chinese import policy towards circular economy and lesson to vietnam

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MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS CHINESE IMPORT POLICY TOWARDS CIRCULAR ECONOMY AND LESSON TO VIETNAM Specialization: International Trade Policy and Law PHAM THI THUY DUNG Hanoi – 2020 MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS CHINESE IMPORT POLICY TOWARDS CIRCULAR ECONOMY AND LESSON TO VIETNAM Major: Economics Specialization: International Trade Policy and Law Code: 8310106 Full name: Pham Thi Thuy Dung Student ID’s number: 1806060002 Supervisor: Dr Ly Hoang Phu Hanoi – 2020 i DECLARATION I hereby declare that this master thesis is the scientific research of my own which made on the basis of the theoretical studies, field report and under the direction and supervision of Dr Ly Hoang Phu The research contents and results of this thesis is completely honest These data and documents for the analysis, review and evaluation were collected from various sources which are fully listed in the reference list I am fully responsible for the content of this master thesis as well as this declaration Hanoi, 14 March 2020 Author Pham Thi Thuy Dung ii ACKNOWLEDGEMENT During the completion of this master thesis, I received the guidance and valuable help from the lecturers, siblings and friends With great respect and deep gratitude, I would like to express sincere thanks to: Dr Ly Hoang Phu, who wholeheartedly helped, supported and encouraged me from the initial to the final level of this dissertation He provided me with comprehensive guide from choosing the topic, outlining the thesis and editing this research Professors and lecturers, who not only spread profound knowledge and information in the fields of economy and law but generated strong motivation for me while I was taking this course as well Last but not least, I would like to express my sincere thanks to my family, my colleagues and my friends, who have always by my side encouraging, supporting, contributing valuable ideas and giving me favorable conditions for me to complete this scientific research iii TABLE OF CONTENTS DECLARATION i LIST OF FIGURES vii LIST OF MAPS vii ABSTRACT viii INTRODUCTION .1 Research Rationale .1 Literature Review Research objectives .5 Research questions 5 Objects and Scope of research .5 Research methodology Thesis outline CHAPTER 1: THEORETICAL BACKGROUND OF CIRCULAR ECONOMY .7 1.1 Background 1.1.1 History 1.1.2 Definition 11 1.2 Principles 13 1.3 Implementation of CE at different scales .16 1.3.1 CE at micro level .16 1.3.2 CE at intermediate level 19 1.3.3 CE at macro level 19 1.4 Opportunities and challenges to move towards a more CE 22 1.4.1 Opportunities 22 1.4.2 Challenges .24 1.5 Linkages between international trade and circular economy 25 1.5.1 Potential impacts of the circular economy transition on trade flows 26 1.5.2 The importance of import policies toward circular economy .27 1.5.3 Trade in waste and scrap 29 iv 1.5.4 Trade in secondary raw materials 31 1.5.5 Trade in second-hand goods 33 1.5.6 Trade in goods for refurbishment and remanufacturing 33 1.5.7 International co-operation on circular economy value chain 34 CHAPTER 2: CHINESE IMPORT POLICY TOWARDS CIRCULAR ECONOMY .35 2.1 Overview of Circular Economy in China 35 2.1.1 CE at micro level .38 2.1.2 CE at intermediate level 38 2.1.3 CE at macro level 39 2.2 Introduction to Chinese importation 40 2.2.1 Mechanism 40 2.2.2 Market 42 2.2.3 Legal framework 44 2.3 Import policy towards CE .50 2.3.1 Chinese operation green fence policy 53 2.3.2 Chinese waste import ban policy 55 2.3.3 “Zero Waste” Cities Construction Pilot 56 2.4 Assessments 61 2.4.1 The positive impact 61 2.4.2 The negative impact 62 CHAPTER 3: SOME LESSONS TO VIETNAM 65 3.1 Overview of CE in Vietnam 65 3.1.1 Current status 65 3.1.2 Some good practical applications 67 3.2 Current Vietnamese import policies in transition to CE 70 3.2.1 Tariff measures .70 3.2.2 Non-tariff measures 71 3.3 Evaluation of CE adaption in Vietnam in terms of import policy .77 3.3.1 Achievements 77 v 3.3.2 Existing issues 78 3.4 Lessons to Vietnam in terms of adapting CE 83 CONCLUSION 86 APPENDIX 87 Published References 89 Electronics References 92 vi LIST OF ABBREVIATIONS Abbreviation Full name ASEAN Association of South East Asian Nations CE Circular Economy DFE Design For Environment EMF Ellen MacArthur Foundation EU European Union EPR Extended Producer Responsibility LCA Lifetime cycle assessment MSWM Municipal Solid Waste Management PP Pollution Prevention TUR Toxic Use Reduction ISO International Organization for Standardization IRP International Resource Panel NAFTA North American Free Trade Agreement SME Small-and-Medium-Size Enterprise VGCL Vietnam General Confederation of Labor UN United Nations UNIDO United Nations Industrial Development Organization WB World Bank WTO World Trade Organization WRAP Waste and Resources Action Programme vii LIST OF TABLES Table 1.1: Global Imports of Aluminum Scrap by Country and Year (in metric tons) 32 Table 2.1: China’s Global Merchandise Trade: 1979-2018 ($ billions) 42 Table 2.2: China’s Major Merchandise Trading Partners in 2018 43 Table 2.3: Major Chinese Merchandise Imports in 2018 44 Table 2.4: Import China Taxes (%) 45 Table 3.1: Summary of Waste Management Status