U.S. International Trade Commission COMMISSIONERS Deanna Tanner Okun, Chairman JenniferA. Hillman, Vice Chairman Marcia E. Miller Stephen Koplan Charlotte R. Lane Daniel R. Pearson RobertA.Rogowsky DirectorofOperationsandActingDirectorofIndustries ThisreportwaspreparedbytheOfficeofIndustries JenniferBaumert,ProjectLeader [email protected] MichaelFerrantino, Economist Staffassigned: WilliamChadwick,LisaFerens,TomJennings, DennisLuther,andLindaWhite Withspecialassistancefrom: LynetteGabourelandCynthiaPayne Underthedirectionof: RichardW.Brown DivisionChief Address all communications to Secretary to the Commission United States InternationalTrade Commission Washington, DC 20436 U.S. International Trade Commission Washington,DC20436 www.usitc.gov Solid and Hazardous Waste Services: An Examination of U.S. and Foreign Markets Investigation No. 332-455 Publication 3679 April 2004 ABSTRACT The environmental services sector, including the solid and hazardous waste services industry, is the focus of increasing international attention. The sector has received special emphasis in the World Trade Organization (WTO), as the reduction or elimination of barriers affecting trade in such services has been identified in the Doha Ministerial Declaration as one of the principal goals of the present negotiating round. Moreover, environmental issues have become increasingly tied to international trade and investment, such that the environmental impact of trade agreements is more likely to be evaluated and considered as a critical component of the policy under consideration. This report provides an overview of U.S. and foreign markets for solid and hazardous waste services; examines trade and investment in solid and hazardous waste services markets, including barriers affecting such trade and investment; and discusses existing regulatory practices. With regard to the geographic coverage of this report, information is presented on both developed- and developing-country markets. The global market for solid and hazardous waste services is dominated by developed countries, with the United States, Western Europe, and Japan ranking as the world’s largest markets for such services. In most developed countries, the solid and hazardous waste services sector is considered a mature and competitive industry, while solid and hazardous waste services markets in many developing countries are small, but rapidly growing. Among the countries discussed in this report, high- income economies typically generate more solid waste than the middle-income economies. In addition, high-income countries manage a greater share of their waste, are more likely to employ modern waste management techniques, and are more likely than developing economies to maintain and enforce strict waste management regulations, as developing economies may lack the economic and political capacity to finance extensive waste management programs or maintain strict regulations. The extent of cross-border trade and investment in solid and hazardous waste management services differs dramatically among the countries examined in this study, but is greatest among high-income countries where stringent regulation and consistent enforcement create steady demand for waste management services and encourage the development of waste management capacity. Few of the countries selected for discussion in this report have explicit restrictions on trade in solid and hazardous waste management services. However, regulations and practices that pertain to all sectors, or to related sectors such as architecture and engineering, can potentially affect trade in the waste management industry. i PREFACE On July 1, 2003, the U.S. International Trade Commission (Commission) received a letter from the United States Trade Representative (USTR) requesting that the Commission conduct two investigations under section 332(g) of the Tariff Act of 1930 on discrete segments of the environmental services industry.1 The USTR requested that the first of these reports focus on solid and hazardous waste services. In response to the request, the Commission instituted investigation 332-455 on July 29, 2003. The USTR requested that the Commission’s report include: • an overview of foreign and domestic markets for solid and hazardous waste services; • an examination of trade and investment in solid and hazardous waste services markets, including barriers affecting such trade and investment, if any; and • a discussion of existing regulatory practices. The USTR requested that, for the purposes of this investigation, the Commission define the solid and hazardous waste industry to include the collection of solid and hazardous waste from households and industry; the treatment and disposal of solid and hazardous waste by various means; the collection, separation, and sorting of recyclable materials; waste compacting; waste reduction services; and incidental services. The USTR also requested that the Commission include information on both developed- and developing-country markets. Copies of the notice of investigation were posted at the Office of the Secretary, U.S. International Trade Commission, Washington, DC, 20436, and the notice was published in the Federal Register (68 F.R. 46223) on August 5, 2003.2 Nothing in this report should be construed to indicate the Commission’s finding in an investigation conducted under other statutory authority covering the same or similar subject matter. 