mond industry based in Antwerp recognizes this and I applaud the industry for taking steps toward achieving this goal.

Legitimate diamond trade is worth about $55 billion per year and estimates indicate that illegal diamond trade accounts for less than 4.5 percent of the rough diamond production worldwide. Trade in conflict diamonds is a portion of this 4.5 percent. However, even this small percentage of conflict diamond trade is too much, but we must ensure that the steps we take do not undermine legitimate diamond trade through government bureaucracy and tightened price controls. If this happens, the losers are consumers and the African countries engaged in legitimate trade. The winners are the central selling offices of rough diamonds.

Accordingly, I will be looking at all proposals with an eye to determining whether they are administrable, effective, and consistent with our WTO obligations. So let us work together so that we are all winners and send a clear signal that conflict diamonds are not forever.

Mr. LEVIN. Thank you, Mr. Chairman. I appreciate this hearing and the opportunity to hear these distinguished witnesses. Thanks to those of you seated at the witness table, also human rights organizations and others, we have been made aware in recent years of the tragedy of conflict diamonds. Items that should be precious objects of beauty have become too often the currency that perpetuates unthinkable human strife.

In Sierra Leone and Angola, rebel groups are appropriating rough diamonds, selling them, using the proceeds to acquire arms and otherwise continue violent internal conflicts. The practice of trafficking in conflict diamonds has serious implications both for U.S. foreign policy and U.S. consumer protection. This country strives to conduct a foreign policy that emphasizes humanitarian objectives. We take seriously the need to promote respect for human rights around the world. For this reason, we cannot turn a blind eye to this problem.

Further, we have an obligation to protect American consumers from becoming unwitting supporters of gross human atrocities. Diamonds should enrich the lives of peoples in countries that are naturally endowed with them, but instead, peoples in Angola, Sierra Leone, and others are being brought pain and suffering.

I am encouraged that the administration and the international community are taking steps to prevent rebel groups from financing their activities through illegal diamond sales. The two Security Council resolutions are welcome first steps. Likewise, I believe that the diamond industry's efforts to curtail trade in these diamonds are a positive development. So we look forward to listening to you, our colleagues, as well as witnesses from the Department of State, the private sector, human rights groups, and others.

A short time ago, Congress passed and the President signed into law historic trade legislation making the nations of Sub-Saharan Africa our partners in economic progress and prosperity. When fully implemented, that legislation should help to promote increased trade and boost the economic development of those nations. By contrast, the trade in conflict diamonds is actually a set-back to economic development. We must do our part to deter that trade. So I hope today the witnesses will offer helpful suggestions on how

we might do just that, and I want to thank all of you in advance for joining us today and we look forward to your testimony.

[The opening statement of Hon. Jim Ramstad follows:]

Opening Statement of the Hon. Jim Ramstad, a Representative in Congress from the State of Minnesota

Thank you, Mr. Chairman, for holding this important hearing today. As a committed believer in international trade, I have consistently supported opening markets providing more access to goods from around the world. However, as civil war has ravaged some countries in Africa, rebel forces, like the Revolutionary United Front (RUF) in Sierra Leone, have captured diamond mines and used the income from those mines not to help the poor, but to enrich themselves and provide arms and munitions for war. They have also participated in horrific acts of brutality against their opponents and against innocent citizens who happened to be in the wrong place at the wrong time.

To combat this growing problem, the United Nations on July 5th of this year adopted a resolution calling for an 18-month embargo against diamonds from Sierra Leone unless the diamonds can be certified as coming from legitimate sources. Also, the World Diamond Congress has also adopted a proposal to track the source of diamonds.

At this time, U.S. law does not require any information as to the origin of diamonds. I am extremely interested to hear my good friend Rep. Tony Hall's proposal to change that.

While I have concerns about enforcement of the legislation, I am anxious to hear the reactions of the Administration and the industry. Rest assured I will give this important legislation the consideration it deserves and I look forward to today's testimony.

Chairman CRANE. Thank you, Mr. Levin. Now I would like to tell our witnesses that if you can keep your oral testimony to in the neighborhood of five minutes, we would appreciate it. All written testimony, however, will be made a part of the permanent record. With that, we yield to our distinguished colleague from Ohio, Mr. Hall.

STATEMENT OF HON. TONY P. HALL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

Mr. HALL. Thank you, Mr. Chairman, Mr. Levin, members of the subcommittee. I appreciate the chance to testify on a very, very important issue. I appreciate also that my full testimony will be part of the record. I will read from parts of it and refer to parts of it. Thank you.

