How Globalization Can Be the Source of Conflict and Peace

¶ … Conflict with Getting Minerals from the DRC (Democratic Republic of Congo) is Important to China's Economy

Globalization is a significant part of the business world. It offers many opportunities for change and growth, and helps people connect to one another even if they are across the world from each other. Being able to buy something from the next town over or the other side of the world can make a person very happy, and can also help companies expand and gain new clients. However, what the person is buying and where the items are coming from is very important. Some globalization has resulted in a desire for items that are coming from countries where the people are not being treated well. When that happens, it can be a serious violation of human rights and can cause a significant number of problems in the country from which the items are being exported. Such is the case with the Democratic Republic of Congo (DRC), where there is a conflict over minerals (Magistad, 2011).

These "conflict minerals" such as gold, wolframite, cassiterite, and coltan are all widely found in the DRC, and all very important minerals when it comes to what they can offer to the economy (Nest, 2011, 12). However, they are being mined in poor and dangerous conditions as those conditions relate to the DRC and its people (Magistad, 2011). Human rights abuses and armed conflict are seen, mostly in the furthest Eastern provinces of the DRC (Magistad, 2011). There are many groups in the country causing difficulty regarding these minerals, and focusing on how to take what they want without pay or compensation. China's desire to mine these minerals is separate from the abuses taking place from some of these groups, but still a part of the issue that will be addressed here. The United States also plays a role in the issue, as it has its own laws and regulations about mining from countries like the DRC.

Research Question

With any paper or study, it is important to have a research question in mind. Not doing so means there is nothing to study, or that the paper is not focused on a specific issue. That can leave the paper without a clear focus or unable to address a specific issue directly, leaving little for the reader. The research question asked here is:

How is the conflict with getting minerals from the DRC (Democratic Republic of Congo) important to China's economy?

This is a serious question that does not have any easy answers. It seems as though the answer has to be focused only on China and its specific economic needs, but there are other players in the game when it comes to getting minerals and natural resources from the DRC (Magistad, 2011). It is not only whether China can get these minerals, but whether they can be collected by other countries, as well, and the ways in which the minerals are collected. Studies and research has shown that both peace and conflict can come out of globalization, but currently conflict seems to be the most noticed or significant. This has been addressed by individuals such as Thomas Barnett, who have discussed how globalization can cause stress at first, and how that stress can move into something much more peaceful over time.

Whether this will happen with the DRC and what role China may play in that remains to be seen, as does how that will affect the rest of the world's economy and other countries that also desire DRC minerals. That movement will be explored here in an effort to fully answer the research question and understand globalization more clearly. Without a significant understanding of why there is conflict in the DRC over minerals, it can be difficult to explain the issue and address it fully. However, the conflict is much more global in nature, since there are other countries involved.

The Conflict Minerals

The conflict minerals mentioned in the introduction -- coltan, wolframite, gold, and cassiterite -- are all relatively abundant in the DRC (Magistad, 2011). In order to better understand the issue, it is important to know what these minerals are and what they are used for once they are mined and processed. This can facilitate understanding about conflict in the region and the value and importance of the minerals themselves. There are currently only four minerals that fall under the category of conflict minerals, although more could be added at a later date if they are found to be valuable.

Wolframite -- This mineral provides tungsten (Eichstaedt, 2011, 13). It is very important to have adequate supplies, as it is an extremely dense metal and used in a lot of applications. The most common are the heads of golf clubs, the tips of darts, and weights used for fishing (Eichstaedt, 2011; 13). The mineral is also hard, and is resistant to wear. That makes it good for milling, drill bits, and tools used for metalworking (Eichstaedt, 2011, 13). "Green" ammunition is also being made with tungsten now, as it can be a substitute for lead (Eichstaedt, 2011, 14). There are other applications for tungsten, including the function that makes cell phones vibrate and other types of electronic devices (Eichstaedt, 2011, 14). Because tungsten is used in so many different things, the wolframite it comes from is valuable. That is why there is conflict over mining it in the DRC.

Gold -- Used in electronics, dental work, and jewelry, gold commands a high price and has many applications (Eichstaedt, 2011, 14). There are also chemical compounds created to make semiconductors where gold is used (Eichstaedt, 2011, 15). It is no secret that gold has a lot of value, but the market for it can be volatile, as well. People who buy gold often pay a significant amount of money per ounce, and extracting it from the ground can be difficult, dangerous work. That is a large part of why it is so significant to control a place where a lot of gold is found.

