Do Non-Tariff Barriers Divert Trade? A Case Study of Plastic Waste Export

Globally, production and waste generation have been increasing for several decades. The flow of recyclable waste from developed to developing countries has also risen. Notably, China was the primary importer of recyclable waste for recycling and reuse. However, to reduce the burden of recycling and solid waste management, China has begun restricting the import of low-quality waste. This study analyzes the impact of trade restriction policy, specifically the National Sword Policy (NSP), on waste exports, with a focus on plastic waste scrap . This waste is exported to China from the rest of the world. The analysis relies on two major data sources: the Center for Prospective Studies and International Information (CEPII) database and GDP per capita (GDPPC) from the World Development Indicators (WDI). Using the Gravity model, this study examines trade patterns over a 24-year period from 1995 to 2018, deliberately excluding the pandemic years to avoid bias in the results. The findings indicate that the NSP reduced plastic waste scrap exports to China by 177% while increasing the flow of low-quality plastic waste scrap to the rest of the world by 135%. Considerably, countries with poor environmental regulations received more (339%) plastic, compared to the top 20 importers, which saw an increase of 285%. These findings highlight the need for further analysis of trade patterns, particularly through a multi-product approach and an intensive and extensive margin analysis of all types of plastic waste scrap.