7 Mar 2018

No one benefits from China’s waste imports ban

Fangzhou writes:*

I can still feel my emotions watching "Plastic China," the 2016 IDFA-awarded documentary about two families living and working in one of the thousands of imported waste factories in China. The film was widely discussed by Chinese on social media at the end of 2016, when (coincidentally?) the ’National Sword’ restriction on imported waste came into effect. Seven months later, China gave an official notification banning imports of some types of solid waste to the WTO. The ban went into effect on 1 January 2018.

Social media did not influence the recycling industry, but the ban did. Millions of workers, brokers, transporters and businesses lost income in China and exporting countries. As one of the largest exporters, US already witnessed a 13.5% reduction of plastic scrap exports as a result of the ban's strictness. China's decision to leave the $50 billion plastic waste market also caused tensions domestically. People lost their jobs and some even went to jail for not shutting down recycling factories on time. This lose-lose dilemma makes me think of the world's interdependency.

From an economic perspective, the costs and benefits of the restriction can be briefly illustrated within a simplified bilateral market that looks like this:

In the US, the ban will reduce demand for exported plastic (flow 1) by nearly 290,000 tonnes per year, impacting over 15,000 workers and $3 billion per year of  taxes. The switch to domestic recycling (flow 6) will cost the US over $0.14 billion, or 0.6% of solid waste management costs of all upper-income countries.

China's manufacturers will rely more on virgin plastic to replace lost US supply. Costs saved in purchasing wastes (flow 1, $34 million per year) are not enough to compensate the expense of non-dirty plastics (flow 7). A similar situation took place in 2016 when the US exported less scrap plastic to China but more to India, Vietnam, Mexico, Malaysia and Thailand. It is possible that alternative markets will accommodate the waste rejected by China, but that adjustment will not be easy.

The values above only include purchase, operation, maintenance, and debt service. When taking into account the negative externalities on ecosystems, the costs of the ban could be higher as there is no such thing as ‘clean plastic'! Plastic production increases CO2 emissions, plastic pollution in the ocean, and contamination of water sources.

Who should pay for negative environmental impacts? The producer, the consumer or the recycler? It does not matter when the whole world is suffering from the pollution.

Bottom line: The ban on imported plastic waste reveals the deep interdependence between the Chinese and American markets, but it also shows the social and environmental challenges caused by waste.

* Please help my environmental economics students by commenting on unclear analysis, other perspectives, data sources, etc. (Or you can just say something nice :)