Cassiterite -- Without this mineral there would be no tin, as it is the main ore needed to produce it. Tin cans are made from it, and electronic equipment requires it for the solder used on the circuit boards (Eichstaedt, 2011, 15). There are many others areas where tin is used, such as fungicides, biocides, and PVC pipe, as well as the manufacturing of high performance paint (Eichstaedt, 2011, 15). Because of its many uses, tin has a great deal of value for the consumer and for companies that need it for the items they are making. In order to have tin available for all of these applications, the right amount of cassiterite has to be mined and processed from regions like the DRC.

Coltan -- This is the African, colloquial term for columbite-tantalite. The element tantalum is extracted from this ore. Primarily, tantalum is used to make capacitors for high performance applications, high reliability, and a small format (Eichstaedt, 2011, 16). This can range across everything from airbags, ignition systems, and GPS devices to pacemakers and hearing aids (Eichstaedt, 2011, 16). Laptop computers, mobile phones, anti-lock braking systems, video and digital cameras, and video game consoles also use tantalum (Eichstaedt, 2011, 16). The material is very resistant to wear and has a lot of hardness, so it can be used for a wide variety of things. Milling and other tools, drill bits, and turbine blades for jet engines are other uses for tantalum (Eichstaedt, 2011, 16).

Blood Diamonds

Conflict minerals are strongly related to blood diamonds, which are diamonds that are mined in a war zone (Ma, 2013,-page 2). They are used to finance the efforts of an invading army, the activity of a warlord, or an insurgency (Magistad, 2011). Most of these diamonds come from Africa, but they also come out of Russia (Magistad, 2011). The diamonds are mined and then sold or traded for cash, weapons, or anything of value that is desired by the people who have possession of the diamonds. Because of that, these diamonds have high value but are also shunned by many countries and activist groups. Conflict minerals generally fall into the same category.

Supply Chains - Rebel Groups and Armies

There are several groups that are involved when it comes to mining these conflict minerals. These include the Congolese National Army, the National Congress for the Defense of the People, and the Democratic Forces for the Liberation of Rwanda (Meale, 2009,-page 22). These are not the only groups who are part of the issue, however, or who have been part of the issue in the past. There are foreign groups from Rwanda, Burundi, and Uganda who were involved in the Congo Wars and who removed and processed the minerals, as well (Magistad, 2011).

Governments from those countries still smuggle minerals out of the DRC today, and control of the mines that provide the minerals involves much fighting. The Second Congo War has been financed from the sale of these minerals, as well (Meale, 2009,-page 30). In short, there are so many groups fighting with one another that control of the mines continues to switch and remain in dispute frequently. Some of this will become less of an issue in the future, but for now it is still a serious concern that must not be taken lightly by the people who live near the DRC mines.

Once the materials are removed from the DRC, they go through a number of intermediaries before multinational electronics companies buy them for their own usage. Most of the materials arrive at processing plants in East Asia (Magistad, 2011). U.S. Conflict Mineral Law, which requires electronics companies to verify and disclose their sources of these minerals as being conflict free, applies to any of the minerals that originate in the DRC, as well as any minerals that claim to originate from there, whether or not that origin can be conclusively proven (Magistad, 2011). Additionally, there are nine countries that adjoin the DRC, and the U.S. law on conflict minerals applies to minerals coming out of those countries, as well. That is due to the proximity of those countries, because it would otherwise be easy to move the minerals there and then have them come out of those countries to get around the requirement.

Those countries are: Burundi, Congo Republic, Central African Republic, Angola, Sudan, Rwanda, Zambia, Tanzania, and Uganda (Magistad, 2011). Because of the number of middlemen involved it can be difficult to determine whether the minerals were mined fairly or not, which is why the law requires the disclosure of where the minerals came from. Generally, U.S. companies will not use these minerals if they were mined in conflict. Because of the law, both U.S. And European companies pulled back from purchasing minerals from the DRC (Nest, 2011, 58). They are not prohibited from buying these minerals, but they choose not to do so because they will lose customers who are concerned about where the minerals came from.

