Policy recommendations

  • The European Union should allow ACP countries to maintain their sovereignty and policy space in relation to the appropriate use of their own natural resources. They should be able to use investment regulations, tariff barriers and export restrictions to promote equitable, local and sustainable economic development.
  • The European Commission through its development policy should stimulate resource-rich developing countries to implement their own industrial policies, to protect their infant industries by using legitimate barriers to trade, and by introducing environmental measures. This should allow resource-rich developing countries to move up the value chain, so that the added value to (semi) processed products will remain in the country of origin and would thus stimulate economic development.
  • Within its development budget the EU should allocate sufficient resources to the building of energy and environmental infrastructure to enable developing countries to stimulate economic development.
  • The EU should use its political and economic power to set clear rules in relation to the extraction of raw materials. Like suggested in the February 2011 RMI update an EU code of conduct for EU companies operating in third countries should be developed and measures should be taken to enforce such a code of conduct.
  • In order to provide for more transparency in the supply chain and to minimize the role of European companies in fuelling conflicts over resources, the EU should implement Country by Country reporting, following the US example of the Dodd Frank Act.
  • Within the EPA negotiations the EU should be more flexible as suggested in the RMI update and make sure developing countries can demonstrate the use of export taxes as a policy tool and therefore keep using them.
  • In all policy initiatives and actions elaborated on the basis of the strategy laid down in the Raw Materials Initiative that affect developing countries, DG Development should be closely involved, and ACP partner countries and civil society organisations should be consulted.

 

 

Case: Raw Materials Initiative

12-05-2011 Raw Materials and transparency hot topic among various MEPs

The Raw Materials Initiative set up in 2008 leads to many discussion and questions among MEPs. In the first place this initiative could lock resource-rich developing countries in a situation where they have no choice but to remain net exporters of raw materials, instead of being given the chance to develop their own downstream industries and move up the value chain. This outcome conflicts sharply with EU developments objectives, as to better integrate developing countries on the world market. In the second place, the raw material industry is subject to many financial scandals.

There are increasing calls for more transparency concerning payments made by international corporations to governments of states that issue permits to mine valuable raw materials or to provide oil production rights. This lack of transparency fosters corruption and inhibits the development objectives of the EU. More financial transparency can be obtained by implementing country-by-country reporting which is similar to the US equivalent; the Dodd-Frank Act, which should lead to transparency in trade in minerals, which are currently for instance  fuelling and funding the armed struggle in the Eastern Democratic Republic of Congo. Besides country by country reporting would also make tax payments more transparent, this way tax evasion by multinational corporations can be tackled as well.

For more information on this, please see our policy case studies on raw materials and on fair taxes.

The four questions below all emphasis the need for transparency in general and on raw material trade and production. Fair Politics is happy to see that so many MEPs are concerned about this and therefore awards a point to MEPs Franz Obermayr (NI), Judith Sargentini (Greens/EFA) and the Greens/EFA group (Franziska Katharina Brantner, Reinhard Bütikofer) and the S&D group (María Muñiz De Urquiza) and to MEP Fiona Hall (ALDE).

Monitor fair: NI, S&D, Greens/EFA, ALDE

Parliamentary question
E-003001/2011
17 March 2011
WRITTEN QUESTION, by Franz Obermayr (NI)

Subject: Transparency of financial transactions in mining and oil extraction
There are increasing calls for transparency concerning payments made by international corporations to governments of states that issue permits to mine valuable raw materials or to provide oil production rights. More and more 'end consumers' are now rejecting the exploitation of workers and the wide scale environmental destruction involved in the extraction of valuable raw materials (e.g. the sale of so called 'blood diamonds'). One of the most significant issues in the extraction of raw materials and the production of oil is that it is very difficult to trace where the products come from, and traceability of the payments made by corporations to governments is also often poor. This is obviously an important issue for the EU, since a legislative proposal on this issue will be submitted by the end of the year.
The disclosure of transactions made between corporations and governments is being followed very keenly by international NGOs. A recent report by Transparency International and the Revenue Watch Institute deals with the anti corruption measures of international gas and oil companies, and the payments made by corporations to the governments of countries where they operate are being analysed.
1. What is the Commission's view of the lack of transparency regarding financial transactions between international corporations and European governments?
2. What action does the Commission plan to take in order to guarantee the traceability of products which are bought and sold in Europe?
3. How does the Commission plan to ensure that third countries take steps to end the exploitation of those working in resource extraction and to improve their often poor working conditions?
4. Which studies are being used as a basis for the legislative proposal planned by the EU which is to be submitted at the end of this year?

