Garbage in, Garbage out

Garbage and Blue Asbestos in Sri Lanka Singapore Free Trade Agreement

By Gomi Senadhira-September 25, 2018, 12:00 pm 

GIGO or "garbage in, garbage out" is a computer industry saying which means that the quality of the output received from a computer program depends on the quality of the inputs. When input data is flawed it would produce a defective output or "garbage". This principle also applies to trade agreements. When you put garbage into a trade agreement, when I say garbage, it is not just the plastic and asbestos waste but faulty inputs that would produce a bad agreement. In the case of SLSFTA the faulty inputs are hidden within the Rules of Origin, the products list for which Sri Lanka had provided tariff concessions and services commitments. All that has produced an agreement heavily loaded against Sri Lanka. The plastic waste was my first concern. But that is only the tip of the iceberg. Even then, Let me just focus only on two types of garbage – plastic and asbestos, to illustrate the problems with this agreement.

When I raised my concerns about providing tariff concessions to Singapore for plastic waste under the SLSFTA, the ministry of development strategies and international trade argued that in the national tariff guide of Sri Lanka plastic waste is already duty-free, on MFN basis and these items are also already liberalized under the Sri Lanka – India FTA and Sri Lanka – Pakistan FTA. Therefore, nothing was specially granted to Singapore under the SLSFTA and the status quo had not changed.

To an average layman, there may not be any difference between an unbound zero in the national tariff guide of Sri Lanka and the bound zero in the tariff schedule in the SLSFTA. But for an average trade negotiator, the difference is significant - like the zero in a zero and a zero in a thousand. The zero in the in the national tariff guide could be increased to 100% or to 500% or higher at any time without any consultation with any country. Once you bind them the status quo changes immediately and consultations is required under the provisions of the relevant agreements. The issue of binding tariff lines at applied rate had been discussed intensely within the GATT/WTO system since very early days and any trade official/ negotiator should be conversant of the issues.

Sri Lanka – India FTA, Sri Lanka – Pakistan FTA and SLSFTA are three separate bilateral agreements. It is not a common practice (or even an uncommon practice) to include a product included in tariff concessions in one agreement in another agreement, without analysing the possible implications. Singapore exports most of its plastic waste overseas, as recycling in Singapore is not financially viable. India and Pakistan don’t do that. (In case one didn’t know that already.) Secondly, the agreements with India and Pakistan were signed many years ago. Back then it was believed, "One man's trash is another man's treasure ... or at least valuable raw material."

Until recently rich countries could export their garbage to poor countries. China started importing waste in the 1980s and established a huge processing and recycling industry. In 2016 China was the world’s largest importer of plastic waste and imported roughly 8 million tons. That was more than half of global imports. Rich countries like the U.S., the E.U, Japan and Singapore depended on China to take their plastic waste. China, in turn, used the world's plastic waste as an inexpensive resource to make cheap plastic products. But after forty years of using foreign garbage as a raw material, China realized that the environmental cost of doing that was too high. In July of last year, China decided to ban importing 24 types of waste, including that of plastic. With that, the global garbage trade went into a tailspin.

In 2016, Singapore exported almost 42,000 tonnes of plastic waste and most of that made its way to China. What was not exported was mainly incinerated and shipped to a man-made Semakau island. But that solution too is running short on time. With the use of disposable products growing at a rapid rate the landfill in Semakau island is fast filling up. So, the need to find overseas markets or dumping yards. All that happened during the period of negotiations of the SLSFTA. So, how did Sri Lankan negotiators react to these developments? Did they see them as a threat or an opportunity? Or were they clueless?

If Sri Lankan negotiators considered the crises as a threat, then they would have certainly taken adequate precautions to mitigate any adverse impact from it, like including relevant tariff in the negative list and adjusting our commitment to open waste processing services to Singaporean investors appropriately. They could have easily copied the relevant sections from the Singapore- India CECA. But they didn’t.

So, did they consider this as an opportunity? With the Chinese ban, Chinese investors were looking at East Asia to relocate their expertise, equipment and waste supply chains. The total investment is estimated at around 10 billion yuan ... more than a billion dollars! Many East- Asian businessmen were keen to grab some of it. But then came the restrictions on investment. Malaysia, Vietnam and Thailand restricted any new investment in the area and their focus shifted to South Asia. So, did Chinese and East- Asian businessmen looked at Sri Lanka to be the new destination for these investments and managed to include relevant provisions in the SLSFTA?

The text of the SLSFTA says, yes, Sri Lanka is open for investments in waste treatment plants and for duty-free imports. It certainly allows (or rather welcomes) investors from Singapore (or Chinese investors through Singapore) to establish facilities to collect, treat and dispose hazardous and non-hazardous waste and import waste. Unless we revise the agreement and remove the garbage provisions it is possible for misuse these provisions (as it was done by copper smelters in the case of ISFTA) to establish environmentally harmful industries in Sri Lanka.

But the government says that garbage would not be imported under the agreement and garbage in the SLSFTA duty-free list was a simple cut and paste job. But trade agreements are not simple copy and paste exercises.

So, there are several unanswered questions.

When Singapore made the specific request to Sri Lanka to include a commitment to allow Singaporean companies to establish facilities to collect, treat and dispose hazardous and non-hazardous waste, did we examine it in consultation with relevant experts from environmental agencies and elsewhere? Did we analysed the import exports statistics of the two countries, the request and offer lists and the relevant developments in the international trade arena? Did we study services – goods linkages? Did we brief the stakeholders appropriately?

The answers are perhaps in the product specific rules in the agreement. As they the devil is in the details. In this case, garbage is in the details in the form of blue asbestos.

The product specific rules are included in a trade agreement only when one of the parties to the agreement has a strong interest in trading in that product. Then an explicit request is made by the interested party, which would be carefully analysed and negotiated before specific rules are formulated. As we do not produce or import blue asbestos the request for product specific rules couldn’t have been originated from Sri Lanka. We know how hazardous this product is. The views of the president, government and people of this country on blue asbestos are well known. Yet, we have product specific rules to facilitate its trade within the agreement.

Singapore also does not manufacture blue asbestos and banned its import in 1989. Today, Singapore’s main challenge regard to asbestos, which is considered as one of the toxic industrial wastes, is to safeguard workers and the public from asbestos exposure during demolition and renovation of old buildings constructed before 1989 and has strict guidelines on the handling of removal and disposal of asbestos waste in the designated landfill located offshore at Semakau Island. As I said earlier that landfill is fast filling up. Then comes the very liberal product specific rules for trade in blue asbestos in the SLSFTA. Did Singapore request it? Why did they do so? If we are not planning to import (duty-free) very toxic industrial waste, then why did we agree to the product specific rules for blue asbestos? These questions need answers so that the people and the government can understand the real implications of the SLSFTA on Sri Lanka.