The Tom Lantos Block Burma JADE (Junta's Anti-Democratic Efforts) Act, a piece of US legislation aimed at placing sanctions on the Burmese junta, appears to have hurt the wrong guys as far as Thailand and Burma are concerned.
The Act, which was enforced last year when the US stepped up its economic sanctions against the military regime, has negatively affected Thailand's jewellery industry because it uses Burmese semi-precious gems, which are now banned in America. The US law has also hurts ordinary Burmese as many earn their living from mining and trading gemstones on the Thai-Burmese border.
As a result, a group of US officials representing the Government Accountability Office (GAO) were here recently to gather information about the effectiveness of the Tom Lantos Act. GAO is responsible for following up on US government programmes and activities and making recommendations to the US Congress. A report on the Tom Lantos Act is due by the end of September.
Thailand does not have indigenous sources of gemstones, so rough gems are still being imported from Burma for the cutting industry in Chanthaburi and Bangkok.
Unlike diamonds, nobody controls the supply of semi-precious stones. Fifty years ago, India used to be the main ruby-trading centre, but since then most of the trading has been done in Thailand. However, with the implementation of the Act, it is possible that the centre will be relocated to China in the next five years.
This is because Thai ruby-traders won't buy them because they can't sell it in the United States, and as a result, Burmese suppliers are now selling to China.
In addition, the US ban has hit small miners in Burma because they are no longer able to make quick sales to their closest neighbour, said Anthony Brooke, a director of the Thai Gem and Jewellery Traders' Association.
So to survive, they are being forced to sell to the junta, at a much lower price, and the junta then goes on to make foreign exchange by selling the stones to other international buyers.
As a means to stop this drain, the Thai jewellery industry has said that it is ready to cooperate with the US provided the legislation hurts the Burmese junta as intended, instead of poor Burmese miners and low-income workers in Thailand.
Prior to the US ban, 80 to 85 per cent of Thai dealers purchased rough stones from border sources, and very few were bought through the junta's sources.
The ban also seems a bit pointless because testing each and every stone to see if it comes from Burma can be prohibitively expensive.
Plus, the ban has forced the price of rubies to drop considerably, and markets in Mae Sai and Mae Sot districts have gone quiet, while many cutting factories in Chanthaburi have closed down. This slump has also prompted Thai gemstone operators to quit the business.
In 2008, Thailand exported more than Bt429 million worth of rubies to the US, but since the introduction of the Tom Lantos Act exports to the US have plummeted.
Overall, the Thai jewellery industry employs more than 1.1 million people, and its output accounts for 2.25 per cent of Thailand's gross domestic product.
Given the significance of this industry, US authorities should review its legislation and minimise unintended negative consequences.