What China’s 2014 Chairmanship of the Kimberley Process Could Tell the World

Written by Brad Brooks-Rubin

 “The Chinese Century,” as the New York Times Magazine framed it in a 2004 cover story, has been upon us since before the 21st century even began.  And while the influence of the Chinese economy on the world in the past several decades is undeniable, understanding the goals and motivations of that economic activity is much more complex.

2014 could shine an unprecedented light on just those drivers.  Few other than the diamond industry or attentive moviegoers who remember the closing scenes of Blood Diamond know about the Kimberley Process (KP).  But even for those unfamiliar with the relatively obscure initiative designed to curb the flow of “conflict diamonds,” China’s role as next year’s chair could provide important signals on China’s thinking on a range of key issues, from natural resources management and development in Africa to the evolution of consumer consciousness toward “ethical” products,  the role of civil society and the thorny subject of unilateral and multilateral sanctions.

Unlike other international forums where China’s periodic leadership is a mandatory element, such as when it serves as Security Council President, the KP Chairmanship is voluntary.  And given some of the structural elements of the organization, explained below, the chair can have inordinate influence on the progress – or stasis – of a given year.  Having volunteered to take the reins of the KP and understanding the authority that comes with the role, China hopefully has an agenda in mind.  Whether and how that agenda unfolds can tell us much.

Kimberley Process Primer

First, it’s important to note a few basic points for the KP-uninitiated.  Non-governmental organization and UN reporting demonstrated that the rough diamond trade helped to fuel conflicts in the late 1990s in Angola, the Democratic Republic of the Congo, Liberia and Sierra Leone.  Estimates ranged from 4-15 percent of the global diamond trade at the time may have been in stones sold to fund these wars.

Both because of the need to preserve consumer confidence in diamonds and to take a stand against such horrors, the diamond trade joined with governments and NGO reporting to develop a response.  The South African government convened the first meeting in Kimberley, South Africa, in May 2000, and the Kimberley Process was born.  Over the next 2.5 years, backed along the way by UN General Assembly Resolution 55/56 (December 2000), negotiators developed a universal certification system for all cross-border trade in rough diamonds that would exclude “conflict diamonds.”

The Certification Scheme requires participating governments to develop an “internal controls” system to ensure that conflict diamonds, defined as rough diamonds sold by rebel movements or their allies to fund efforts to overthrow legitimate governments, are excluded from the trade.  Each shipment of rough diamonds, whether produced in the country or being re-exported, must be accompanied by a certificate attesting to the conflict-free status.  The system of government certification is then complemented by a “System of Warranties” developed by the umbrella organization the World Diamond Council and implemented by the industry through use of a warranty statement on transaction documents.

The KP is not a treaty-based organization, but rather has a common “core document” that governments agree to implement.  This commitment is backed by a World Trade Organization waiver that allows for a closed trading system; exports may only be made to other countries within the system.  As such, the system is “voluntarily mandatory,” meaning that a country need not join, but must do so if any of its consumers or companies want to engage in the rough diamond trade.  Similarly, exclusion from the KP results in exclusion from the global trade.

As of mid-2013, there are 81 countries within the system, representing more than 99 percent of global rough diamond production and trade.  According to the Kimberley Process’ dedicated statistical website, the initiative generally oversees $12-$14 billion in production and more than $50 billion in export and re-export trade each year.  All of this is achieved without a headquarters, governing board, funding mechanism to support implementation, or, until 2012, any type of administrative secretariat.  Rather, the system is headed by an annually-rotating chair, managed by a system of working groups that also include the industry and NGOs as non-voting observers, and dependent on the resources of individual countries to be enforced.  Decisions within the KP are taken through consensus by unanimity, meaning that a single “no” vote can defeat a proposal.

Like a Diamond, is the Kimberley Process Also Forever?

Early growing pains were followed by real challenges.  In recent years, the once largely-technical body has become increasingly politicized following high profile disputes.

The first emerged when NGOs within the KP reported that Venezuela had failed to implement any semblance of an internal controls system.  After two years of difficult negotiations, the country eventually decided in 2008 to “self-suspend” and remove itself from the system while it developed a new compliance program.  Venezuela has failed to do so five years on, leaving the KP unsure of how to push further progress.  A December 2012 Reuters article claimed Venezuela was mocking the KP through its inaction.