My focus today is on the humanitarian cost, the human costs of the trade in conflict diamonds. We also call them blood diamonds, or trading of arms for diamonds. I have seen it in Angola. I am aware of it in Liberia and in the DRC. But it has never been more clear than in Sierra Leone, where Congressman Wolf and I had traveled last year. What I want to focus on is the role diamonds play in the butchery in some of the nations blessed with a resource that has become really a curse.

1999 was a very good year for the diamond industry. De Beers, the monopoly which controls 65 percent of the market, posted profits 86 percent higher than in 1998. As a rule, 30 percent of those profits come from conflict diamonds, even though these stones make up between five and 15 percent of the total supply, because they tend to be large and disproportionately valuable stones. In Sierra Leone, diamonds average two carats in size.

1999 was a bad year for the people of Sierra Leone and little better for many in Angola and the Democratic Republic of the Congo. The billion or so dollars brought in by these countries' diamonds last year was used to buy the machetes that severed the limbs, the weapons that have turned rag-tag gangs into their tormenters, and military forces for the international community to reckon with.

When Frank and I were in Sierra Leone last year, we went to the amputee camps. We saw the results of what can happen when you take diamonds and you trade it for arms. We saw a rag-tag army go from 500 rebels to 25,000 strong. We saw the kind of games, or heard about the kind of games, that they played on the people of Sierra Leone. One of the games is, you stick your hand in a bag. You pull out a piece of paper. If it says "hand," they chop it off. If it says "ear," the ear comes off. If it says "foot," they hack it off with a hatchet.

The year 2000 has not changed the equation much except in Sierra Leone. Now U.N. peacekeepers, whose deployment is costing $1.5 million per day, have joined on the misery side of the equation. Five hundred were kidnapped in May and held for more than a month. Today, 13,000 are reportedly holed up in fortified areas, unable to open the country's main road. The force's commander blames diamonds both for rebels' refusal to disarm, as they promised, and for infighting that has paralyzed his peacekeepers.

Unfortunately, these wars have not stopped the diamond business. For other manufacturers, war threatens workers and factories and farmers. For oil companies, war jeopardizes pipelines and equipment. For a diamond trader, though, the economic incentives are backwards. War favors traders who can deliver weapons and supplies. It increases the supply of diamonds available. In fact, wars have been great for business.

Consumer opinion should be an added incentive to do the right thing for most businesses, and it would seem to make the diamond industry particularly sensitive to any link between their product and the savage wars that might stain its image. I think what we see is that the worth of diamonds is pretty much what they symbolize, love and commitment. The image was created and is sustained by an advertising campaign worth hundreds of millions of dollars a year. But it is only an image. Fur, which is another luxury product with an image problem, does keep you warm. Diamonds' worth depends wholly on consumers' perceptions. So sometimes diamonds are not a girl's best friend.

American consumers, who buy two-thirds of all the world's diamonds, have a very different understanding of diamonds than Sierra Leoneans or Angolans or Congolese people, and with the increase in media attention to the horrors of the diamond wars, reality is almost certain to make these conflicting images apparent. Americans are smart and they want action, and they are going to be outraged. I do not think they really know what has happened with conflict diamonds. They are going to be outraged if we do not do something about this.

I was encouraged to see the diamond industry finally do something to end its assistance to this blood trade two months ago. Last year, Frank and I and Cynthia McKinney came up with a more traditional approach, giving consumers information to make their own

decisions. We had urged the industry to either support it or counter it. I had hoped to introduce implementing legislation for their counter proposal, but the industry has not yet finalized its approach.

To encourage this process, I have introduced the CARAT Act, H.R. 5147. Title III expresses the sense of Congress that our government should do all it can to put this proposal or something like it into effect. I believe it is critical that Congress express this now because key countries and segments of the industry are dragging their feet.

The United States is the largest market for diamonds. We have a moral obligation to speak out and what we say will make a difference. Title II aims to add some encouragement to this process in the form of requiring diamonds' origin to be certified as soon as that is technologically feasible and cost effective. Title IV requires the administration to work more coherently on this problem. Under Ambassador Halperin's leadership, there has been more attention and focus.

But much more effort is needed. Over the past decade, our government, has sent $3 billion in humanitarian aid to Angola, Liberia, the DRC, and Sierra Leone, while over the same period $10 billion in diamonds was smuggled out.

Several months ago, 70 American human rights and humanitarian organizations led by Physicians for Human Rights formed a coalition to press for the industry to act on the problem of conflict diamonds. I was not surprised to see their enthusiasm for this work and pleased to learn that they are proceeding in a responsible manner. Launching a boycott of diamonds would be the easiest thing in the world to do on this issue, and this coalition has not done that. Instead, they are waiting to see whether the diamond industry will implement its proposal and what Congress is going to do. I do not expect this coalition to wait forever. Christmas is coming and with it a golden opportunity to educate consumers about where the money they spend on tokens of love goes.

