Waste Import and Export Bans: China

Overview

Trade rules may well play a more important role in driving circular economy policies. Regions that are implementing sustainable design rules and circular product standards for locally manufactured goods will likely expect compliance for imported goods. Less controversial and easier to implement than border adjustment taxes, sustainability rules for manufactured products can act as a catalyst for circular economy policies.

Impact

The plastic waste crisis and China’s 2017 National Sword policy, which effectively banned waste imports to the country, were two factors that accelerated the move to a more circular economy. Prior to this, China was the world’s largest buyer of scrap material. The abrupt ban, which took effect in 2018, left many countries scrambling to find another market to accept the waste, or to find recycling capacity at home.

Exports of both paper and plastic, the two lowest-value scrap materials, dropped between 2010 and 2018, in some cases significantly. A few countries were able to divert waste from China to Vietnam, Malaysia and the Philippines in order to continue exporting, but this is a short-term solution. Some of these nations have limited capacity to process domestic waste, which is growing rapidly partly thanks to urbanization.

Many Southeast Asian nations have followed China’s example and also set quotas or bans on waste imports, leaving countries in the Americas and Europe with few options but to landfill, burn or store the waste themselves.

Opportunity

These trends could spur more countries to impose their own export bans, in an effort to encourage domestic recyclers to increase their capacity with the promise of a healthy supply of scrap material. Australia is a rare example of this, having put in place a gradual export ban on most of its waste. However, these mechanisms alone have not been sufficient incentive to build a domestic recycling industry. Earmarked funding, such as the A$190 million (U.S.$132 million) the Australian government put toward a ‘Recycling Modernisation Fund’, along with landfill bans, high tipping fees and recycled content mandates are all needed to align the entire supply chain toward circular economy goals.

Other governments may follow the example of the EU, which is seeking to use the Single Market to broaden the reach of of its circular economy policies. In its 2020 Circular Economy Action Plan, the European Commission said that it would seek to incorporate “circular economy objectives in free trade agreements, in other bilateral, regional and multilateral processes and agreements, and in EU external policy funding instruments.”

In 2019, the EU imported around $1.3 trillion of manufactured goods. Under proposed regulations, these imports could be subject to ‘eco-design’ standards and recycled content mandates that target upstream design and manufacturing. This would directly impact foreign manufacturers, which could be forced to overhaul supply chains and assembly lines in order to secure continued access to the EU market. Companies with a large customer base in Europe may find it cheaper to redesign all their products to be EU-compliant rather than creating a new variation, particularly if these regulations align with their own goals