Policy statement
The Basel Convention Export
Ban Amendment - A business perspective
Commission
on Environment, 8 November 1999
Summary
In September 1995, the Third Conference of Parties to the "Basel
Convention on the Control of Transboundary Movements of Hazardous Wastes
and Their Disposal" adopted Decision III/I to amend the Convention.
If ratified, this amendment would ban the transboundary movement of hazardous
recyclable
commodities and wastes from States listed in Annex VII (mainly
OECD countries) to States not listed in Annex VII (non-OECD countries)
to the Convention. The ban amendment for recyclable commodities has not
yet - and may never - become a part of the Convention. Nevertheless, some
countries have restricted exports in anticipation of the ban. The European
Union, for example, has put the ban into effect unilaterally.
This paper discusses related
environmental and trade issues to show that banning shipments of recyclable
commodities will not likely solve the small remaining number of cases of illegal
traffic in hazardous wastes. Nor will the ban help build waste treatment and
recycling capacity in developing countries. The alternative is to build new
capacity with a focus on environmentally sound management (ESM) for assuring
protection of human health and the environment. Technology transfer through
commercial trading arrangements can foster ESM.
This paper deals with transboundary
shipments of what the Convention calls hazardous wastes but only for recycling
- not for final disposal. Most of these "wastes" are secondary raw
materials for manufacturing and value-added operations in developing countries.
The proposed export ban
would deny importing countries the right to determine what they wish to import
and ignore whether these countries have the capacity to manage wastes in an
environmentally sound manner. Denial of imported secondary raw materials would
hurt economic development and hinder development of this capacity to properly
manage all hazardous wastes
The export ban appears to
be GATT-inconsistent, trade disruptive and discriminates between countries where
the same conditions may prevail.
The Convention already permits
countries to ban the import of any waste they declare hazardous under domestic
legislation. It also permits bi- or multilateral agreements for trade (Article
11). The continued availability of these arrangements, or the expansion of Annex
VII to any country that wishes to join and can assure environmentally sound
management, would reduce the trade disruption from the export ban. States should
retain sovereign rights to control their imports.
The paper makes several
suggestions for consideration by developing countries in order to keep control
over their import policies.
1. Introduction
In September 1995, the Third Conference of Parties (COP-3) to the "Basel
Convention on the Control of Transboundary Movements of Hazardous Wastes
and Their Disposal" adopted Decision III/1. This is a decision is
to amend the Convention to ban the transboundary movement of hazardous
wastes destined for final disposal and recycling/recovery operations from
States listed in Annex VII to States not listed in Annex VII. This annex
lists Parties and other States that are members of the OECD, the European
Union, and Liechtenstein. To be legally binding, 62. Parties must ratify
the amendment.(1) Decision
III/1 also gave certain instructions to the Technical Working Group (TWG)
of the Convention.(2)
As of August 1999, there
were 15 ratifications of the ban amendment. The European Union amended European
legislation on waste shipme
nts to incorporate Decision II/12 as well as III/1,
which broadens the ban. EU legislation now stipulates that Article 11 arrangements,
which could make the ban less trade restrictive and recognize developing countries
that have the proper waste management, are no longer possible. The EU has also
ended existing agreements that covered exports from EU to non-OECD States, whether
concluded by the EU or by individual member states.
A ban that prohibits trade
based on a country belonging to an economic "club", and disregards
environmentally sound management (ESM) capacity (which is required by the Convention),
is both discriminatory and excessive. Not only are non-Parties affected, but
Parties to the Convention are discriminated against if they are non-Annex VII
States. Trade from developed to developing countries would no longer operate
within the Convention's system of Prior Notification and Consent, which stipulates
that Parties of export, import and transit must take environmentally sound management
into consideration before agreeing to any transboundary movement. Under the
export ban, importing non-OECD countries are precluded from determining for
themselves what they can import from Annex VII countries, their largest suppliers
of secondary raw materials.
2. Status
A technical working group (TWG) established by the Basel parties identified
certain wastes as hazardous (subject to the Convention and the pending
export ban) and others as non-hazardous (not subject to the Convention).Wastes
on the non-hazardous list would be treated as hazardous if they contain
enough of a hazardous waste (or constituent) to exhibit certain hazard
characteristics, which are identified in the Convention. These lists have
become part of the Basel Convention as Annex VIII (hazardous wastes) and
Annex IX (non-hazardous waste).(3)
Most internationally traded
metals and other secondary materials are considered non-hazardous (Annex IX).
