EU Tax Observatory Seminar

Du 19/01/2024 de 12:00 à 13:00

Salle R1.14

MOREAU-KASTLER Ninon (ENS Paris-Saclay)

(JOB TALK) No blood in my mobile: regulating foreign suppliers

Can developed countries enforce that goods consumed domestically do not contribute to human and environmental rights violations in developing countries where they are sourced? This paper studies how global trade reacts to new due diligence policies, which constrain firms in developed countries to prevent human rights violations involvement of their foreign suppliers as much as possible. I study the US Dodd-Frank Act Conflict Mineral Rule (2010), a law targeting specific conflict minerals extracted in D.R.C. and adjoining countries. I study the consequences on source countries’ trade integration. Comparing targeted bilateral trade flows to non-targeted products and exporters within the structural gravity framework, I find that this policy decreased D.R.C. and adjoining countries’ exports in value of 3T products by 70%. However, this new type of extraterritorial law has unintended consequences: I estimate that 38% of exports are diverted to opaque countries, called legal havens after the law is implemented. Looking at US firms’ reactions, I show that sales are negatively affected, while administrative costs increase at the time of the law.