Business Ethics At The Diamond Trade - Coursework Example

Blood and Gems: A Look At The Diamond Trade For many people, diamonds have long since considered to be a priceless memento of the love and devotion that we hold for people. A common gift during a holiday or that which is presented at an engagement, diamonds have for many years held a strong popularity for a significant portion of the population both in the United States, as well as internationally. The collection and trade of the gems is a practice that has come under great scrutiny in recent years for what many have classified as “blood diamonds”. Those diamonds which have been gathered in such a manner that would be in direct violation of not just human rights, but also national and international laws. Also afforded the nickname of “conflict diamonds”, in years past the world has seen stories published of the manner in which these gems are gathered and the nature of the conditions in which people are expected to work in order to collect these delicate wonders. In light of the horrific nature of the issues surrounding these diamonds, the United States Congress has set forth with its views upon the issue. With the laws that have been put into place both nationally and internationally to try and combat the problems involved with the trade, one thing is for sure. That is, diamonds are a gem which, in a very considerable way, has influenced the lives of many people through history and up until the present day. Major companies, as well as nations, benefit to a great degree when it comes to the transport and sale of the diamonds which they bring out of the regions for which they work. As a participant in such affairs, the companies themselves can face a harsh reality of needing to separate themselves from the crisis at hand as a means of ensuring their profitability at home, as well as abroad. One such company would be De Beers. “De Beers, the company which dominates world diamonds, hopes to maintain both its share of the market and the reputation of its gems. At stake, among other things, is the prosperity of Botswana. The right to extract diamonds there is shared 50-50 between its government and De Beers (AC Vol 42 No 14) through the Debswana company, which produces 70 percent of De Beers Southern African gems, 80 percent of Botswanas export income and half of its governments revenue. Botswana accounts for 70 percent of the production of all De Beers controlled diamond mines; South Africa and Namibia form 30 percent. Yearly, Botswana produces 20-30 percent of the world total,” Going on to say that, “The reputation, and therefore the price, of diamonds is endangered by the notorious trade in blood diamonds, which has fuelled the civil wars in Angola and Sierra Leone. De Beers and Debswana are pushing a scheme called Diamonds for Development, which would operate under what they call the Kimberley mechanism, after the huge deposits around the South African town of that name. It would ensure that new gems should carry unforgeable certificates of origin,” (“Blood from stones”, p.4). The ethical issue for De Beers would come down to a simple fact. It was their desire to move themselves away from the ethical accusations involved with this portion of the diamond trade, with the intent of pursuing a practice that would declare diamonds to not be of the same gathering practices that blood diamonds are a part of. The need to act swiftly on the issue of blood diamonds is something of great importance for a great many people. With the reports of human rights violations alone, as well as the nature of the business practices on the part of the national governments and the jewelers that seek to profit from these gems in any way that they can, the debate on blood diamonds is one that has reached across the spectrum of discussion with many stakeholders who are impacted by the ethical ramifications, along with the legal decisions that are made by those who are put into place with the purpose of setting forth those laws. The economic status of a nation can give way to the act of war. The civil infighting for the chance to get a hold of as many natural resources as possible. The participation of governments, corporations, as well as average everyday people, in the practice of gathering such resources in the hopes of turning them into profits for which they can greatly benefit from. As it comes down to it, individual human nature comes into play in this instance. How each individual can have a distinctly different set of priorities as it comes to going back doing things. Each with their own set of motives and whose motives will surely impact their own lives, but will also to an extent bleed into the lives of those around them in ways that to a large degree, are quite unimaginable until experienced first hand. While on the one hand accumulated wealth can attribute to a prosperous turn of events, in the end, wealth can also lead to dastardly circumstances in which those involved will be forever changed in some manner or another by the events