Used lead acid batteries are a notable exception as are certain mixtures of
batteries containing nickel and cadmium a popular type of rechargeable battery
that is shipped for recycling.
There are also notable exceptions
for the electronic sectors. Precious metals ash from incineration of printed
circuit boards is listed on Annex VIII as a hazardous wastes as is "Waste
electrical and electronic assemblies or scrap containing components such as
accumulators and other batteries included on Annex VIII, mercury switches, glass
from cathode ray tubes …"
The lists (Annexes VIII
and IX) have full legal status in the Convention but do not preclude the continued
use of the Annex I/Annex III combination to determine hazardousness. The implementation
of the export ban by the European Union is not limited to Annex VIII but applies
to materials in Annex IX that the EU considers hazardous under European legislation.
At COP-4 in 1998, the Parties
decided to leave Annex VII unchanged, until the ban amendment enters into force
(i.e., when ratified by the 62 Parties). This was a political decision and no
action will be taken on applications to join Annex VII from Monaco, Israel and
Slovenia. The Parties requested the TWG to work with the Sub-group of Legal
and Technical Experts in providing an analysis of the issues relating to Annex
VII and report to the Fifth COP, December 1999. However, the breadth of this
study is contentious and political as
evidenced by the debates at the November
1998 and subsequent TWG meetings.
The COP did not discuss
the continued availability of Article 11 arrangements under the export ban.
The TWG is continuing to work on clarifying the criteria for establishing Article
11 arrangements.
The creation and adoption
of Annexes VIII and IX has reduced a major uncertainty in the Convention. With
the notable exception of spent lead acid and unsorted nickel-cadmium batteries,
almost all traded recyclable materials should not be subject to the ban amendment,
except through individual decisions by Parties. At a glance, it might appear
that the ban amendment would not pose a major problem. However, there are several
underlying problems.
- An Annex VII exporting
country can unilaterally decide to ban the export of anything they alone determine
is hazardous waste.
- Unlike in the original
Convention, where a system of prior notification and consent operates, the
ban amendment removes from importing countries the responsibility of determining
what can be imported.
- Instead of limiting the
export ban to countries that do not expressly wish to receive hazardous wastes,
the ban more generally applies to all non-OECD countries. This includes those
that may wish to receive one or more materials and are prepared and capable
of treating them in an environmentally sound manner.
Instead of imposing obligations
on both importing and exporting Parties, the ban gives OECD countries the responsibility
of "protecting the non-OECD countries" with an obligation not to export
to them. Importing countries, particularly those with the capacity or potential
to manage hazardous materials in an environmentally sound manner, lose their
right to determine which raw materials they can import.(4)
Should the ban become legally
binding, it is critical that non-Annex VII countries be able to continue importing
needed raw materials. This may be accomplished either through Article 11 bilateral
arrangements or by having the countries added to Annex VII. Short of these steps,
there are solid grounds to argue that the export ban is GATT-inconsistent and
trade disruptive.
3. Arguments why the ban should not be ratified
The arguments in favour or against the ban amendment generally fall into
two categories: environment and trade.
3.1 Environment
Proponents of the ban amendment stress a largely environmental rationale.
Their reasoning, in summary, is that all developing countries are incapable
of handling many hazardous waste and that countries will reduce production
of such wastes only when there is no place to put them.(5)
Such arguments are sweeping
generalizations and that assume all industrialized countries have a callous
attitude towards developing countries. The arguments ignore that industrializing
economies among the developing countries, particularly in Asia, may have a
better capacity for environmentally sound management of wastes than some OECD
members. At the same time, the ban amendment permits transboundary movement
of hazardous wastes between non-Annex V
II States. Trade intra- non-OECD is
increasing much faster than other movements and deserves the full attention
of the Convention.
While most traded recyclables
will not be subject to the ban as Annex VII currently stands, it does not
guarantee that developing countries dependent on waste recyclables will be
able to continue importing their requirements from Annex VII States. Revision
of Annexes VIII and IX, the hazard characterization and classification of
wastes, is ongoing and could change trade patterns for secondary raw materials.
Despite consensus on these annexes, some countries or groups of countries
have decided to apply the export ban beyond wastes classified under Annex
VIII. This sort of decision is an indisputable sovereign right but it is a
questionable anti free-trade practice when unilaterally imposed by an exporting
country.