in the ASEAN Countries 65 Table 3.2: Preferential import duties on various commodities 70 Table 3.3: Some of specific legislation for recyclable materials and products 71 LIST OF FIGURES Figure 1.1: The circular economy - an industrial system that is restorative by design .9 Figure 1.2 Some of the elements of a circular economy mentioned above and others in relation to each other .13 Figure 1.3: Sources of value creation for the circular economy .15 Figure 1.4: Linkages between international trade and the circular economy 26 Figure 1.5: Plastic Waste Import Quantity (in million kilograms) 30 Figure 1.6: Plastic Waste Import Value (in million US$), cumulative, 1988-2017 30 Figure 2.1: Circular economy development in China .37 Figure 2.2 : Import processing model .48 Figure 2.3 : Contract processing model 49 Figure 2.4 Volume of plastic waste exported by European Union (EU-28) to China from 2015 to 2017 (in million tons) 60 Figure 2.5: Imports of plastic waste by some countries between January 2016 and November 2018 (in tons per month) 63 LIST OF MAPS Map 1.1: Circular economy activities around the world 11 Map 2.1: 11 pilot “zero waste” cities in China 57 viii ABSTRACT In the last few years, the circular economy has received considerable attention worldwide because it offers an opportunity to optimise and promote sustainable production and consumption through new models based on continuous growth and limitless resources This concept has been adopted in some countries such as Denmark, Netherlands, Scotland, Sweden, Japan, China, and Germany while it is being considered by others including England, Austria, and Finland Although applications of a circular economy have been identified in many developed countries, a few of studies exist that investigate practices in developing countries However, the implementation of each country may vary, with specific priorities This paper aims at analyzing the concept of circular economy (CE) and some international experience of implementing CE An in-depth exploration of current practices in developing countries such as China would enhance the circular economy’s significance and would help understand its wider level of implementation With this concern, this study provides an analysis of experiences of China in adapting circular economy in terms of import policies In order to analyse the effectiveness as well as shortcoming of applying of import policy towards circular economy of Chinese government, a critical review and analysis of the literature was conducted It also identified the implementation structure of the CE in China which CE was proposed as a national strategy that developed to address environmental issues and resource scarcity after a period of intensive economic development In the end, the experiences in transition to CE will be drawn in case of Vietnam 80 materials that might otherwise be banned from consumer markets will be kept in circulation The use of recycled plastics can bring health risks, for example via plastic waste streams that contain harmful pollutants such as brominated biphenyl ether (BDE) flame retardants, while water reuse is only beneficial for health if sufficient standards are in place Access to finance Activities associated with ‘linear’ (i.e Non-circular) resource extraction and processing often account for the bulk of financing, foreign exchange earnings and foreign investment in lower-income countries Resource-led development – which focuses on leveraging the potential investment in, and revenue and jobs from, natural resource sectors – has been a popular theory among major donors and international organizations in recent years OECD analysis of private-sector resources mobilized for development reveals that almost half of these resources are focused on energy, industry, mining and construction Restructuring economies to accommodate more ‘circular’ activities will require a major shift in infrastructure, industrial processes and innovation priorities Developing countries are already facing a major infrastructure investment gap; many lower-income countries lack even basic solid-waste management infrastructure Yet current investment in modernizing solid-waste management processes and establishing the ‘reverse logistics systems’ needed to scale up the reuse of materials and products is inadequate: the European Investment Bank (EIB), for instance, invests relatively little in solid-waste-related activities Access to finance for existing industry may also be needed to support the transition to CE activities Without careful planning, many facilities and sites will struggle to function in the move to more resourceefficient economic activity Access to technology Significant progress has been made on the technological foundations for CE activity A growing range of data and information technologies are making CE solutions practical for the first time in a range of sectors There has also been a stepchange in the technology available to improve supply chain traceability: satellite- 81 based GPS technology, the rise of the ‘Internet of Things’ (IoT), low-power wireless technology, advances in big data and ‘distributed ledger’ blockchain technology, and developments in artificial intelligence and machine learning – all are transforming companies’ ability to track and trace commodities and