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Non-conflict Solutions

Jul 7, 2000 9:40 AM   By Martin Rapaport
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By Martin Rapaport

The issue of conflict diamonds is rapidly gaining momentum as a primary concern of the United Nations (UN), international government agencies, the diamond trade and nongovernment organizations (NGO’s). Interest in the role diamonds play as a source of funding for conflict in Africa has expanded beyond the initial group of NGO’s, trade groups and government officials. International press coverage is expanding as evidenced by the lead article in this week’s Newsweek magazine. It is reasonable to expect that the media will continue to publicize the issue in the future and significantly increase public awareness of the problem. The issue of conflict diamonds has taken on a life of its own and is well beyond the control of any one group of concerned parties. The diamond industry is well advised to prepare for unprecedented media attention on this matter.

Initial development of the conflict diamond issue focused on increasing trade awareness of the problem and gathering experts to discuss the issue. To its credit the diamond trade has taken a responsible and proactive role. Diamond trade organizations have fully cooperated with NGO’s and government. They have also publicly issued directives and resolutions that forbid members of the diamond trade from dealing in conflict diamonds. So far this has resulted in the adoption of responsible attitudes by NGO’s and minimal damage from negative publicity.

While holding conferences to discuss the issues and develop consensus regarding conflict diamonds is of great importance, we must recognize that mere talk will not resolve this issue. The serious challenge now facing the diamond industry, governments and NGO’s is to move beyond the talking phase and come up with reasonable and practical solutions to the problem. Now that everybody has woken up to the fact that conflict diamonds are a serious problem it is high time that we did something about it.

The dynamics of the situation are such that NGO’s and the concerned public they represent are likely to increase their demands on the diamond industry for action. Jewelers can expect letters from NGO’s requesting information on their policy regarding conflict diamonds. Consumers are going to ask jewelers, "What are you doing about the problem?" As media coverage increases, responses such as "we are talking about the problem," are not going to be sufficient. In the near future, certainly by the holiday season, NGO’s and the public are going to want to know what specific actions the diamond trade is taking.

Frankly, the only way to stay on top of this problem is by staying ahead of it. For a limited period of time — before the mass media fully publicizes the issue and the holiday season begins — the diamond trade has a window of opportunity to implement specific actions that address the problem. Fortunately, the meetings of the World Diamond Congress (WDC) in Antwerp this month provide an excellent opportunity for the diamond trade to take action.

Solutions

The problem of conflict diamonds first came to the attention of the World Diamond Congress at the president meetings in Moscow in July 1999. While the WDC issued clear resolutions calling on its members not to trade in conflict diamonds there was a sense that there was relatively little the diamond trade could do to resolve the situation. The primary problem was that conflict diamonds are indistinguishable from non-conflict diamonds and there was no way the trade could control their flow. The attitude was, "We want to help, but what can we do?"

Fortunately, over the past year new ideas have been generated. There are now unilateral actions that the diamond trade can take that will help alleviate the problem of conflict diamonds. Furthermore, if the diamond industry, government and NGO’s work together we can effectively solve the problem of conflict diamonds through the implementation of controls over the flow of rough diamonds. This would ensure conflict diamonds do not enter the diamond distribution system. We must recognize the fact that we can solve the problem and act on it.

From the perspective of the diamond trade, the fundamental solution to the problem of conflict diamonds breaks down to a two-step process. One: Identification of conflict diamonds; two: Control the flow of diamonds so that conflict diamonds do not enter the legitimate diamond distribution stream. It all boils down to identification and control.

Identification. Since the diamond industry cannot identify conflict diamonds directly (i.e. they are smuggled and look like non-conflict diamonds) the solution is to the identify non-conflict diamonds. In other words ensure that only non-conflict diamonds enter the diamond distribution system and thereby by default you will be excluding conflict diamonds. The way to do this is by having all countries (i.e., governments) that export legitimate rough diamonds seal them in tamper proof containers and register the shipment with carat weight and value in an international diamond database. This process is explained in much greater detail in last month’s article "Rough Controls" available at www.diamonds.net/conflict.

Control. Simply have customs officials control the exports and import of all rough diamonds by making sure that every shipment is sealed and registered in the international diamond database. If it is not in the database the country can’t import it.

The basic problem with the identification and control solution is that the diamond industry cannot implement this solution by itself. The only way it can work is if government customs inspectors enforce controls over the export and import of rough diamonds. Simply put, the diamond industry does not have the legal power to control rough diamond exports and imports. Only governments can do this.

The key to resolving the conflict diamond situation is for NGO’s, governments and the diamond trade to recognize that they are not in conflict with each other regarding the issue of conflict diamonds. A "non-conflict solution" implies that there is no conflict between the trade, NGO’s and governments. We must all recognize that we do not have an adversarial position with each other. We all desperately want to solve the problem and the only way to solve the problem is by working together.

International Regulations

From a practical perspective two things need to be done by government. One: The United Nations Security Council must issue a resolution requiring all governments to control the export and import of all rough diamonds as outlined above. Two: Governments of consuming nations, such as the United States, must pass laws requiring that commercial quantities of polished diamonds may only be imported from countries that have implemented rough controls.

Now while we will discuss and support other helpful things that the diamond industry can and should do on a unilateral basis, we must emphasize that the only way to really solve the problem of conflict diamonds is by steps one and two above. Fundamentally, we either control the flow of rough diamonds or we don’t. We either solve the basic problem of conflict diamonds or we don’t. Simply put, we either do it or lose it.

In the view of this writer, the diamond industry, NGO’s and governments must do everything they can to lobby the Security Council to pass a resolution requiring rough diamond controls. Implementing international regulations through the World Trade Organizations and/or treaties should also be done, but this can take several years — time that we do not have. We must recognize the fact that the only way to effect rough controls in the short term is through a UN resolution and/or legislation requiring such controls by the U.S. and other consuming nations.