Parliamentary questions
O-000095/2011
18 April 2011
ORAL QUESTION, by Franziska Katharina Brantner, Reinhard Bütikofer, on behalf of the Greens/EFA Group and María Muñiz De Urquiza, on behalf of the S&D Group

Subject: A comprehensive EU strategy on conflicts on natural resources 
The 2011 Annual Action Programme of the crisis-preparedness component of the Instrument for Stability (IfS) (Article 4(3)) includes a proposal for action to strengthen the capacity of local non-state actors to better understand and resolve natural resource conflicts. It seems however that this particular action is not coordinated at EU level.
To date, neither a comprehensive EU strategy on conflict over natural resources nor any binding code of conduct or reporting rules for activities in third countries exist. This stands in stark contrast with legislation in the US (Dodd-Frank bill), Canada, Norway and Hong Kong that requires private companies to disclose the amount and the recipients of payments made in exchange for natural resources.
This lack of transparency fosters corruption and conflict in third countries. A recent report by Transparency International shows that very few multinational companies disclose their payments to host governments with, for example, not a single EU company having revealed its transfers to the Libyan regime.
How does the Commission intend to integrate the proposed IfS project into an overall EU approach to conflict and natural resources?
When will the Vice-President/High Representative, with the EEAS and in cooperation with the Commission, present a comprehensive EU strategy on conflicts and natural resources, including an appropriate and binding code of conduct for those operating in third countries and especially for projects receiving EU funding, such as from the EIB or through the EBRD?
Does the Commission intend to include mandatory disclosure rules for payments to third countries in its proposal on country-to-country reporting to be published later this year?

Parliamentary questions
P-004340/2011
2 May 2011
WRITTEN QUESTION, by Judith Sargentini (Greens,EFA)

Subject: European legislation on conflict minerals
The United States is in the process of implementing the provisions of Section 1502 and Section 1504 of the Dodd Frank Act.
Section 1502 addresses conflict minerals. This section requires all listed companies to report on their use of these minerals. This should lead to transparency in the trade in minerals fuelling and funding the armed struggle in the Eastern Democratic Republic of Congo.
Section 1504, on the other hand, addresses financial transparency. This section requires all listed oil and mining companies to disclose the revenues they pay to governments worldwide.
In the joint resolution on failures in protection of human rights and justice in the Democratic Republic of Congo of 7 October 2010 (P7_TA(2010)0350), the European Parliament invited the European Commission to draft European legislation on conflict minerals (under Section 1502 of the Dodd Frank Act).
1. Can the European Commission confirm that it is presently preparing legislation on country-by-country financial reporting (comparable to Section 1504 of the Dodd Frank Act), instead of legislation on conflict minerals reporting (comparable to Section 1502 of the Dodd Frank Act)?
2. Can the Commission confirm that modifications in the Transparency Directive will address the new EU requirements on financial reporting?
3. Can the Commission indicate how it will honour the request by Parliament in the joint resolution on human rights and justice in the Democratic Republic of Congo of October 2010 (P7_TA(2010)0350) to establish EU requirements on conflict minerals reporting (comparable to Section 1502 of the Dodd Frank Act)?

Parliamentary question
E-003369/2011
29 March 2011
WRITTEN QUESTION, by Fiona Hall (ALDE)

Subject: Country-by-country reporting
The EU recognises the need for country-by-country reporting of tax and other payments to governments by cross-border companies so as to ensure that developing countries can maximise their own resources for development and deter tax fraud and corruption.
What steps will the Commission take to ensure that the scope of its proposal for a regulation will extend to all cross-border companies and that  pre- and post-tax profits as well as taxes and other payments are reported, as called for by European Parliament resolution of 8 March 2011 on Tax and Development Cooperating with Developing Countries on Promoting Good Governance in Tax Matters (2010/2102(INI))?
Given the importance of ensuring that financial reporting requirements are consistent across different jurisdictions in order to avoid multiple reporting standards which are costly for companies and may create problems of comparability of financial information between jurisdictions, what steps will the Commission take to ensure that its proposal for regulation is consistent with Section 1504 of the Dodd Frank Wall Street Reform and Consumer Protection Act in the United States, which requires extractive companies to disclose payments to governments for each of their projects in every country where they operate?