More significantly, the KP struggled from 2009-2011 to develop a response to grave, government-led violence in Zimbabwe’s Marange diamond fields in late 2008 and early 2009.  Although many in the KP initially advocated for an outright suspension of the country, China and others argued that this could not be done because violence initiated by governments does not fall within the definition of “conflict diamond.”  A specific monitoring system was eventually implemented for Zimbabwe, but it was fraught with difficulty, leading to accusations that the West was pursuing other agendas through the KP.  The monitoring system proved effective over time, but led to debilitating rifts.  In 2012, the U.S. chair introduced an updated definition of “conflict diamond” seeking to address perceived deficiencies in the original construction.

The U.S. chairmanship in 2012 did witness the adoption of several reforms but left the key question of the “conflict diamond” definition unresolved.  South Africa was selected to guide the initiative through 2013, its tenth anniversary.  In November 2013, South Africa will host the Plenary, where it is expected modest gains will be made to address the implementation and enforcement of the initiative.  But absent a surprising turn of events, KP reform efforts will likely remain on the table.

Through the range of disputes described above, the role of the chair proved increasingly critical.  When the KP chair was willing to step forward and pursue a strong agenda, results often ensued.  When the chair avoided an issue, pursued its own specific interests or refused to push against perceived impositions on participant sovereignty, the divisions deepened.

 Uncomfortable but Unavoidable Questions

These disputes have given rise to a number of essential, if uncomfortable, questions that arguably threaten the viability of the initiative itself.  For those working in sectors beyond diamonds, the themes behind the questions posed above are likely to be quite relevant:

• Can concepts of “human rights,” which implicitly drove the creation of the KP, be incorporated in an explicit and binding manner into a multilateral system managed by governments?  Can Western approaches to respecting and protecting human rights be squared with those elsewhere?
• Do consumers actually care about the ethical origin of the products they purchase, or are their main concerns price and quality?  Have consumers in newly-dominant markets such as China, India or the Middle East developed ethical consciousness yet?  Will they?
• How strongly are governments willing to respond to violations by other governments within a multilateral system, especially when such violations result from internal issues that go to the heart of national sovereignty?
• As African economic fortunes rise, largely on the back of natural resource production, how do African governments exercise political control and influence?  What role does the large-scale Chinese investment in Africa play in defining African political perspectives?

When China assumes the helm on January 1, these questions will likely remain unanswered.

Enter China: A Guide for the Potentially Perplexed

As indicated above, the chair of the Kimberley Process plays a critical role in setting the agenda for the year and responding to issues that emerge along the way.  The chair hosts two meetings per year, and what those meetings achieve — and how they are perceived by observers — depends largely on what the chair seeks to accomplish.

For those outside the KP looking for clues to their own sectors that could emerge during China’s chairmanship, here is a guide for the potentially perplexed:

• How does China handle the “conflict diamond” definition?  The primary arguments in support of updating the definition of “conflict diamond” emanate from a view that consumers do not distinguish between rebel-led and government-led violence and expect diamonds to be “blood-free.”  Yet there is little concrete data demonstrating consumer purchases of diamonds are driven by ethical concerns, even in the West.  There is every possibility that the diamond trade could follow the fur industry and wither as a result of consumer worries, but that has not been seen to date.

China, as the home of an emerging consumer class and the world’s largest jewelry retailer, could take a proactive approach and support an updated definition to ensure consumer confidence.  Or, alternatively, China could ignore, or officially terminate, the proposal, indicating that it does not believe there is sufficient market pressure in the West or at home to force a change.

• If the definition itself does not expand, will China support other approaches to integrating human rights?

Even if the definition is not expanded, the KP could take supportive stances on the inclusion of human rights in the implementation of the initiative, such as ensuring respect in the circumstances of how diamonds are mined and traded.  Moving away from a definition-based approach would mean that human rights issues could be raised within the KP as an area that a country needs to improve upon, but generally not threaten its ability to trade rough diamonds within the certification system.  This has been endorsed by the diamond industry and is seen by many opponents of the definitional change as a compromise approach.

