Give Me Freedom, Give Me an Independent Voice!

"Can you imagine postal workers around the world being told to boycott mail from a certain country because of human rights abuses in that country?!" This is what a flabbergasted industry member asked me recently. His response reflects a growing sentiment in the middle section of the diamond pipeline, which includes rough diamond buyers, manufacturers and polished diamond wholesalers.

This sentiment does not reflect a lack of ethics or moral fiber. In fact, when it gets to working out the issues, this section of the pipeline has always been at the forefront.

Diamond traders and their representatives had a key role in forming the Kimberley Process (KP) and they don't understand why the lower section of the pipeline, jewelers, demand, "something be done."

Nearly 52,000 KP certificates were issued in 2010. Almost 41,000 – 79 percent – were counted in the trading and manufacturing centers of Belgium, UK, Israel and India. None of them reached jewelers.

Traders are paying the cost, legal liability and responsibility to be fully KP-compliant. They are the ones who face the added work and the administrative and financial burdens of getting the goods certified or released; and they are the ones who need to do the necessary due diligence to ensure that they purchase only KP-compliant goods.

Furthermore, it was this section that was in the fray when the KP was drafted. It is they who participate in KP review missions to hot spots such as Zimbabwe, Liberia and DRC. There were no jewelers on these missions. The mid-section of the industry is truly engaged in and supports KP implementation.

From this perspective, jewelers' demand that something be done is like saying that a car does not have an engine because the driver never looked under the hood. Without an engine, the car will go nowhere, no matter how skilled the driver. Diamond traders are doing much, it's just transparent to retailers.

Jewelry organizations come up with all kinds of impossible suggestions to change the Process. It may sound terrific to the ears of non-understanding bureaucrats, but these suggestions cannot be implemented. In addition to being unworkable, they create unnecessary friction within the KP community.

The diamond trade has imposed voluntary warranties on itself, which the jewelers belittle. They don’t understand that these guarantees are signed statements by diamond traders for which they are legally liable. Making false statements constitutes fraud that may trigger other legal claims.

These warranties are serious and, to my knowledge, jewelers have not imposed anything similar on themselves.

The governments of KP-member countries also audit the industry’s KP warranties on polished diamonds. The industry is willing to live with these burdens. It only asks not to be challenged by jeweler organizations eager to out-NGO the NGOs.

There is so much more that bothers diamond traders. They buy rough for cash, make large investments in technology, have high labor costs and then finance jewelers – who ask to have goods on memo or 120-day credit.

To make matters worse, jewelers don’t seem to appreciate that diamond traders have a very narrow margin of some 10 percent. Retailers' mark up is in the 30-100+ percent zone.

When jewelry organizations ask for the Chain of Custody to be implemented, traders hear, "Whatever you are doing is not good enough, now pay more to implement an additional system so we the jewelers could do better." Jewelers, in the meantime, are not willing to pay more for the diamonds they buy. They say so themselves, quite bluntly.

Diamond traders are between a rock and hard place. If some future event turns consumers against diamonds, jewelers can still sell gold jewelry. Diamond traders will be out of work.

This debate is creating a rift in the diamond industry, which is represented in the KP by a single organization – the World Diamond Council (WDC). The WDC represents the entire pipeline, from miners to jewelers. With such different needs and outlooks, some are starting to think it wrong that a number of NGOs serve as Independent Observers in KP, but only one entity represents the diversified trade. This may change soon.

In India and Israel, concerned industry leaders and opinion makers are already thinking of forming an additional Independent Observers body that will voice the needs of the industry and trade at KP. This is a good and necessary move, and we hope that Belgium and others will join this initiative. The group feels that the KP decision process is not hearing the real, daily users of KP and, therefore, it wants to be able to speak independently of jewelers and present their different perspective.

For example, the industry member mentioned above – who asked for anonymity – states, "KP is essentially an international customs organization for rough diamonds." Because of that, human rights issues should be directed to the UN's Security Council.

The Security Council dealt well with Angola and Liberia when it imposed sanctions on diamonds, arms and placed travel bans during and after the civil wars in those countries. Last April it did the same with Côte d'Ivoire, placing an arms embargo, travel ban, assets freeze and diamond sanctions on the country. KP, of course, follows suit and diamonds from sanctioned countries are not allowed to be traded. This is just one of a wide number of effective moves that have been taken by the international community.   

It is also a far better solution than the suggestion to add human rights to the core documents of KP, especially when several countries within the consensus-based system will never agree to the change – so why waste time on a divisive debate that will lead nowhere?

Forming a new Independent Observers body is necessary. The diamond industry's voice will be heard more clearly and there will be more players sharing the burden of responsibility within the KP committees and bodies. The entire spectrum of the diamond value chain, including consumers and poorly paid diggers in Africa, will only benefit from this.