrica.blogspot.com/2011/08/drc-minerals-mess.html
http://texasinafrica.blogspot.com/2011/08/dodd-frank-catastrophe.html

To your specific points:

Companies spend an enormous amount of money complying with FTC and SEC regulations, and dealing with potential and actual investigations. It may not look like "results" from the outside, but companies will rationally over-correct to avoid even a chance of getting caught in the gears of those agencies.

As for the other parade of horribles (slavery, terrorism, etc.) you need to decide how much collateral damage you're willing to inflict to enforce such a policy, and balance it against the actual effect your policy has. I'm curious if you think the very marginal benefits of this particular law are worth the damage that Laura describes in her two posts.
 
The damning point is that the (corrupt) government of the DRC instituted their own mining ban (Sept. 2010 - March 2011) causing much of the disruption long before the Dodd-Frank provisions took effect... but that is glossed over in the NYT OpEd that is apparently the center of this.
http://www.minesandcommunities.org/article.php?a=10423
http://www.nytimes.com/2011/08/08/opinion/how-congress-devastated-congo.html

So are the same SEC fearing companies then going to refuse to purchase products from Chinese/Japanese companies that contain goods manufactured with minerals that come from DRC? Really? Or not, because once it's been manufactured it doesn't matter? It's all just an excuse... The primary use is Tantalum Capacitors, and I can't find an American manufacturer for them (all Japanese or Chinese). I'm kinda in that business.

Looks like an excuse for banks to bash the broader Dodd-Frank bill in some rather odd ways... (I would rather congress just brought back Glass–Steagall and put Phil Gramm and his friends up on spikes to remind people of the consequences of opaque markets and bad lending practices, but they're all owned by bankers so what's the use). Europe will detonate soon enough anyway on the back of CDS.

The article implese the Chinese are getting the commodity Ta at a significantly reduced price when there are no planes flying, and individuals are digging Coltan ore out of the ground with hand tools, but Congo accounts for 80% of the world supply? It's a commodity, doesn't that mean that there are many other starving people with hand tools digging similar holes that are now more busy? I don't really know enough about the business, but it certainly doesn't sound efficient to me (if it requires airplane transport to extract the ore and support the "mining"). Just what are the external costs? Do they matter? Why did many other commodities (like iron etc) also have a boom bust cycle over the last couple of years, when they aren't controlled by warlords and produced with hand shovels?

Re: The OpEd - What is being discussed is an "obscure section" of Frank-Dodd, but it's all caused by the "Obama Law"? WTF? This looks like a political scam on so many levels. It a game played by both sides against the middle. "John Prendergast is an "intelligence" agent causing poverty and disruption with the help of ENOUGH...??? Where does this come from.... oh the blog comments. I don't trust any of these sources. What else has David Aronson published?

I found this:
http://www.international-alert.org/resources/publications/complexity-resource-governance-context-state-fragility
Seems rational enough, but doesn't support the thesis very well.

And this:
The organization ENOUGH, has this to say, "On March 1, 2010, the Congolese government issued a traceability manual backed by several national stakeholders. This move puzzled many North Kivu civil society groups who questioned the need for new regulations, as opposed to the enforcement of existing laws. Some groups saw this as an implicit admission that the Congolese government was unwilling to enforce its own laws, and there was suspicion that the government would continue to fail to uphold its commitments."

Sounds a lot like what I was talking about before I even read on the subject... It doesn't matter what laws you have if you don't enforce them. They don't, we don't, and it's all just politics... global and local.
What a scam.
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