Cross-border dumping of hazardous waste

August 20th, 2010

In its formal sense, the study of illicit financial flows seeks to understand cross-border outflow of money and goods.

E-Waste in Guiyu, China | Photo: Art_Es_Anna, Flickr

These outflows usually flow from developing countries to their developed counterparts and the results can be disastrous.  The sentiment behind the concept is that developing countries lose wealth and capital to an international system, often with residents in compliance, at a cost to the domestic people and their economic development.

This represents the traditional understanding of a cost.  But there are different types of economic costs.  For example, you could go and spend $30,000 on a new car and that would be a cost to your bank account.  Or a reckless driver could smash the bumper of your old car.  That’s a cost, too.  That cost includes the amount of money you spend fixing the bumper, the amount of time it takes you to deal with the problem, the increase in your stress levels, and the degradation of the value of your car.

In the context of illicit financial flows, we often discuss the first type of cost—we think of costs to developing economies as the reductions in money and goods.  Or we think about the outflows of valuable goods through diamond smuggling, for example.  But there is another side of this coin.  In addition to outflows of “goods” there are inflows of “bads.” And those, just like your car’s damaged bumper, are costs, too.

Of these types of costs, none is more poignant and tragic than the cross-border dumping of hazardous wastes.

The history of this problem takes root in the 1980s when developed countries began waking up to the environmental problems associated with the disposal of toxic wastes—ranging from chemicals and electronics to plastics and metals.  The public realized that not only did these wastes degrade environmental quality, but they posed serious health and safety risks, including immune, reproductive, and respiratory disorders.  Legislators worldwide responded, in the United States, for example, Congress passed Superfund, a program established to regulate the cleanup of abandoned hazardous waste sites.

Though these legislative actions were admirable, many producers suddenly found themselves facing increasing demand for their goods, but without cheap ways to dispose of waste.  In response “toxic traders” evolved, who routinely shipped hazardous waste to developing countries where it was managed improperly because these nations did not have the capacity to deal with the wastes in an environmentally sound manner.  When environmental activists discovered and made public this activity, international outrage and condemnation pressured developed countries to take action.

Hazardous Waste Crew in American Samoa | Photo: Casey Deshong, FEMA

And so the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal was born.  The Basel Convention requires countries to cooperate to achieve environmentally sound management of hazardous waste and builds a framework for controlling cross-border movements of waste.  According to Convention requirements “every company or broker wishing to export hazardous wastes to ask the Government of the exporting State to provide prior written notification” to authorities in the importing State. The importing country must then give written consent before the export can take place.  In addition, each approved shipment must be accompanied by a “movement document” that details the contents and their disposal requirements.

But just as capital controls in developing countries that exist to prevent the outward leaks of funds have systematically fail to do so, the Basel Convention has failed as well.  And leaked it has.  Researchers estimate that of the 440 million tons of toxic waste generated every year worldwide, about 10 percent is disposed abroad.

One of the largest cross-border flows of these funds occurs between Mexico and the United States.  In 2003, Simeon Tegel writing for EcoAméricas reported that 50-80% of Mexico’s hazardous industrial waste is dumped illegally. Though domestic laws in Mexico do not permit hazardous waste imports, the border continues to flow.

In the Ivory Coast in 2006, residents discovered hundreds of tons of “slops” from a ship named the Probo Koala, were allegedly dumped near Abidjan, the African country’s commercial capital.  The ship was owned by a London-based multinational energy and oil company named Trafigura.  According to Amnesty International, at least 15 people died and 100,000 were sickened and evidence shows the company illegally dumped these wastes after taking on a lengthy cross-border search for a disposal site. Trafigura maintains, however, that it “has always denied and continues to deny any liability for events that occurred in the Ivory Coast.”

In Nigeria businessmen have been known to facilitate the dumping of international toxins.  Sometimes they disguise imports of toxic chemicals and wastes under false labeling, for example Polychlorinated Biphenyls—an odorless yellow liquid that is highly linked to liver disease and cancer—are labeled as vegetable oil. Poly Vinyl Chloride—a plastic waste—was found to be called “artificial raisins.”  In one instance radioactive milk was imported from the Baltic region.  Such practices are reminiscent of trade misprincing—a practice in which an importer or exporter falsely represents the value or quantity of a trade in order to transfer additional wealth abroad, which is usually held in an account by a counterpart.

In more recent years hazardous waste dumping has taken a turn for the worse as e-waste—comprised of broken,

E-Waste in Asia | Photo: Bert van Dijk, Flickr

surplus, and obsolete electronic devices—has accumulated in accelerating rates among developed countries.  While this was hardly an issue at the time of the Basel treaty, it has become a massive problem in the developing world, where such waste contaminates water supplies and soaks land with heavy toxic metals.

These wastes pose not only health, social, and safety risks, but also burden the recipient countries with high economic costs.   Hazardous wastes pose problems to developed and developing countries alike—first there is the first the cost of containment and clean up and the cost to the citizens of increased medical expenses, shortened life spans, and reduced quality of life.  There is also the loss of the ecosystem services—which includes air and water quality—and the existence value of natural resources.  But developing countries are hit even harder by these costs, as first they have less capacity to deal handle the waste and often do not have the infrastructure to purify their drinking water.  As a result, there is a massive cost to water quality for the public and agricultural producers who depend on access to clean water for subsistence.

Though these costs are not “illicit financial flows” in the traditional sense, they represent a similar pattern of imposed costs on developing countries.  They also flow through the same mechanisms—including faulty international systems and an oblique system of trade—that facilitate their traditional counterpart.

Written by Ann Hollingshead

Follow @FinTrCo