products and monitor environmental conditions in real time In many developing countries, however, the ‘digital divide’ remains a very serious problem, with more than billion people still without access to the internet, and billion people without a mobile phone Many CE approaches not require costly technology investments and are already widely accessible in developing countries Household-level and farm-waste composting, for example, are well proven, low-cost and nontechnology-intensive means of tackling food waste and reducing the need for fertilizer Informal-sector employment The vital role played by informal labour is one of the most important areas of divergence when comparing CE approaches in developing and developed countries Developing economies typically have a more fragmented private sector, with considerably higher shares of informal-sector employment, than advanced economies Almost the employed population in developing regions is in informal employment, and waste management is among the principal activities of the informal sector Where previously waste-pickers may have been well equipped to process simpler industrial materials, increasingly they are dealing with e-waste – often made up of complex composites – and lack the skills and technology to optimize recycling and repair processes With the informal sector capturing a large share of material flows, more formalized processes that may be better suited to recycling e-waste cannot source enough feedstock to recycle these products in an economical way For example, numerous formal facilities in China have been unable to compete with the informal sector due to the latter’s established network, low operating costs and convenience of collection (Geng, 2008) Resource-intensive economies 82 For many developing countries, natural resources – defined broadly here to include both extracted minerals and agricultural goods – account for a large proportion of GDP, employment or both For countries with large hydrocarbon and mineral reserves, models of extractives-led growth have long been promoted by national governments, multilateral organizations and donor agencies Resource revenues have been a key driver of development gains and economic growth to date For many countries, moreover, agriculture continues to be the single largest source of domestic employment While the CE has the potential to create new opportunities for value addition and employment – many of them local – the fundamental decoupling of economic growth from resource use nevertheless implies significant changes to industrial strategy This is likely to meet resistance from governments and industry Without meaningful dialogue at the national and international level around future growth pathways, there is a risk that natural resource-exporting countries will see the CE not as an opportunity for economic diversification but as a threat to continued growth Infrastructural deficits and urbanization Key to visions for a CE in developed countries has been the opportunity to tap into an economy’s existing stock of materials – through the dismantling and recycling of e-waste, organic waste and construction materials, for example – and so displace primary production and its associated energy requirements and greenhouse gas emissions Resources available in unused assets and products, and in abandoned buildings and infrastructure, can be brought back into circulation in a number of ways Governments may incentivize the reuse of existing buildings over new builds: for example, according to UK administrative statistics, the UK could remove the per cent value-added tax (VAT) charged for converting buildings into housing, or introduce fiscal measures such as ‘landfill taxes’ to encourage remanufacturing over waste disposal In developing countries, however, the focus remains on investing in new infrastructure and building stock in order to support rapid industrialization and urbanization Critical infrastructure has not kept pace with rapid urbanization in many developing countries, and city slums have borne 83 the brunt of this expansion At the same time, developing countries also have far smaller stocks of materials for reuse and recycling than high-income countries 3.4 Lessons to Vietnam in terms of adapting CE In order to successfully apply circularization, Vietnam needs to have many aspects of improvement From China’s experience, Vietnam can draw on valuable lessons when making control against the global waste flows to Vietnam During the case study research, it is showing that Chinese import ban have had negative impacts on global value chain as well as global response Vietnam should make the import policies selectively and carefully Firstly, related to legislation, at present, Vietnam have not had the complete law and policies to support the circularization The policies-makers should consider the circular economy as a national program It is necessary to have the cooperation of government, manufacturers and customer Government should issue and adjust legal documents, stipulate the implementation and guide the implementation of the new management system of wastes, of which classifies clearly responsibility of stakeholders as proposed, particularly the authority agencies; invest in researching and issue standards of recycled materials and products; focus on