China's Interest in DRC Minerals

China has no such law about where its supplies of minerals and ores must come from, and its electronic companies do not have to disclose anything to the government about supplies that are used to make electronic components or other devices. Because of that, Chinese buyers are still purchasing minerals from the DRC (Magistad, 2011). There is a bigger issue for the DRC, though, in that the Chinese are now basically the only buyers. That means they are more able to set their own prices, because the DRC has no one else to sell to who is willing to pay more. Buyers from China are offering 20 to 30% less than what they had to pay when U.S. And European buyers were their competition (Magistad, 2011). They are buying a lot of minerals, but it is still not as much when compared with how much was being sold when there were more buyers in the market. Tin and coltan are the main interests for the Chinese buyers. The coltan is especially important, because it also contains quantities of usable uranium (Magistad, 2011; Nest, 2011, 31).

Reserves of uranium are extremely high in the DRC, and the minerals that contain them can be sold to the Chinese buyers where they could not have been sold to the European and U.S. buyers. The reason behind that has to do with the percentage of uranium in the minerals. Because it is radioactive, uranium can be very dangerous. When U.S. And European buyers were purchasing minerals from the DRC, they would not buy anything with a uranium content that was greater than two percent (Magistad, 2011). The Chinese buyers do not have that rule, and even five percent uranium content is not too much to keep them away (Magistad, 2011). That allows for a larger section of minerals to be mined and sold, but the Chinese buyers are still not enough to keep the DRC in business the way it was before. Many of the mines have suspended their operations, and the miners are not bringing their minerals to sale because there are no buyers to take them so they can make a profit.

There are such rich reserves of conflict minerals in the DRC that China will be supplied with them for a very long time. Their warehouses are full, and there is constant turnover (Magistad, 2011). There are more sellers than buyers at this point, so that is keeping China's economy growing while the DRC limps along and tries to survive. Since the region's government depends on mining for a full 1/2 of its budget, losing European and U.S. buyers has really hurt the country as a whole (Magistad, 2011). Many of the miners who no longer have buyers are being recruited into army and rebel groups, and then they go where they are told to go and where they think they can make some money (Magistad, 2011). It is a very different life than what they had when the European and U.S. buyers were clamoring for their minerals.

Many of the armed groups that used to operate the mines have been removed by the government. This is a good thing, because they used to cause significant problems for the people in the area, going as far as raping women and forcing children to do the mining work while they held them at gunpoint (Magistad, 2011). Now around 60% of the mines are free of this kind of behavior (Magistad, 2011). The government saw a huge opportunity to clean up the mines when the Conflict Minerals Law was enacted, but they did not anticipate how much the business of mining minerals would dry up as U.S. And European buyers pulled away from doing business with the country and decided to avoid that region altogether (Ma, 2013,-page 4; Magistad, 2011). Whether this was a smart decision for the U.S. Or European countries remains to be seen, but it certainly benefitted China and it looks like it will continue to do so for the immediate future.

Other Agreements with China

Now the country pays significantly less for the minerals it needs from the DRC, and does not have to worry about any competition. That is not the only agreement China has with the DRC, though. There is also a deal involving resources in exchange for infrastructure, in the amount of $6 billion (Magistad, 2011). It was originally supposed to be a $9 billion agreement between the two countries, but both the IMF and the World Bank expressed serious concerns that the DRC would not be able to handle that large of a debt to China, and it could cause financial problems (Magistad, 2011). There are still criticisms of the current deal, however, because it requires the DRC to repay China before it repays other debts, was not clear on the pricing and value of the minerals, and had vague terms that could easily be misinterpreted if there were ever questions or disagreements about the agreement (Magistad, 2011).

Despite the critics, China states that the deal is a winning proposition for both sides involved (Magistad, 2011). It is interested in the rapid development of its economy, and the minerals it gets from the DRC play a significant role in that. Without the minerals it would not be able to make the number of electronics it produces for use in its country and for export. Since the minerals are now able to be bought for less due to a lack of competition, China's economy is growing by leaps and bounds (Magistad, 2011). In return, the DRC gets a better infrastructure that is built by Chinese teams (Magistad, 2011). That can help the DRC move forward, because it does not have the teams of workers with qualifications to build things the way the Chinese teams can. That does not mean that the DRC is getting a good deal, though, since the terms of the agreement are open to a lot of interpretation and the DRC is really not being paid or compensated that well based on what the Chinese are receiving in return.