that have come as a result. Impacted to a varying degree from it. In regards to the information obtained and the legal measures taken, in January 2003 the 108th United States Congress detailed their collective views on the issue of blood diamonds. In their act titled the Clean Diamond Trade Act, the members wrote in their findings the following, “(1) Funds derived from the sale of rough diamonds are being used by rebels and state actors to finance military activities, overthrow legitimate governments, subvert international efforts to promote peace and stability, and commit horrifying atrocities against unarmed civilians. During the past decade, more than 6,500,000 people from Sierra Leone, Angola, and the Democratic Republic of the Congo have been driven from their homes by wars waged in large part for control of diamond mining areas. A million of these are refugees eking out a miserable existence in neighboring countries, and tens of thousands have fled to the United States. Approximately 3,700,000 people have died during these wars. (2) The countries caught in this fighting are home to nearly 70,000,000 people whose societies have been torn apart not only by fighting but also by terrible human rights violations. (3) Human rights and humanitarian advocates, the diamond trade as represented by the World Diamond Council, and the United States Government have been working to block the trade in conflict diamonds. Their efforts have helped to build a consensus that action is urgently needed to end the trade in conflict diamonds,” The source goes on to further enumerate the congressional findings when it says that, “(4) The United Nations Security Council has acted at various times under chapter VII of the Charter of the United Nations to address threats to international peace and security posed by conflicts linked to diamonds. Through these actions, it has prohibited all states from exporting weapons to certain countries affected by such conflicts. It has further required all states to prohibit the direct and indirect import of rough diamonds from Sierra Leone unless the diamonds are controlled under specified certificate of origin regimes and to prohibit absolutely the direct and indirect import of rough diamonds from Liberia. (5) In response, the United States implemented sanctions restricting the importation of rough diamonds from Sierra Leone to those diamonds accompanied by specified certificates of origin and fully prohibiting the importation of rough diamonds from Liberia. The United States is now taking further action against trade in conflict diamonds. (6) Without effective action to eliminate trade in conflict diamonds, the trade in legitimate diamonds faces the threat of a consumer backlash that could damage the economies of countries not involved in the trade in conflict diamonds and penalize members of the legitimate trade and the people they employ. To prevent that, South Africa and more than 30 other countries are involved in working, through the `Kimberley Process, toward devising a solution to this problem. As the consumer of a majority of the worlds supply of diamonds, the United States has an obligation to help sever the link between diamonds and conflict and press for implementation of an effective solution. (7) Failure to curtail the trade in conflict diamonds or to differentiate between the trade in conflict diamonds and the trade in legitimate diamonds could have a severe negative impact on the legitimate diamond trade in countries such as Botswana, Namibia, South Africa, and Tanzania. (8) Initiatives of the United States seek to resolve the regional conflicts in sub-Saharan Africa which facilitate the trade in conflict diamonds. The Interlaken Declaration on the Kimberley Process Certification Scheme for Rough Diamonds of November 5, 2002, states that Participants will ensure that measures taken to implement the Kimberley Process Certification Scheme for Rough Diamonds will be consistent with international trade rules. (US H.R. 1584 Section 2, p.1). Through means of hoping to work towards a solution, the US Government set forth with a plan of dealing with the many issues that plague the blood diamond industry. The central point in the US-created resolution would be the ban put into place by Congress when it comes to the importation of these diamonds from their countries of origin, in particular Sierra Leone. Further setting forth the implementation of a policy in which diamonds are determined to either be part of the greater blood diamond trade, or those that are in fact deemed to have been gathered without the harsh practices that have come to be known with blood diamonds, or as they are also called “conflict diamonds. In the text “Diamonds, Blood, and Taxes” written by Richard Snyder of the Brown University Department of Political Science and Ravi Bhavnani from the Political Science Department at Michigan State University, both men seek to address many issues with one such being the ethical conundrum involving the practice of gathering blood diamonds. Both