common and particular materials such as metals (black and colored metals), paper, plastic (including rubber); establish the recycling fund with full functions and legal foundations, with the participation of related authority agencies in order to support and supervise financially the lengthening of responsibility of the manufacturers and consumers; establish and apply regulations of “greening” of the supply chain of international materials as well as policies of “green” moral in the society; increase the capacity and establish the human resources serving the system of waste management Manufacturers should broaden contacts with standards and criteria agencies of developed countries to be better informed about environmental criteria and requirements stipulated in various national environmental codes and international environment conventions due to limited access to this sort of information 84 Secondly, related to secondary materials, Vietnam cannot release import waste ban as China did Such practices made secondary raw materials a bad reputation and lowered the potential for the development of a circular economy in general Therefore, Vietnamese policies-makers should seek for other solutions We should reopen to import for high quality recycled material and seek global collaboration, which would not only ease the shortage of recycled plastic material but also save time for other economies to build new waste treatment plants At the same time, we need to control the quality of recycled material at the beginning from the exporting countries by which loading photos for each container must be sent on or before the cut-off date for each booking in order to be reviewed in a timely manner Shipment will be suspended and potentially returned for any failure to so For regulations and rules on imported material scrap, it needs to formulate standard system for recycled material scrap and products and develop adequate technology standards Therefore, Vietnam needs other countries’ active support for its environmental efforts through technical assistance programs, clean technology transfer, and facilitation of Vietnamese accession to technology banks Only then can Vietnam enjoy full and effective access to advanced technology and respond fully to environmental concerns For example, The Trade and Sustainable Development provisions of EU FTAs offer a useful basis for developing e-waste related Aid for Trade strategies For instance, the FTA with Vietnam (awaiting signature and conclusion) states that Parties may work together on trade-related aspects of green growth strategies and policies, including sustainable production and consumption Despite banning imports of used electrical and electronic equipment (EEE) in 2013, Vietnam faces a significant e-waste issue, with increasing amounts of e-waste being generated domestically, in addition to illegal exports due mainly to its proximity with China The informal e-waste handling system is very active and plays an important role in rural economic development but has significant negative consequences on the environment and public health Aid for Trade mechanisms could be put in place to help Vietnam develop its e-waste 85 treatment infrastructure, to ensure safer management and participate in making Vietnam an official and safe e-waste global trading platform Thirdly, related to hazardous waste, which China prohibited these kind of goods completely is very useful Vietnam will need to strengthen controls on imports and exports of recyclable wastes and to get tougher in enforcing them We should manage to import of environmentally-unfriendly products during trade and investment liberalization and facilitation, in bilateral and multilateral economic ties To that, Vietnam policy-makers should study and apply correctly environment-related regulations of the WTO such as stipulations of the Agricultural Association, the SPS Agreement, and technical standards to ensure regulatory consistency with the WTO and recognition of measures by WTO member countries, establishing a close co-ordination mechanism between commercial agencies and environmental agencies, participate in international conventions on environment and implement their stipulations policies establish on trade technical management cooperation In this process, it is in national necessary to programs with international environmental agencies and organizations so as to ensure the effective adoption of those provisions on environment (of MEA Agreements) into our commercial laws and policies, and avoid cumbersome stipulations that block trade activities; and collect and disseminate information of the UNCTAD and the WTO working teams on trade and environment to the ministries and branches concerned, especially those involved in control of imports-exports and enterprises This is to raise their awareness about the trading of products detrimental to the environment and of other countries solutions to these problems so that they can design relevant policies for Vietnam 86 CONCLUSION CE as a concept was introduced in 1990 with its 3R principles of reducing, reusing and recycling energy, materials and waste CE is seen as offering a viable alternative development strategy to ease tensions between desired national economic development and environmental concerns It also helps address