However, even though the DRC knows the deal is not perfect, it also knows that without the deal it would lose even more. If it has millions of dollars of minerals and resources in the ground but does not have the people and infrastructure to retrieve those, it can get paid hundreds of thousands for the right to remove those things. Yes, the Chinese get millions, but the DRC still gets hundreds of thousands it would not have been able to get at all without the help of the Chinese and their interest in the minerals (Magistad, 2011). Even though the situation is not ideal, both sides do benefit from it. The DRC keeps its mining operations moving forward, even if they are in a reduced capacity, and gets much needed infrastructure. The Chinese get to grow their economy much more quickly now that they are paying less for the minerals they need and avoiding competition with other countries.

The Conflict Mineral Law

While the law does not apply to buyers from China, it is important to discuss it briefly here. Doing so will help to show the magnitude of it and why it had such an impact on China's economy. Additionally, the law may change in the future and U.S. And European buyers will move back into the DRC mineral market, which could be a significant game changer for China and the way the country is currently doing business. The requirement that U.S. companies disclose where they get their minerals from and that they do not buy conflict minerals is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law by President Obama in July of 2010 (Eichstaedt, 2011, 35). The SEC issued its draft regulations in December of that same year, requiring companies to disclose the use of conflict minerals (Eichstaedt, 2011; 36). As such, most companies just decided to avoid the minerals altogether, so they would not have problems with customers.

Because of the law and the requirements of the SEC, companies decided that they were pulling out of the DRC and the countries surrounding it. The SEC also has the authority to determine when (and if) the law no longer applies, but that is not likely to happen anytime soon. Companies that need these minerals to make their products have generally had to pay more for the minerals as a raw material because they can no longer purchase conflict minerals without the need to disclose that (Magistad, 2011). In many cases, that makes the companies uncomfortable. They also worry that their customers will not to buy from them or do business with them if they purchase and use conflict minerals. There are many people against the use of conflict minerals because of the human rights violations that occur when mining them, but these same people may not realize the minerals are needed to create products they buy and use every day (Magistad, 2011).

The Future of Minerals in China

While China is getting a lot of minerals out of the DRC and paying very little for them now, that could change in the future. One of the issues being addressed by the United States is to put a stop to Chinese products made with conflict minerals coming into the U.S. market (Magistad, 2011). If that takes effect, China will have to find another source for its minerals, and may have to pay much more for them, as well. Of course, the other option is to ensure that mines in the DRC from which the minerals come are being run fairly and safely. Then they are no longer conflict minerals, and they can be purchased and used by U.S., European, and Chinese companies selling in the U.S. market. That would mean safer conditions for the people in the DRC, and also more competition for the minerals that are available. It could become a good situation for a number of people and countries.

One thing it would do would be to slow down the number of imports from China to the U.S., at least for a time. That is because changes would have to be made to the way China gets its minerals and what it sends to the United States for resale. Once issues with that were resolved, supplies would likely go back to current levels. Still, the cost of these products could go up because the cost of the minerals will likely rise when there is more competition once again. Since Chinese buyers were paying 20 to 30% more when they had competition, it is realistic to expect they will be paying at least that much more again. The cost of making the goods will rise accordingly, so it is a logical conclusion that the cost of the goods to consumers will also be higher. That will cause China's economy to slow, as well, so they would be wise to buy their minerals from the DRC while they can (Magistad, 2011).

There is no specific timeline for when the U.S. And other countries may try to stop the importation of any products made with conflict minerals (Magistad, 2011). Right now, the law is focused on U.S. companies that make and sell their products in the United States. They are the companies that have to disclose if they are using conflict minerals. To avoid the backlash that disclosure would provide, they are simply not using the conflict minerals in any of their products or buying them at all, so there is no issue with disclosure. That is important for the companies and for the people who purchase from them. However, Chinese products that are imported and sold in the U.S. may still have been made with conflict minerals. The requirements of disclosure do not apply to those products or companies, so there is no backlash generated from selling them. Most people are not even aware that the conflict minerals are a part of their electronics or other devices that use specific metals.

When (and if) laws are changed in order to reflect the conflict minerals used by companies outside the United States that import their products to the U.S., China will have to make adjustments, as well. The idea that China would stop exporting to the U.S. is not realistic, so changes would have to come in the form of where China gets its minerals. However, there are two ways in which that could happen. First, China could go elsewhere to get its minerals, and stop getting them from the DRC. Second, there could be significant changes made in the DRC so there was no longer a U.S. law against getting minerals from that location. Both of these options would work for Chinese exports to the U.S., and both would also work for the continued growth of the Chinese economy. It is important to consider, though, that either change could result in China being required to spend more money for the minerals it buys, which could result in a higher cost for the finished products.