It is important for government, trade and NGO’s to understand that the fundamental solution to the problem of conflict diamonds lies with governments legislating international controls. The diamond industry simply cannot solve this problem by itself.

Unilateral Actions by the Trade

The diamond trade must recognize that they cannot take the position that since the solution requires government legislation they can adopt a laid-back position. On the contrary, adverse publicity has the potential to ruin our legitimate business. Furthermore and more importantly, we have a moral obligation to do everything in our power to restrict the flow of conflict diamonds independent of what governments do.

The trade through the WDC can and should adopt resolutions that one, expel any member that knowingly deals in conflict diamonds; two, require all members to sign a positive affirmation that they do not knowingly deal in conflict diamonds; three, require all members that buy rough diamonds from non-members to refrain from buying diamonds whose origin is not known and documented, and to require such buyers to issue an affirmative statement indicating the diamonds are non-conflict on all invoices for the sale of such goods. And fourth, establish an international directory of members, so that the retail trade can identify members as legitimate sources of non-conflict diamonds.

Recommendations

We recommend that the WDC adopt a resolution along the following lines.

The WDC calls on all governments and NGO’s to support the following system of controls for the international trade of rough diamonds.

1. All countries that export rough diamonds shall have an official government agency that registers export shipments in an international diamond database (IDD). The data shall include a unique country export registration number; the number of carats; the number of stones greater than two carats; the value and date of shipment. Furthermore, the diamonds are to be sealed in an officially sealed tamperproof container which will include an officially signed document that contains all the information entered into the international diamond database.

2. All countries that import rough diamonds shall have an official government agency in charge of controlling rough diamond imports. No rough diamonds are to be imported unless they are in a sealed tamperproof container from the country of export and the export shipment information in the international diamond database matches the enclosed official documentation. The importing country will enter date and country of importation in the international diamond database.

3. There shall be established an International Diamond Authority which shall include government, trade and NGO representatives. Such an authority will monitor the system of rough controls, audit countries importing and exporting rough diamonds, control access to the international diamond database, and have the authority to authorize or deny rough export privileges to any country.

4. All countries that import commercial quantities of polished diamonds shall do so only from countries that have implemented the above system of rough controls.

We also recommend additional WDC resolutions governing rough trading by members of the WDC organizations as presented above.

Retailers

Most of our discussion regarding conflict diamonds has dealt with a system of rough controls and other matters that pertain to the diamond trading markets. Our emphasis so far has been on providing and implementing solutions to the problem and therefore they have focused on matters that are not normally the direct concern of retailers.

Furthermore, there has been very little that retailers can do to solve the problems that originate with rough diamonds in Africa.

Undoubtedly, many of our retailer readers are wondering why we have devoted so much attention to this issue and what it means to them. We strongly encourage retailers to know everything they can about this subject because even though they are not well positioned to solve the problem, should things not work out on implementing rough controls the brunt of the problem will fall on retailers. Consumers will not be asking rough dealers where their diamonds come from — they will be confronting retailers. While retailers cannot solve the problem, they are very much on the front line of this issue.

Clearly, retailers are facing a potentially difficult public relations problem of the greatest magnitude. While media attention about the problem has been rather limited over the past year, we can expect much more coverage in the months ahead. It appears increasingly likely that by this holiday season NGO’s and some consumers will be asking retailers about conflict diamonds and they are going to be expected to have answers. Retailers are going to have to train their sales staff on how to deal with this issue and take some actions to ensure that they are reasonably certain the diamonds they are selling are non-conflict.

We strongly support the initiative taken by Jewelers of America (JA) which has prepared important information for its members. The information includes a sample press release with a public statement about the "African Diamond Controversy." This press release can be used by jewelers to explain their position to the local media. There are also guidelines on how to talk to consumers about this issue. Finally, there is a sample agreement that jewelers can have their diamond suppliers sign. This agreement assures the retailer and the retailers’ customers that reasonable measures have been taken to ensure that diamonds being sold by the retailer are conflict free. Indeed, these are the kind of things retailer can and should do to prepare themselves in the event they are confronted over the issue. Forewarned is forearmed.

We encourage jewelers to talk to their diamond suppliers about conflict diamonds and to find out what they are doing about the problem. At this stage there may not be that much they can do, but undoubtedly they will pass your concerns upward through the distribution channel.

It is also a good idea for jewelers to develop a nonconfrontational stance with NGO’s and other social activists in the community. Clearly, jewelers want to do what is right and have a common cause with NGO’s. One of the objectives of NGO’s is to have retailers relay NGO’s concerns to suppliers. This assures NGO’s that retailers are aware of the problem and are working with suppliers to make sure that no conflict diamonds are sold in their store.

Conclusion

The conflict diamond issue presents significant but not insurmountable challenges to the diamond trade. This is not a problem that will go away by itself and it requires the trade to adopt a proactive stance. The key challenge is for the trade, governments and NGO’s to work together so as to enact international regulations that control the flow of rough diamonds. There is also an opportunity for the diamond trade to implement internal controls that will restrict the trade in conflict diamonds. Hopefully, the positive and proactive stance our industry has taken on this issue over the past year will help us take positive action in the weeks ahead. Positive action that will stop the trading of conflict and illicit diamonds and help ensure a brighter future for the people of Africa.

Background on this topic is available in the following articles written by Martin Rapaport. "Blood Money" November, 1999, "Guilt Trip" April, 2000, "Rough Controls" June, 2000. These articles and other information are available at www.diamonds.net in the conflict diamond forum.
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Tags: Conflict Diamonds, Fair Trade, Kimberley Process
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