Mr. Chairman, we are running out of time. This has been going on for too long. We have little leverage over these countries in Africa. The threat of our taking away food aid or medicines is not enough leverage. We are not going to commit troops to countries in Africa. We have pretty much determined that. What leverage do we have? I think the only leverage we have in this particular case is to take the profit out of wars, by stopping the trade in blood diamonds. We have a chance to make a difference.

I urge the committee to mark-up H.R. 5147. I would also request that you include the testimony of Mayer Herz, who is a member of the U.S. diamond industry who was not able to testify. Thank

you.

[The prepared statement and an attachment follow:]

Statement of Hon. Tony P. Hall, a Representative in Congress from the State of Ohio

Mr. Chairman, Mr. Levin, and Members of the Subcommittee: I appreciate your focus today, and the opportunity to testify to you. My focus is on the human cost of the trade in conflict diamonds. I have seen it in Angola, in Liberia, and in the DRC but it has never been clearer or sadder than in Sierra Leone, where Congressman Wolf and I traveled last December.

Frank Wolf speaks eloquently about the people who lost their arms, and ears, and lives to machetes wielded by rebels trying to overthrow this small country's democratic government, so I'll let him tell that story. And Cynthia McKinney can tell you what she and other members of the International Relations Committee are trying to do to stop the diamond wars and repair the damage they have caused.

What I want to focus on is the role diamonds play in butchery of people whose nations are blessed with a resource that has become a grotesque curse.

Industry and People

1999 was a very good year for the diamond industry. DeBeers, the monopoly which controls 65 percent of the market, posted profits nearly 90 percent higher than in 1998.

As a rule, 30 percent of these profits come from conflict diamonds (even though these stones make up between 5 and 15 percent of the total supply) because they tend to be large and disproportionately valuable stones. In Sierra Leone, diamonds average two carats in size.

1999 was an unspeakably bad year for the people of Sierra Leone, and little better for many in Angola and the Democratic Republic of Congo. The billion-plus dollars brought in by these countries' diamonds last year was used to buy the machetés that severed their limbs, and the weapons that have turned ragtag gangs into serious military forces their neighbors and international troops will reckon with for years to come.

The year 2000 hasn't changed the equation much-except in Sierra Leone. Now UN peacekeepers, whose deployment is costing $1.5 million per day, have joined on the misery side of the equation. In May, 500 were kidnaped and held for weeks. Today, 13,000 are virtually holed up in fortified areas-unable to open the country's main road, much less protect civilians. The force's commander blames diamond profiteering both for rebels' broken promise to disarm, and for in-fighting that has paralyzed his peacekeepers.

Incentives All Wrong

Unfortunately, until very recently, the diamond industry hasn't considered any of this to be its problem. For most manufacturers, war threatens their workers and factories. For oil companies, war jeopardizes their pipelines and equipment. For the diamond industry, though, the economic incentives are backwards. War favors traders who can deliver weapons and supplies, and war increases the supply of diamonds available. In recent years, war has been great for the diamond business.

The niceties of international law haven't been much of a deterrent to the diamond industry's participation in these wars either. For eight years, traders dealt gladly with rebels who tried to overthrow Sierra Leone's elected government, and briefly succeeded.

The business partners of a generally respectable industry there were rebels who used the profits from their trade to turn children into their parents' murderers, and then into soldiers and sex slaves. . . rebels who spent their earnings on drugs to make their young fighters fearless, and to buy the weapons that make this one of history's uniquely brutal wars on civilians. Traders reported these as Liberian diamonds-six million carats a year worth, when they knew full well that Liberian mines can produce just 2 percent of that.

There are similar stories in the Congo and in Angola, whose people are now beginning to starve and whose land has been turned into a minefield. In Angola, DeBeers bragged in a recent annual report about its prowess in being profitable enough to buy enough rebel diamonds to keep prices from collapsing.

Consumer Opinion

So economic and legal incentives for peace failed. For most businesses, a third factor often is reason enough to do the right thing: customer opinion. The diamond industry would seem to be particularly sensitive to any link between its product and savage wars that might stain its glittering image. Industrial diamonds (most of which are man-made) have a real value-but diamond gemstones' worth is in what they symbolize: love and commitment. This image was created and is sustained by an advertising campaign worth hundreds of millions of dollars a year. . . but it is only an image. Fur, another luxury product with an image problem, does keep you warm. Diamonds have no intrinsic value: their worth depends wholly on consumer sentiment.

American consumers-who buy two-thirds of all the world's diamonds—have a very different understanding of diamonds than Sierra Leonean, or Angolan, or Congolese people. And with the increase in media focus on the horrors of the diamond wars, reality is almost certain to reveal these conflicting views. As the situation now