Jewelers Vigiliance Committee Annual Luncheon

Robert F. Cekuta, Deputy Assistant Secretary for Energy, Sanctions and Commodities
Washington, DC
January 7, 2011

Thank you, Cecilia, for that kind introduction. And thank you for all the tremendous work that you, JVC Chair Marc Green, and the entire organization have done in 2010 and throughout your nearly 100-year existence. The Jewelers Vigilance Committee has been and remains the leader in educating and assisting the entire jewelry industry on the wide array of compliance challenges it faces. I am delighted and honored to be keynote speaker this year at the Jewelers’ Vigilance Committee’s annual luncheon and look forward to working even more closely with you in 2011 on just a few of those many challenges.

Since I came to my present job as a Deputy Assistant Secretary of State for Energy, Sanctions, and Commodities last September, a significant, and very interesting, portion of my job has been the number of issues that involve the jewelry industry in one way or another. Having worked with Al Eastham and J.D. Bindenagel years ago when they were helping set up the Kimberley Process, I had some sense of what I was getting into – and that free samples of diamonds and gold were not in the cards.

There are many reasons for the attention on issues affecting the U.S. and international jewelry industry. Partly it is a coincidence of timing of when I came to the job – just after the passage of conflict minerals legislation and just before the Kimberley Process Plenary. It is also a function of the increase in customers’ concern, in the United States and elsewhere, about how products are produced and the regimes in place in the countries where those products originate. However, the high level of attention is also because of the need to work with the private sector as an active partner if we are to realize key aspects of foreign policy.

As supply chains broaden and widen, media and NGOs examine and publicize more and more about the various aspects of these supply chains and the effects they have in the countries where products originate or are manufactured. The public expectations of business in this regard are also broadening. And with such expectations come new tools, some of which now squarely affect your industry. And if I might offer my other point that all of you probably already know all too well – bad news gets out faster, gets much more attention, and gets remembered much longer, than good news

Before discussing specifics, I think it is important to draw attention to the work of the UN’s Special Representative for Business and Human Rights, Professor John Ruggie. Professor Ruggie recently issued a draft document called, “Guiding Principles for the Implementation of the United Nations ‘Protect, Respect and Remedy’ Framework.” As the title indicates, the report – which follows years of work and extensive consultations – looks to focus the many efforts of government, business, and NGOs around the framework that Professor Ruggie has developed for thinking through the intersection of business and human rights. In this report, Professor Ruggie urges companies to develop policies related to the human rights impacts of their activities and their relationships, as well as to undertake assessments of the impacts their activities are having. There are many views on the work of Professor Ruggie, but I think you will all find his reports of immense interest, something to read and consider. You may also find them perhaps an important stage-setter for the more specific issues that face you and others in your industry, especially when so many consider the products you create and expect that the beauty we see at the end of the supply chain will be accompanied by your doing good, or at least doing all that you can to insure there is no consistent pattern of untoward, illicit, or otherwise undesirable practices, where the supply chain begins.

Along these lines, the question of what are popularly called “conflict minerals” from eastern Congo captured a great deal of attention – in the press, in the public, and among policy makers – in 2010 and will likely continue to do so in 2011. It is an excellent example of what I noted earlier: the sense among customers, perhaps the growing sense, that they do not want to buy or to own products that contributed to violence or human rights abuses elsewhere in the world.

In public remarks last June about the question of conflict minerals, Under Secretary of State for Economic, Energy and Agricultural Affairs Robert Hormats called it, “one of the great moral issues of our times.” Violence in the eastern provinces of the Democratic Republic of the Congo, or DRC, feeds off the illicit trade in minerals and has claimed an estimated 5 million people, more lives than any conflict since World War II. Along with millions dead, there have been horrific incidents of rape of women and girls and of violence against and committed by children – horrors the diamond industry heard about in Sierra Leone and Liberia.

The linkages between human rights abuses and the illicit minerals trade in the eastern DRC are multiple and complex. The violence in eastern DRC has, for example, resulted in the collapse of traditional economic activities, such as agriculture and industry, causing more and more of the population to turn to artisanal mining for their livelihoods. Sadly, the mineral wealth in the region has also developed into a critical source of funding that perpetuates the violence committed by both rebel groups and a number of units of the Congolese military.

As a result, revenue derived from the illicit trade in minerals is serving both as a cause and as a consequence of the region’s continued insecurity and instability. Those of you interested in further information about this situation can talk to me or members of my team at State, but you should also talk to Cecelia who would appreciate your contact information and the chance to discuss what the Jewelers Vigilance Committee can do for you.

To address this conflict and the role of the minerals trade in fuelling the violence, Congress included a provision dedicated to conflict minerals in the Dodd-Frank Wall Street Reform and Consumer Protection Act that President Obama signed in July. In its action, Congress added gold to the so-called “3 T’s” – or tin, tantalum, and tungsten – on its list of conflict minerals and established a requirement that companies perform due diligence with respect to the trade in these minerals. Specifically, companies that report to the Securities and Exchange Commission must disclose to the SEC and to the public the due diligence efforts that they have taken to ensure that the minerals they use in their manufactured products have not directly or indirectly benefited the armed groups in DRC. The SEC issued draft regulations in December and has invited public comment on the proposed regulations, which will be issued in final in April. All of you are encouraged to engage in this process.