Should the ban come into
force, Article 11 arrangements or membership in Annex VII on the basis of
environmentally sound management capacity would be needed to provide developing
countries the means to import their requirements. This is essential for countries
dependent on secondary raw materials because of insufficient resources or
prohibitively high costs of primary production. Developing countries in need
of secondary raw materials for their recycling industries should retain the
sovereign right to import them.
In order to promote economic
development and environmental improvement through recycling, the Convention
should encourage trade in secondary raw materials to countries that have the
capacity for environmentally sound management of these raw materials. The
focus has to be on environmentally sound management, which would improve the
capacity of developing countries to properly manage domestic as well as imported
secondary materials.
3.2 Trade
The following short analysis shows that the export ban is prohibited under
GATT/WTO rules. It is not saved by any of the exceptions in these rules for
environmental protection. WTO members, whether Parties or non-Parties to the
Convention, are affected.
3.2.1 Most favoured
nation
The pending export band contravenes the most-favoured nation treatment in
Article I of GATT. This policy of non-discrimination is fundamental to the
operation of the multilateral trading system. The most-favoured nation (MFN)
treatment (Article I) clauses states:
"With respect to customs
duties and charges of any kind imposed on or in connection with importation
or exportation or imposed on the international transfer of payments for
imports or exports, and with respect to the method of levying such duties
and charges, and with respect to all rules and formalities in connection
with importation and exportation, and with respect to all matters referred
to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege
or immunity granted by any contracting party to any product originating
in or destined for any other country shall be accorded immediately and unconditionally
to the like product originating in or destined for the territories of all
other contracting parties."
Because the amendment
is an export ban, there are no products and customs duties or charges involved.
However, the export ban would appear to const
itute a formality that gives
Annex VII States an advantage in access to supply, which is not similarly
accorded to other States. The same waste materials are involved. The ban
is a de facto agreement among Annex VII States not to ship secondary raw
materials to other States. At the same time, these shipments are allowed
to other Annex VII countries. This is discriminatory and inconsistent with
Article I of GATT.
3.2.2 Elimination
of restrictions
The pending trade ban also contravenes Article XI of GATT, the general elimination
of quantitative restrictions. Article IX(1) states:
"No prohibitions or restrictions
other than duties, taxes, or other charges, whether made effective through
quotas, import or export licenses or other measures, shall be instituted
or maintained by any contracting party on the importation of any product
of the territory of any other contracting party or on the exportation or
sale for export of any product destined for the territory of any other contracting
party."
This Article explicitly
rules out prohibitions or restrictions other than customs tariffs. The pending
export ban is inconsistent. At the same time, the export ban does not appear
to be saved by any of the exceptions of the Article.(6)
Because there appear
to be inconsistencies between the export ban and the agreed-to trade policy
objective of two leading GATT provisions, it would be useful to examine
whether the ban is saved under the exceptions provided in GATT Article XX.
Article XX provides a basis for Parties to the Convention who are also members
of the WTO to deny MFN treatment to Basel non-Parties or non-amendment Parties
who are also members of the WTO.
3.2.3 General
exceptions of article XX
This article states:
"Subject to the requirement
that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination between countries where
the same conditions prevail, or a disguised restriction on international
trade, nothing in this Agreement shall be construed to prevent the adoption
or enforcement by any contracting party of measures:
(b) necessary to protect human, animal or plant life or health...
(g) relating to conservation of exhaustible natural resources if such measures
are made effective in conjunction with restrictions on domestic production
and consumption."
The trade policy goal
of Article XX(b) is to ensure non-arbitrary and non-discriminatory measures
that are necessary to protect human, animal or plant life or health. "Relating
to conservation" means that it should be primarily aimed at addressing
the goal of XX(g) and in conjunction with comparable restraints on domestic
production. As long as the main purpose is environmental, several GATT panel
findings permit mixed motives. The export ban is not a disguised restriction.
Countries ratifying the amendment would have to implement the ban through
domestic measures and notify GATT.
In spite of the above,
the export ban would arbitrarily and unjus
tifiably discriminate among countries
where the same conditions prevail. There are differences in conditions among
Annex VII States as well as among non-Annex VII States. Some non-Annex VII
States are far more economically advanced and industrialized than the rest
of the group. They may share similar conditions with a majority of the Annex
VII States and yet be discriminated against simply because they do not belong
to Annex VII. There are Annex VII States that do not necessarily share the
same conditions as the others, but that would be able to continue receiving
waste recyclables from their Annex VII brethren. Several of these States
are in Annex VII because they are OECD members but it can be argued that
they are not as industrialized and advanced as the other members. The discrimination
of the ban is not grounded on differences in conditions, but on membership
on a list.