1 See appendix A. 2 See appendix B. For summaries of the public submissions received in response to this investigation, see appendix D. iii Executive Summary Introduction On July 1, 2003, the U.S. International Trade Commission (Commission) received a letter from the United Stated Trade Representative (USTR) requesting that the Commission conduct two investigations under section 332(g) of the Tariff Act of 1930 on discrete segments of the environmental services industry, with the first of these reports focusing on solid and hazardous waste services (appendix A). The environmental services sector has received special emphasis in the World Trade Organization (WTO), as the reduction or elimination of barriers affecting trade in such services has been identified in the Doha Ministerial Declaration as one of the principal goals of the present negotiating round. The USTR indicated that information on environmental services markets would be useful in conducting WTO negotiations on environmental services, the environmental review of this element of the current WTO negotiations, and future negotiations and reviews. The Solid and Hazardous Waste Services Market In 2001, the year for which the most recent global data are available, solid waste management services and hazardous waste management services respectively accounted for 43 percent and 6 percent of the $279 billion worldwide environmental services market. The United States is the world’s largest market for solid and hazardous waste services, while other key markets for such services include Western Europe and Japan. In 2001, the world’s largest solid and/or hazardous waste services firms included Onyx (a subsidiary of French firm Veolia Environment, solid and hazardous waste services), Sita (a subsidiary of French firm Suez, solid waste services), Waste Management (United States, solid waste services), Allied Waste (United States, solid waste services), and RWE Entsorgung (Germany, solid waste services). Relevant literature indicates that differences in technology (between methods of disposal, between countries, and over time) influence the conditions of supply in the industry. Changes in the amount of waste generated and in the state of regulation influence the conditions of demand. These fundamental determinants of supply and demand, in conjunction with other forces such as economic growth and the relative prices of energy and recyclable materials, influence the market structure of the industry. There seems to be a significant relationship between economic welfare and the character of national solid and hazardous waste services markets. In most developed countries, the environmental services sector as a whole, and the solid and hazardous waste services segments in particular, are considered mature industries characterized by reduced profitability and excess capacity, which are driving consolidation. Further, high-income countries manage a greater share of their waste, are more likely to employ modern waste management techniques, and are more likely to maintain and enforce strict waste management regulations than developing economies. By v contrast, solid and hazardous waste services markets in many developing countries are small, but are experiencing rapid growth. Many developing countries have expressed significant interest in environmental issues, going so far as to pass strict environmental legislation, but they sometimes lack the resources to enforce their environmental policies. Private sector participation in the solid waste industry also seems to be related to per capita income levels. Solid waste management industries in high-income countries tend to be dominated by private firms, while in many middle-income countries, waste removal is still considered a public-service that state and local governments undertake themselves. Certain other market characteristics, particularly in the hazardous waste segment, seem to be unrelated to income. Although high-income economies typically generate more solid waste than middle-income economies, hazardous waste generation in a given country does not seem to be closely related to a country’s level of development. Additionally, the hazardous waste management industry is dominated by the private sector in almost all of the sample countries in this investigation, regardless of income level. Trade and Investment The extent of cross-border trade and investment in solid and hazardous waste management services differs dramatically among the economies examined in this study. Such activity tends to be most common among high-income countries where stringent regulation and consistent enforcement create steady demand for waste management services and encourage the development of waste management capacity. Affiliate sales associated with direct investment in the waste management services industries are likely one or two orders of magnitude larger than cross-border trade of such services. Approximately 30 percent of WTO member states– and eight of the twelve economies1 discussed in this report– made commitments on refuse disposal services under the General Agreement on Trade in Services (GATS) (appendix C). Restrictions specific to trade in refuse disposal services are limited. However, broad measures that apply to purchases or rentals of property, equity holdings, residency requirements for directors, tax and subsidy measures, and visa provisions such as quotas and length of stay may have an impact on the foreign provision of solid and hazardous waste management services, as may measures specific to related sectors such as architecture and construction. 1 Among the economies discussed in this report, Australia, Canada, China, the Czech Republic, the European Union, Japan, South Africa, and the United States scheduled GATS commitments on refuse disposal services. Chile, Egypt, Malaysia, and Mexico did not schedule GATS commitments on such services. vi