Europe's single market concept allows rough diamonds to legally enter the European Union anywhere, whether it is Portugal, Denmark or Italy, to freely move around in Europe.

The strict controls imposed on rough imports into Antwerp violate the single market mechanism since, strictly taken, if the diamonds are already in Europe they cannot be subjected a second time to import controls when the goods reach Belgium.

The EU is not willing to jeopardize the integrity of a "single market" just because of (justified?) Belgian fears that customs officers in the member states may not be familiar enough with diamonds to distinguish between "conflict" and "non-conflict". Or to recognize diamonds for that matter. The Belgian government has now raised the stakes by publicly presenting its own diamond import control system as being more effective than the yet to be implemented Kimberley certification system.

I expect that the U.S. government's General Accounting Office will shortly publish a new report which will also be highly critical of the Kimberley certification proposal, publicly doubting that it can keep conflict diamonds out of the United States. So after dozens of meetings on every continent of the globe, the governmental Kimberley Process may be about to be derailed.

The Belgium government seems ready to fight the European Commission on this issue and its foreign minister fired the opening salvo in the Belgian parliament. "Belgium has said it will not loosen its stringent import control system to comply with the so-called Kimberley international guidelines aimed at curbing the illicit trade in diamonds," says Belgian Foreign Minister Louis Michel, quoted by Reuters, stressing that the "the Diamond High Council physically checks every diamond shipment entering Belgium, including export and import documents, and fears it would have to move to a system of random checks." The Minister told his parliament that "Belgium will never accept - and I stress this - an application of the Kimberley agreement in Europe that results in a reduction of existing verification standards, as this would immediately harm the interests of Antwerp."

This situation poses a challenge to the diamond industry at large. The interest of the industry is clear: to keep conflict diamonds out of the business. It is not inconceivable that the unthinkable will happen: that it may not be prudent for the industry to support the Kimberley Scheme. That would require, however, coming up with a more effective scheme, in conjunction with self-regulation.

There are reports to the effect that Antwerp's Diamond High Council "was asked by the European Commission and the Kimberley group to stop its bilateral initiatives to install monitoring systems." If that is true, then the Kimberley Process prefers political expedience to effectiveness. One might compare it to a central bank asking its member financial institutions to close an eye on money laundering. Simply ridiculous.