China’s adoption of this position would almost assuredly lead to its success.  However, this would require China to acknowledge the potential applicability of human rights to economic systems implemented on a national level.  From Internet freedom to labor rights, China has traditionally opposed such steps within its own borders.  As the chair of a multilateral initiative, China could be convinced to accept it as a consensus-building path and start a new course.  Should China maintain its position and oppose the introduction of human rights, it may augur the continuation of hostility towards such rights in other sectors.

• What happens if diamond-related violence emerges among rebels in a KP Participant?

The Central African Republic (CAR) was suspended by the KP in mid-2013 following rebel activity that led to the overthrow of the existing government.  The country was subsequently suspend from trading within the KP and is likely to remain suspended through the remainder of 2013.

As China takes the helm, it will be forced to answer the question of how a specific “sanction” like this suspension is managed.  Traditionally, China seeks to avoid interference in domestic affairs or to infringe on sovereignty.  But if the integrity of the trading system is to be maintained, then these types of actions are required.  Should China recognize this necessity and stand behind the CAR suspension or endorse this step elsewhere, it could point to a potential opening in the Chinese willingness to accept this approach in other forums.

If China proceeds to advocate for the lifting of the CAR suspension, or is unwilling to push for such steps should rebel activity emerge elsewhere, it could signal the continuation of Chinese hostility toward multilateral sanctions.

• How does China respond to African producer concerns about not benefiting fully from the revenue generated by the diamond trade?   One of Zimbabwe’s arguments against suspension was that the West was seeking to impose terms on an African producer that would only benefit the traders and consumers, hearkening back to the legacy of colonialism.  Although untrue, it resonated with many producers, who expected that the KP would be an institution that would protect their interests and be a forum to promote development in Africa.

This could be the trickiest of all issues for China, which is extensively invested in Africa.  In many African countries, China exchanges short-term investment and infrastructure projects for the right to extract the natural resources necessary to support its economy.    Many lauded China’s approach as a new alternative to the West’s historic debt-and-aid approach.  Over time, cracks are developing in China’s “no political questions asked,” particularly as many African governments move from dictatorships to democracy.  For example, China tends to bring in its own workers and managers to perform the work, often leading to hostile relations with local citizens and political leaders.  In some higher profile cases, such as copper mines in Zambia, this hostility has led to serious violence, leading the New Yorker to ask in June 2013 if China is a nation of “New Imperialists.”

If China shows support for recent reforms that seek to integrate development objectives, such as improved oversight, regulation, and protection for artisanal miners and local communities in mining areas, into KP implementation, it may demonstrate a recognition of responsibility for its activities in Africa and around the globe.  If it opposes such steps, then those hoping to see a change in approach from China toward Africa will be disappointed.  And how African governments then respond to China will be perhaps the most telling aspect of all.

KP, China, and 2014: Much Ado About…?

The Chinese chairmanship of the Kimberley Process in 2014 could be a watershed for China, as it voluntarily steps forward to lead a multilateral, multi-stakeholder initiative.  Whether it takes a proactive stance on some or all of these issues could signal a new direction for the Chinese Century.  The expectation for any leader is that they have to be “for” something and cannot simply oppose all progress.  Where that progress is made will be instructive to many observers.

But if China’s approach is to host two enjoyable meetings for participants that show no interest on the chair’s part to move these critical issues forward, it will not only mean rougher times for the KP, but show consumers, manufacturers, and other governments around the globe that the motivations of the Chinese Century will veer little from those seen to date.

Expert Biography

Brad Brooks-Rubin is an attorney with Holland & Hart who advises national and international clients on nearly all aspects of trade sanctions, export controls and international trade laws and regulations. His practice also focuses on compliance challenges in the emerging fields of conflict minerals due diligence, and human rights and corporate social responsibility in business matters, enabling clients to benefit from a more comprehensive and efficient approach to supply chain management.   From January 2009 – June 2013, he served at the U.S. Department of State as the working level representative of the United States to the Kimberley Process.  He can be reached at [email protected] or 202-654-6912.