North-South Trade in Recyclable Waste : Economic Consequences of Basel

The Basel Conventions adoption of Decision II/I2 provides for a global ban on the North-South trade in recyclable wastes from the end of 1997. Taking the used lead battery market as a case study, this paper provides an analytical framework for examining the global and regional implications of the ban now in place. It shows that, when considering standard economic welfare the acceptance of Decision II/I2 necessarily reduces global welfare. However, when environmental externalities are taken into account, the global welfare results are less clear. Global welfare is enhanced if and only if the environmental welfare gains in the South more than offset the standard gains from trade loss in the South plus the combined standard and environmental welfare losses in the North. The paper concludes by arguing, firstly, that the ban on North-South trade should be removed and secondly, recycling waste importing countries should be able to determine their individual solutions to national environmental externalities based not on a globally enforced ban, but rather on their national economic challenges, environmental conditions, resource endowments and social preferences