men write that, “As documented by numerous journalistic reports and scholarly case studies , alluvial diamonds played a central role in many civil wars in contemporary Africa (e.g., Sierra Leone, Angola, Congo, and Liberia). Moreover, one recent analysis found that among resource-rich countries, producers of alluvial diamonds had the highest civil war rate in the 1990s. Because of their strong association with civil war, alluvial diamonds have been labeled “blood diamonds” and the “ultimate loot”,” (Bhavnani & Snyder, p.563-64). The act of war in this instance becomes not just a foreign policy issue, but also one of morals and ethics. The ethical ramifications of facilitating war through the process of diamond gathering. Ethical boundaries become crossed anytime in which the pursuit of profit is put forward in such a manner that the well-being of innocent people is thrown by the waste side as a result of such a pursuit. Not only are there ethical and legal implications for the international community, there are also those within the nations that the gathering of these diamonds occurs in the first place and those who are benefactors of the diamond trade. On a legal side, the implications for the African region are great. In an article written by Mungo Soggot titled “Conflict Diamonds are Forever”, Soggot seeks to clairify the numerous issues involving the trading of blood diamonds. He explains that, “International efforts such as the Kimberley Process and the United Nations monitoring mechanism on conflict diamonds have spotlighted the helplessness and ineptitude of the South African authorities – whose monitoring efforts are, by comparison, among the best on the continent. There are, for example, no officials from the South African Diamond Board in Kimberley to monitor what kinds of stones go through the exchange. The only regularly monitored stones in Kimberley are those in De Beers Harry Oppenheimer House, the companys sorting center for southern Africa, which are examined by the government diamond valuator. In Johannesburg, the situation is not much better. The diamond bourse, on the fifth floor of downtown Johannesburgs Jewel City, has dealt with between U.S. $360 million and $490 million worth of diamonds a year for the past three years. Diamond buyers are required to be licensed by the government – a license which foreigners cannot obtain – but licensees are allowed to be accompanied by foreign associates, who generally provide the financial backing for most serious South African diamond dealers. Although South African law requires diamond producers to offer their stones to local cutters first before exporting them, no more than 10 percent of the diamonds passing through the bourse stay in South Africa. Diamonds coming into the bourse are also supposed to be checked by Diamond Board representatives to be valued and identified. But they rarely are, and when checked, not by anyone with sufficient experience to identify the origin of the stones, officials at the government diamond valuator concede,” Mungo Soggot details further that, “In November 1999, the South African government diamond valuator filed a report on the bourse stating that inspectors weighed incoming diamonds, but did not "examine or check them as prescribed under the [1986 Diamond] Act."The report continued: "The Bourse personnel say this has been the practice for sometime, and were not aware of this requirement. No one seems to know the rationale behind this legislation, but this process could help particularly small diamantaires against being duped into buying fake diamonds. In the present situation Angolan diamonds supply would be minimized." The clear implication being that Angolan diamonds were being laundered through the bourse. The report encapsulates the irony of the diamond business in South Africa. There is an extensive armory of legislation to monitor the progress of diamonds from the moment they are mined to when they are sold. These rules were established in the late 19th century following the discovery of diamonds and the creation of the De Beers monopoly in South Africa and later also implemented in neighboring Namibia to protect De Beers. They were so tightly written that they obliged diamond dealers to register with the police even the transfer of diamonds between different magisterial districts. Such rules could now make South Africa a relatively easy country in which to monitor the flow of illicit diamonds. But the rules are seldom observed,” (Soggot, 11/8/02). The discussion of law and ethics can create a very complex view of any issue that is discussed. With the substantial implications for national, as well as international consumers and industry leaders, along with the innocent civilians, the presence of politics in discussion ultimately leads to the formation of a wedge that can derail the issue to the extent of making it quite difficult, if not impossible, to achieve success in fixing a problem(s). “The politics of the board have grown increasingly turbulent since the