IBM, HP, Seagate, and other companies have admitted that some of their products include gold from North Korea. The companies disclosed in recent financial filings – first spotted by Foreign Policy – that some of their suppliers sourced gold from the "Central Bank of the DPR of Korea", according to filings with the US Securities …
>it also complicates the supply chain enough that crap countries run by evil people can still make money.
I presume you're talking about the Western CEO's here.
It seems to me that the main driver for globalisation is to hide profit. You can re-invest in new assets abroad and treat them as an expense rather than an asset depreciating over time. It also gives you a large labour pool which is unlikely to go on strike leading to a more stable supply-chain. Very large companies also use competition between governments to wrangle tax concessions and gain benefits such as government-funded business-parks.
Evil Heads of State Not Required
The separation between raw materials and finished goods is vast. Hell, the road from raw materials to just the factory loading dock is an incredibly twisty and dark road. There are about 7.43 million opportunities for everyone from the truck maintenance guy to the supply chain directors brothers girlfriend to certify/relabel/transship or otherwise degrade the integrity of the supply chain.
It's all fine and dandy to require companies to verify the provenance of materials used in their products, but their information is only going to be as good as they are supplied with and that's always going to be the weak link.
There's no need for a despotic leader to 'ease sanctions', you just need a few general staffers who want to make some extra money on the side. It's never going to be a hard sell to convince someone that checking a certain box isn't a big thing in exchange for food for their kids. Hungry mouths, poverty and valuable natural resources tend to all hang out together and until that changes there is near 100% certainty that the things you are reading this website with, the clothes on your back and the pharmaceuticals in your body are 'tainted'.
Everybody involved knows that too. This is just holier than thou social responsibility theater. But I'm sure a bunch of specialized consulting firms are making good money with it.
Both P.Lee and Don Jefe are correct.
What I would add is that sourcing and manufacturing in other countries allows companies to maintain a certain level of ignorance, or at least 'plausible deniability', providing them with the savings of third-world standards without having to actually get their hands dirty.
This was seen very clearly in the recent Rana Plaza factory collapse in Bangladesh.
What was happening in the clothing industry was (and is!) that western companies were outsourcing at least part of their production to India/Pakistan/Bangladesh but doing so through middle-men, who then farmed to work out to various factories.
In one 'supply chain' reported on, the brand contracted their work to a middle-man company in India. That company then subcontracted the work out to a factory in India who only did a portion of the work themselves. The bulk of the work was farmed out to several factories in Bangladesh. Even then, there were instances where, due to workload or extra orders, some of the Bangladeshi factories further subcontracted out to other, smaller firms.
It's a mess and, as each part of the chain must make a profit, the end result is that the people actually making the product are paid a pittance and are working in, well, death traps.
All through that, however, the furthest the original company sees is the factory in India, which is a nice, clean and relatively modern affair. Unfortunately, nearly none of the work is actually done there.
So, as Don says, there is always the potential that the complication inherent in global supply chains will result in these situations, but there is also the simple fact that some companies prefer this complication for exactly that reason - they end up getting the benefit of the questionable practices (lower costs) but don't have to actually engage in those practices themselves.
In other words, it's not so much that they can't know but that they don't want to.
What you are describing is 100% correct for "pseudo"-brands such as supermarkets and el-cheapo clothing chains (as for example the ones implicated in the Bangladeshi factory collapse disaster).
That is not correct for most real premium brands. These hold their supply chain in an iron fist (usually without any velvet gloves). Examples here would be Apple, most boutique French labels, etc. There are clauses in their contracts that any subcontracts have to be approved and any suppliers have to be approved too.
When I hear that Tesco has no clue what is in their product I actually belive that. They have their supply chain set-up in such a way that it provides them with plausible deniability regarding the truck guy relabeling the horse meat from the horse abbatoir as beef. This is done on purpose too. I find it difficult to belive that Apple, Omega or one of the boutique clothing labels supplying shops that do not even have price stickers on their stuff do not know their goods origin.
What a non-article
Lets have some basics here. North Korea is a pariah state in the eyes of western nations but that does not mean it is not a nation in the eyes of others. North Korea has a major ally who is also its biggest trading partner, it is called China. Who is the world's biggest producer of cheap electornics due to its large industrious low paid workforce, that's it, China a country which is not regarded as a pariah state despite the fact that its treatment of its populace is not exactly a million miles from the way North Korea treats its.
Now the big news, American corporate giants and those companies of other western nations who want to produce goods cheaply to sell at vast margins (talking about you here Apple) to customer's around the world, all buy their electronics in China.
I am amazed that anyone felt they had to do this research as it is abundantly clear that North Korean resources were likely to be used. In fact I would not be surprised to find out that Foxconn workers each rice produced in North Korea and that the slightly radioactive paint for watch dials used in the Chinese watch industry is also produced in North Korea in a factory next to where they test their nuclear weapons.
Desiring the impossible
The assumption here is that if these companies didn't buy gold known to come from NK, NK would not be able to sell its gold, or would have to sell it at a huge discount.
A moment's thought should tell you that's not the case. A minuscule discount will suffice to sell their gold to a country or person who doesn't care, and once their gold is melted with gold from scrap jewellery or scrap computer parts, nobody will have the faintest idea where it came from. (Not that the Chinese even care).
Sanctions can only work for lower-value stuff, especially ones where the refineries are few and specialized. We can probably avoid buying Tantalum ores from war zones where it is dug out by slaves. We can track tankers full of Iranian oil and force them to sell it to customers further away than Europe, causing Iran a small percentage loss (at the cost of increasing global CO2 emissions!) For gold, there's no chance of anything like this working.
Isn't that the most-recycled metal on the planet?
As soon as a gold bar is not freshly dug up, extracted, and cast in a known factory in an "approved" nation, there's a good chance it will contain traces of grave robbery, war, murder, slave trade, genocide, and all the other inventive things the human race has inflicted on his fellows over the course of human history.
So far for "ethics".
If countries are supposed to only by Conflict Free does that mean that no one is buying the few American made products that we still offer?
Globalisation has never brought me any pandas! And now I want to know why. Where's my bloody panda?
I'll have mine medium rare with chips please...
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