existing resource scarcity and pollution problems and enables enterprises and industries to improve their competitiveness by removing green barriers in their international trade relations China’s rapid industrial development and persistent high rate of economic growth since its open door policy at the end of the 1970s have led to increased awareness about China’s resource scarcity and environment degradation CE is viewed as a viable solution to countries’ resource scarcity and environmental problems A growing body of literature has emerged during the last two decades on various theoretical, methodological and empirical aspects of CE and its implementation China has made serious efforts to intensively and on a large scale implement CE with the objective of providing long term and sustainable solutions to its severe resource scarcity and environmental degradation problems This research provided an overall review of literature on the circular economy in China and the sustainable development strategy elsewhere The current practice of the strategy is being carried out at the micro, intermediate and macro levels covering production, consumption, waste management and various public support programs to promote, regulate, monitor and evaluate CE’s successful implementation Also, this thesis gives several recommendations for Vietnam in the implementation of CE such as better management of importing secondary raw materials as well as hazardous waste, more concentration in transition to circular economy through laws and policies Moreover, it can be said that economic benefits should be closely tied with the responsibility, in order to successfully apply circularization 87 APPENDIX List of scraps allowed to be imported for production materials (Enclosed together with the Prime Minister’s Decision No 73/2014/QĐ-TTg dated December 19, 2014) No Name of scrap Code number Gypsum 2520 10 00 Granulated slag (slag sand) from the manufacture of iron or steel 2618 00 00 Chemical elements doped for use in electronics, in the form of discs, wafers, or similar forms 3818 00 00 Waste, parings and scrap, of plastics of polyethylene (PE): spongy, un-solid 3915 10 10 Waste, parings and scrap, of plastics of polyethylene (PE): Other 3915 10 90 Waste, parings and scrap, of plastics of polystyrene (PS): spongy, un-solid 3915 20 10 Waste, parings and scrap, of plastics of polystyrene (PS): Other 3915 20 90 Waste, parings and scrap, of plastics polyvinyl chloride (PVC): Spongy, un-solid 3915 30 10 Waste, parings and scrap, of plastics of polyvinyl chloride (PVC): Other 3915 30 90 10 Waste, parings and scrap, of other plastics 3915 90 00 11 Recovered (waste and scrap) paper or paperboard: Unbleached kraft paper or paperboard or corrugated paper or paperboard 4707 10 00 12 Recovered (waste and scrap) paper or paperboard: Other paper or paperboard made mainly from bleached chemical pulp, not colored in the mass 4707 20 00 13 Recovered (waste and scrap) paper or paperboard: Paper or paperboard made mainly from mechanical pulp (e.g, newspapers, journals and similar printed matter) 4707 30 00 14 Recovered (waste and scrap) paper or paperboard: Other, including unsorted waste and scrap 4707 90 00 15 Waste silk (including cocoons unsuitable for reeling, yarn fiber scrap and garnetted stock) 5003 00 00 16 Cullet and other waste and scrap of glass; glass in the mass 7001 00 00 88 17 Waste and scrap of cast iron 7204 10 00 18 Waste and scrap of alloy steel: Stainless steel 7204 21 00 19 Waste and scrap of alloy steel: Other (other than stainless steel) 7204 29 00 20 Waste and scrap of tinned iron or steel 7204 30 00 21 Other waste and scrap of iron or steel: Turnings, shavings, chips, milling waste, sawdust, filings, trimmings and stampings, whether or not in bundles 7204 41 00 22 Other waste and scrap of iron or steel: Other 7204 49 00 23 Remelting scrap ingots (iron, steel, cast iron) 7204 50 00 24 Copper waste and scrap 7404 00 00 25 Nickel waste and scrap 7503 00 00 26 Aluminium waste and scrap 7602 00 00 27 Zinc waste and scrap 7902 00 00 28 Tin waste and scrap 8002 00 00 29 Tungsten (wolfram) waste and scrap 8101 97 00 30 Molypdenum waste and scrap 8102 97 00 31 Magnesium waste and scrap 8104 20 00 32 Titanium waste and scrap 8108 30 00 33 Zirconium waste and scrap 8109 30 00 34 Antimony waste and scrap 8110 20 00 35 Manganese waste and scrap 8111 00 00 36 Chrome waste and scrap 8112 22 00 Timelines of China’s ban on the import of recover materials (Source: https://swana.org) 89 REFERENCES Published References Associate Parliamentary Sustainable Resource Group, Exporting Opportunity? 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EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS CHINESE IMPORT POLICY TOWARDS CIRCULAR ECONOMY AND LESSON TO VIETNAM Major: Economics Specialization: International Trade Policy and Law... as ? ?circular economy? ??, ? ?circular economy an cleaner production”, ? ?circular economy and eco-industrial park”, ? ?circular economy and zero waste”, ? ?circular economy and international trade”, ? ?circular. .. 35 CHAPTER 2: CHINESE IMPORT POLICY TOWARDS CIRCULAR ECONOMY 2.1Overview of Circular Economy in China Chinese interest in the circular economy was piqued in the 1990s by Germany and Japan's recycling
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