The export ban is not
a reasonably necessary measure for the protection of health and life under
Article XX(b). The Parties do not appear to have explored alternatives that
are less trade restrictive than an export ban and yet able to achieve the
environmental objectives of the Convention. The original Convention was
not given a chance to demonstrate its ability to meet its objectives. A
restriction of exports only from OECD to non-OECD countries cannot
be considered as necessary to protect life and health. If the argument for
the ban on North-South movement is the absence of the capacity for environmentally
sound management of wastes in non-OECD countries, then it should also apply
to intra- non-OECD transboundary movements. This is not the case
under the amendment so Article XX(b) cannot justify the ban.
The export ban is inconsistent
with Article XX(g). The ban is not primarily aimed at conservation of exhaustible
natural resources, nor is it linked to restrictions on domestic production
and consumption. By definition, conservation embraces preservation, maintenance,
sustainable utilization, restoration and enhancement of the environment.
Recycling leads to conservation. Banning the transboundary movement of waste
recyclables will lead to cessation or reduction of recycling in importing
countries if they rely on imports from Annex VII States either wholly or
for supplementing domestic supplies so as to achieve production economies
of scale. Moreover, domestic wastes that would otherwise be recycled may
end up in final disposal. Production economies of scale are essential to
support economic recycling.
There is a question
if Annex VII States all have the domestic capacity to recycle their "wastes".
Traditionally, the developed world generates much more than they can recycle.
If these States are unable to export to countries with a comparative advantage
for recycling, some recyclable wastes may go to final disposal. Non-Annex
VII States that currently rely on imported waste recyclable secondary raw
materials would have to close production or shift to primary materials at
higher economic and possible environmental costs, including greater energy
consumption. All such trends are contrary to conservation and Article XX(g).
The export ban is not
saved either by Article XX (b) or (g).
3.2.4 The Export
Ban is trade-disruptive
Trade in wastes from OECD to non-OECD countries is not affected as long
as the wastes are not hazardous. The argument remains, however, that countries
with the capacity for environmentally sound management should be in a position
to import their requirements from any source. The trade disruption created
by the export ban will certainly be magnified in cases where Article 11
arrangements are not allowed in the context of the export ban.(7)
Article 11 of the Convention allows bilateral and multilateral arrangements
for transboundary movement between Parties and non-Parties and (if needed)
between Parties as long as these arrangements do not derogate from the Convention.
There are different
interpretations whether Article 11 agreements can continue after an export
ban. Some countries say that bilateral agreements are consistent with the
proposed ban amendment. They point to the third preambular paragraph of
the amendment, which notes that the TWG will develop technical guidelines
for agreements under Article 11.
Other countries do not
share this view. They say that since Article 11 is referred to only in the
Preamble, the amendment does not allow Parties to continue trading under
Article 11 arrangements. In a 1996 letter to the Basel Secretariat, the
Head of the EU Commission's Waste Management Policy Unit at DG-11 stated:
"after legal analysis, … such arrangements would circumvent the
legal requirement of Article 4A. That is not foreseen by the Convention
and not acceptable from a legal point of view."
Trade disruptions occur
because, in the absence of an Article 11 arrangement, non-annexes VII State
are unable to join Annex VII. The Conference of Parties decided (COP-4)
to keep Annex VII unchanged until the amendment becomes legally binding.
Therefore, it is uncertain whether non-Annex VII States will be able to
join Annex VII ever. However, while joining Annex VII may appear to be the
simplest solution for non-Annex VII States to secure raw material supplies,
joining is a double-edged sword. Countries may gain access to an essential
raw material available from Annex VII States but the new annex entrant is
then prohibited from important regional export trade opportunities with
their neighboring non-Annex VII States.
The continued availability
of Article 11 arrangements - or the expansion of Annex VII - would help
reduce trade disruptions that would result from the export ban and give
States sovereign rights to control their own imports.
4.The ban creates trading groups with control over recyclables
The Annex VII trading group would indirectly, yet effectively, control
the price of hazardous (Annex VIII) recyclables and increase the supply
of waste recyclables within their bloc. The combination of higher supply
and lower demand will reduce the prices of the affected recyclables.(8)
Oversupply will lower prices and hence discourage processors from preparing
secondary materials to specifications. The unprocessed material will then
accumulate and/or be sent for final disposal. Neither storage nor final
disposal is preferable to recycling. The export ban would curtail supply
in non-Annex VII States and hence raise prices.