appointment in 1999 of a new, independent government diamond valuator. The chosen company, a Belgium-based operation called DVIC headed by Claude Nobels, soon crossed swords with De Beers. The new valuator, which compiled the critical bourse analysis, has questioned the 1993 transfer to London of De Beers South African stockpile of diamonds, ahead of South Africas first democratic elections in 1994. Nobels also alleged that De Beers has consistently undervalued its diamonds through transfer pricing – a process by which international companies transfer the value of goods and services within the corporation and its subsidiaries from various country bases, finally declaring it where the tax is lowest. Nobels has also focused attention on the opaque relationship between De Beers South African operations and its London office and exposed the cozy relationship between De Beers and the South African Diamond Board,” (Soggot, 11/8/02). Credible implications as it comes to crossing paths with what many consider to be the world leader in diamond trading and the turnaround of the product in the world market for the purpose of sale. Diamonds are a precious gem that many hold dear to them. Those who wish to posses them as a means of showing those closest to them the significance of something for which they deem to symbolize that which is “everlasting”. On the other hand, the issue of diamonds and what they mean are also very important to the nations which have them within their minds and the companies which choose to travel within the national borders in the hopes of gathering as many as they can, with the chance to go back to their corporations and introduce their new acquisition onto the world market. In making those decisions, corporations can in a considerable way find their business decisions play a part in civil war and unrest that has occurred in many of the countries that are involved in the diamond trading industry. In the article “By other means”, published for Africa Confidential, the discussion moves towards the civil unrest in the region of the Congo. The author writes that, “Fighting has begun again. The army is on the offensive around Kindamba, Kimba and Vinza in the north-western Pool Region. Sassou wants to stamp his authority on areas still out of his military control. At the end of May, government forces have claimed to have captured Vinza, the former headquarters of Frederic Bitsangou, known as Pasteur Ntoumi, who leads some of the ninja rebels who once fought under Kolelas. Sassous soldiers are backed by around 1,000 disciplined Angolan troops, his most loyal allies, protecting airports and other key points in Brazzaville and the port of Pointe-Noire,” (“By other”, p.5). For retailers and businesses alike, the reputation for which the company has is the form of advertising that can serve to either make or break a company. The conflict surrounding the diamond trade, specifically in the African region, has considerably impacted the way in which many do business and also has had an impact on the governments where the excavating has occurred, as well as those nations that are the buyers of diamonds for their own citizens. A primary example of such a nation that has a considerable part to play in the purchasing and selling of diamonds is the United States. A nation filled with jewelers that wish to play upon the individual notion of diamonds signifying prosperity, love and everlasting. Complete with commercials that run such tag lines as, “Diamonds are forever”, retailers seek to build their corporate earnings by the sale of such pieces of jewelery that everyone at one point or another has wished to purchase for themselves, or to have purchased for someone else. Whether they are in the form of rings, earrings, or pendants, diamonds are a very popular and sought after part of jewelery for anyone and have created a demand for them that in many ways continues to be strong despite the conflict surrounding the processes for which they are excavated and for those people who risk all to excavate them. For the legal, as well as the ethical reasons that surround the issues of the diamond trade, one thing is for certain. Diamonds have had a great impact on a vast amount of people. Works Cited Africa Confidential. “Blood from stones.” Published: 14 June 2002. Vol. 43, No. 12. Subcategory of article used also: “By other means.” Bhavnani, Ravi & Snyder, Richard. “Diamonds, Blood, and Taxes: A Revenue-Centered Framework From Explaining Political Order.” Institutions: Departments of Political Science for Brown University (Snyder) and Michigan State University (Bhavnani). Soggot, Mungo. “Making a Killing: Conflict Diamonds Are Forever.” The Center For Public Integrity. Published: 8 November 2002. URL: http://projects.publicintegrity.org/bow/report.aspx?aid=152 108th United States Congress. Draft of H.R. 1584. Published: 7 January 2003. Section Used: 2. Act: Clean Diamond Trade Act. URL: http://www.worlddiamondcouncil.com/Updated %20documents%202003/Clean%20Diamonds%20Trade%20Act.html Read More