The issue and process can be complicated, and I commend the JVC -- and Cecilia in particular -- for leadership in bringing the perspective of the jewelry industry into this debate, one that has thus far focused far more on the consumer electronics sector. We recognize that the process for due diligence in this area can be something that seems complex and difficult. With that in mind, we have worked as part of the international efforts to develop guidance, such as those undertaken by an ad hoc committee of the Organization for Economic Cooperation and Development (OECD) and by the United Nations Security Council DRC Sanctions Committee’s Group of Experts. The Security Council noted this guidance when it adopted resolution 1952 in November. That resolution calls on all UN member states to urge domestic companies to implement the guidance. The Security Council resolution is following the path charted by the U.S. Congress last July. Now is the time to move forward. Whether through participation in the OECD’s “gold working group” or simply through your outreach to us, we hope to work closely and extensively with the U.S. jewelry sector to do just that.

Congress also gave the State Department tasks for dealing with conflict minerals. Later in January we will issue a strategy focused on conflict minerals and armed groups. The strategy will focus on a range of programs and themes, built around the aim – bolstered recently by more than $11 million in funding – to work in both the immediate and medium-term to find ways to ensure local and international actors can continue to operate and source minerals from the DRC. There is no value to incentivizing these actors to abandon the DRC as a source of minerals; doing so could potentially lead to even more dire consequences. Sourcing gold – and tungsten, tantalum, and tin – in a way that contributes to conflict and human rights abuses must cease, but we know we can work with you, with others in industry and civil society, and with other governments to ensure that “conflict free” will not evolve into “Congo free.”
Speaking of conflict free, let me turn to the conflict issue that your industry has more traditionally worked on with the State Department –the Kimberley Process’s (KP’s) effort to end the trade in conflict diamonds. We left 2010 having seen much progress in the KP; indeed, the United States has offered to assume the role of Vice-Chair this year, leading to a term as KP Chair in 2012. Israel, led by Boaz Hirsch, did an outstanding job this year as chair, providing important leadership on the most difficult challenges facing the KP system, issues that range from improving the Kimberley Process’ administration to enhancing enforcement efforts to demonstrating resolve to deal with the most divisive issues. Israel set a standard for the commitment needed to identify areas of concern and to find practical and meaningful ways to address them. Israel also demonstrated how much can truly be accomplished by a Chair in place for just one year and Boaz and the members of his team leave the Kimberley Process, indeed the international community, better suited to address the challenges before us.

And as many of you are aware, the headline challenge of the past two years in the KP has been and continues to be Zimbabwe. We remain concerned about Zimbabwe’s lack of progress in implementing the minimum requirements of the Kimberley Process with respect to the Marange diamond fields. In particular, we are concerned about the continued smuggling, the potential for a repeat of the grave violence seen in 2008-09 in and around Marange, and about Zimbabwe’s unwillingness to cooperate fully with the Kimberley Process. As the Review Mission that traveled to Zimbabwe in August 2010 noted, there has been progress, but – and this is …- “there is still some way to go to achieve full compliance with the minimum standards of the KPCS in the Marange diamond fields and also for the Government to honor all of the commitments” it has made. Zimbabwe’s achievement of full compliance is in the long-term interests of Zimbabwe and its people. Zimbabwe’s full compliance is essential to the integrity of both the Kimberley Process and of the international community’s stated commitment to address the issue of diamonds and conflict.

While there has been great attention to Zimbabwe and the situation in the Marange fields, there are other areas where conflict diamonds are an issue. The simmering tension in Cote d’Ivoire and a recent report on diamonds being mined by rebel groups in the Central African Republic make clear that this threat has not been eliminated.

Not unlike the 3 T’s and gold in eastern Congo, efforts need to continue in the diamond sector that give due attention to those in the supply chain to keep diamonds or other commodities from fuelling conflict. Efforts by the Diamond Development Initiative, which many of you support, and our own USAID/State development program addressing property rights in the artisanal mining areas of the Central African Republic and Liberia have demonstrated the potential to achieve the ends we desire. I think you will agree that we must all work together to see the potential realized. The long-term future of the KP and the true test of the resources so many governments, companies, and NGOs invest in it will likely be in the number of artisanal miners and communities that can benefit from these efforts, rather than the number of administrative decisions the KP puts in place.

Finally, as I know some of you are in the colored gemstone business, a word about Burma sanctions – another area where your industry has been important in helping achieve key foreign policy initiatives. The release of Aung San Suu Kyi and the November parliamentary elections will not fundamentally alter the United States’ dual track Burma policy of pressure and principled engagement. We and others around the world are certainly pleased the Burmese regime finally released the Noble Peace Prize winner from her years of house arrest, but the human rights situation in Burma remains abysmal. Burma’s November 7 elections, were based on a severely flawed process and were neither free nor fair. They really seemed to ensure the continued dominance of current regime leaders and are not a substitute for genuine dialogue toward national reconciliation and a representative government. Even while Ms. Suu Kyi’s long overdue release November 13 was welcome news, it remains to be seen if the regime will ensure her freedom and permit her to play a meaningful role in Burmese politics.

As I said at the outset, the challenges facing your industry – and, frankly, mine as well – seem ever-growing and changing. It is also clear that in the 21st century, the traditional roles for government and business and civil society continue to evolve. I hope that we can continue to collaborate closely to reach the goals we would all like to see – a profitable and productive U.S. jewelry industry that does well by doing good.

Thank you very much, and a very Happy, Healthy, and Prosperous New Year.