China Scraps Waste and Scrap Imports
Closure Will Have Significant Effect On Trade Worldwide
China has recently taken steps to close its waste and scrap market—the world’s largest—to imports, jeopardizing more than $5 billion in exports from the United States, the world’s largest waste and scrap exporter.
On July 18, China notified the World Trade Organization (WTO) that it would no longer accept imports of plastic, textiles, unsorted paper, artificial fibers, and certain metals. The notification stated China’s restrictions would enter force in September 2017 and all imports of these items would be blocked by the end of the year.
On July 27, China’s State Council went further, setting a goal of ending all solid waste and scrap imports by 2019 and replacing them with domestic sources. Chinese regulators have also taken steps that place de facto limits on waste and scrap imports into China. China’s Ministry of Environmental Protection (MEP) issued a draft regulation in August setting a maximum contamination rate of 0.3 percent for scrap imports.
According to the Institute of Scrap Recycling Industries (ISRI), a US recycling industry association, China’s proposed contamination threshold would constitute a ban on the import of all scrap imports to China, as it is not possible to achieve such a low contamination level.
China has not issued new import permits for plastic or paper scrap for several months, preventing importers whose permits have expired from doing business, according to a report from the US-China Economic and Security Review Commission.
China’s steady closure of its waste and scrap market will have a significant effect on waste and scrap trade worldwide. China has long relied on imported scrap metal, paper, and plastic as a low-cost source of raw materials for its manufacturing sector. Today, China is the world’s largest importer of waste and scrap accounting for 22 percent of global waste and scrap imports in 2015 ($24 billion out of $109 billion total imports).
In 2015, China accounted for 57 percent of global plastic scrap imports ($4.2 billion), 31 percent of nonferrous metal scrap imports ($11.3 billion), 51 percent of paper scrap imports ($5.3 billion), and 28 percent of electronics scrap imports ($1.8 billion). China’s waste and scrap imports grew from $12 billion in 2005 to $42 billion in 2011, an increase of 246 percent, before declining to $24 billion in 2015.
China’s decision to stop accepting waste and scrap will negatively affect the United States, the world’s largest exporter of waste and scrap. In 2015, the United States exported $17.7 billion of waste and scrap, accounting for 19 percent of global waste and scrap exports. China is the United States’ largest export market for waste and scrap, accounting for roughly $5.2 billion (or 30 percent) of all US waste and scrap exports in 2016.
While US waste and scrap exports to China have declined—largely due to Chinese concerns
over waste and scrap contamination and a Chinese inspection crackdown—they continue to constitute a large share of the United States’ goods exports to China. In 2011, US waste and scrap exports to China peaked at $11.6 billion (11 percent of all US goods exports to China), before declining to $5.2 billion (4.5 percent of goods exports) by 2016.
Despite this decline, in 2016, waste and scrap was the United States’ sixth-largest goods export to China, behind transportation equipment, agricultural products, computer and electronic products, chemical exports, and machinery.
According to the ISRI, China’s ban on plastics, fibers, paper, and textiles as described in its July 18 WTO notification would put 18 percent of US waste and scrap exports to China by volume at risk, roughly $532 million annually. If China fully closes its market by 2019, the remainder of the
United States’ waste and scrap trade would be jeopardized, resulting in the loss of more than $5 billion annually.
The move could also impact planning activities at US ports. Developments in scrap markets are being considered by the Port Authority of New York and New Jersey as part of its long-term planning, noted Bethann Rooney, assistant director in the port commerce department. “Ports that have a niche in bulk cargoes will have to look carefully at this,” she told Global Trade Daily.
According to the ISRI, 40,000 US jobs are directly supported by waste and scrap exports and 94,000 are indirectly supported. More than $3 billion in federal, state, and local tax revenue is collected from US waste and scrap exports.
US goods deficit with China—no end in sight