4.1 Conflict in the
Convention
The p
ending export ban appears to be in contravention to Article 4.9.b of
the Convention. This section stipulates:
"Parties shall take appropriate
measures to ensure that the transboundary movement of hazardous wastes and
other wastes only be allowed if. … (b) the wastes are required as raw
materials for recycling and recovery in the State of import …"
If Article 11 arrangements
are allowed in the context of the export ban, the trade policy intent of Article
4.9.b can be accommodated.
5. Courses of action
This paper has outlined some of the conflicts and inconsistencies among
the rules of the World Trade Organization; the Basel Convention; and Decision
III/1, the export ban. If the ban is ratified, there is no telling what
conflicts could arise. This is especially true if Article 11 arrangements
cannot continue or Annex VII cannot be opened to other States. In the
meantime, the following courses of action are worth considering by national
governments.
5.1 Weigh all implications
when considering the ratification of the amendment
Once the non-OECD countries ratify the amendment, they may have no grounds
for negotiating Article 11 arrangements or joining Annex VII should these
mechanisms co-exist with the ban. Moreover, if they are WTO members, they
will have clearly waived their GATT rights and will lose the grounds for challenging
the ban or Annex VII before the WTO.
5.2 Work within the
Convention for ESM
Many of the difficulties raised here would be eliminated if the Convention
returns to its originally stated system for managing the control of transboundary
movements. The keystone of this system is reliance on Environmentally Sound
Management (ESM). The recycling activities in developing countries should
be based on ESM, whether they use imported or domestic raw materials. ESM
can be achieved inter alia by technology transfer, which accompanies the commercial
arrangements from trade.
5.3 Study the Implications
of trade Challenge before the WTO
If the ban amendment becomes legally binding, or is applied unilaterally "in
the spirit of the decision," non-Annex VII states will be at trade disadvantage;
they will lose control of their import policy. If Article 11 arrangements
are not available, or if membership in Annex VII is not possible, the likelihood
of a dispute with an Annex VII State increases. Such conflicts are resolved
within the dispute settlement procedures of the WTO.(9)
Document n° 210/562 Rev.
8 November 1999
FOOTNOTES
(1) Apparently, this means
62 Parties of those present at COP-3.
(2)
The technical working group (TWG) is to give full priority to the completion
of its work on hazard characterization of wastes subject to the Basel Convention
and to the development of lists of wastes which are hazardous or not subject
to the Convention. These lists, now Annexes VIII and IX,
are critical in clarifying
which wastes are to be subject to the export ban. The Conference of Parties
also instructed the TWG to give priority to the technical guidelines being developed
to assist any Party or State to conclude agreements or arrangements under Article
11 for the transboundary movement of hazardous wastes.
(3)
The tests of Annexes I and III form the fundamental basis for determining whether
a waste is hazardous under the Basel Convention.
(4)
It is difficult to anticipate all of the materials that might be subject to
the export ban beyond those explicitly described in Annex IX. For example, because
of ambiguities in the interpretation of the annexes, there was great confusion
in India causing several thousand tons of zinc residue imports to be denied.
Thousands of small enterprises involved in the manufacture of micronutrients
for fertilizer were closed. Farmers lost the product and subsequent production.
(5)
It is necessary to reiterate that this paper deals only with shipments of wastes
for recycling, not for final disposal.
(6)
Article XI(2) provides some exceptions in recognition of balance of payment
difficulties, particularly in reference to shortages of essential foods and
products, and consequent significant changes in the domestic prices of foodstuffs
due to increases in foreign prices. Other exceptions pertain to prohibitions
found necessary for the application of standards or regulations for classification,
grading, or marketing of commodities in international trade. Another exception
is a prohibition to enable countries to cope with irregular levels of production
due to the unpredictability of nature.
(7)
The European Union has taken this position.
(8)
The EU has indirectly recognized the problem of over-supply after the ban by
proposing a new public-private partnership to explore new recycling methods.
This is somewhat ironic because many of the affected materials are recycled
within mature commodity industries.
(9)
See: J, Crawford and P. Sands. 1997. The Availability of Article 11 Agreements
in the Context of the Basel Convention's Export Ban on Recyclables. International
Council on Metals and the Environment. Ottawa. 46 pp.