Cooperating Alone: The Global Reach of U.S. Regulations on Conflict Minerals

Abstract

In 2010, the United States Congress adopted the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act includes an unprecedented provision to curb the mining in the Democratic Republic of the Congo (DRC) of so-called conflict minerals: components found in many consumer electronics that are sometimes the source of human rights abuses in the mines and regions from which they originate. Companies traded on the U.S. Stock Exchange are now required to conduct due diligence assessments of their supply chains and disclose the presence of such conflict minerals. The mining of conflict minerals is a global problem for which international cooperation among States and companies seems the necessary solution. However, the United States acted alone; it unilaterally adopted regulations that focused on only one country—the DRC—and one set of targets—companies publicly traded in the United States. These regulations likely required less time to adopt and implement than traditional State-to-State cooperation. Critics might argue that conflict minerals originate not just from the DRC but also from other politically unstable nations, and companies publicly traded in the United States are not the only ones to integrate these minerals into their products. Yet, this Article argues that Dodd-Frank’s influence likely extends far beyond its stated geographical scope. This Article is the first to ground the U.S. rules on conflict minerals in the literature on unilateral regulatory globalization. That literature posits that, under the right conditions, a country’s unilateral regulations can unleash a “California Effect” that causes companies outside its jurisdiction and other States to voluntarily align with those regulations. By analyzing the conflict minerals regulations through the lens of unilateral regulatory globalization, this Article reveals the Dodd-Frank Act’s potential to reach beyond its stated goals and DOI: http://dx.doi.org/10.15779/Z388565 * J.D., 2015, U.C. Berkeley, School of Law. The author acknowledges with great appreciation Jamie O’Connell and Jerome Hsiang for their comments on earlier drafts, Katerina Linos for introducing me to concepts critical to this piece, and the editors of the Berkeley Journal of International Law for their diligent reviews and edits. Any remaining errors are mine. Published by Berkeley Law Scholarship Repository, 2016 2016] COOPERATING ALONE 217 enriches the existing literature by examining when regulations focused on business and human rights might trigger a California Effect. Abstract 216 Introduction 217 I. Conflict Minerals: Overview of the Problem 220 A. Human Rights Violations 220 B. The Electronics Industry and the Market for Conflict Minerals ...222 II. A Singular U.S. Policy Response: The Dodd-Frank Conflict Minerals Provisions 224 A. Overview of Dodd-Frank Conflict Minerals Regulations 224 B. Range of Possible U.S. Policy Responses 226 C. Implementation of Dodd-Frank 228 III. The Global Pull of an Enticing Market and Powerful Regulator 231 A. The Theory of Unilateral Regulatory Globalization 231 B. Can Dodd-Frank’s Conflict Minerals Provisions Unleash a “California Effect”? 235 1. Market Power 236 2. Regulatory Capacity 238 3. Preference for Strict Rules 238 4. Target Elasticity 239 5. Nondivisibility of Standards 240 6. Remaining Uncertainties 241 Conclusions 243 216 Introduction 217 I. Conflict Minerals: Overview of the Problem 220 A. Human Rights Violations 220 B. The Electronics Industry and the Market for Conflict Minerals ...222 II. A Singular U.S. Policy Response: The Dodd-Frank Conflict Minerals Provisions 224 A. Overview of Dodd-Frank Conflict Minerals Regulations 224 B. Range of Possible U.S. Policy Responses 226 C. Implementation of Dodd-Frank 228 III. The Global Pull of an Enticing Market and Powerful Regulator 231 A. The Theory of Unilateral Regulatory Globalization 231 B. Can Dodd-Frank’s Conflict Minerals Provisions Unleash a “California Effect”? 235 1. Market Power 236 2. Regulatory Capacity 238 3. Preference for Strict Rules 238 4. Target Elasticity 239 5. Nondivisibility of Standards 240 6. Remaining Uncertainties 241 Conclusions 243