China Threatens Polluters with Ban on Exports

China Threatens Polluters with Ban on Exports
(International Herald Tribune)

China has raised the stakes for companies violating environmental laws with rules to block polluters from exporting their goods, after its trade surplus jumped 56 percent last month.

Companies found ignoring waste-discharge limits face a ban from international trade for as long as three years to discourage exporters from cutting costs at the expense of the environment, according to a statement Friday from the Chinese Ministry of Commerce and the State Environmental Protection Administration.

The government is struggling to reduce the effect of its expanding economy on the environment and to combat charges that its exports are kept inexpensive by lax environmental and labor standards. China said this month that the gap between exports and imports jumped 56 percent in September to $23.9 billion.

"It's the government's belief that China's trade surplus is not really due to the exchange rate, it's due to structural problems – the cost of production is much lower than it should be because environmental standards aren't strong enough," said Paul Cavey, an economist at Macquarie Securities. "The idea is to try and enforce pollution standards and labor standards, that'll raise the cost."

China's economy expanded 11.9 percent in the second quarter from a year earlier. The growth has come at a cost, with farming and industrial waste polluting one-third of Chinese lakes, rivers and coastal waters, according to a report in July by the Organization for Economic Cooperation and Development.

"Some enterprises seek to reduce export costs by exceeding pollution limits," the statement said. Export prices then "don't fully reflect social costs, aggravate trade frictions, fuel unreasonable growth in the trade surplus and damage the image of China's products."

China passed the United States last year to become the world's largest source of carbon dioxide gas, from burning fossil fuels and producing cement, according to the Netherlands Environmental Assessment Agency. China has set a goal of cutting the energy consumed for each unit of gross domestic product by 20 percent and major pollutant discharges by 10 percent in the five years to 2010.

China has "very serious" pollution problems and has paid a "large environmental price" to industrialize and urbanize, the deputy prime minister, Zeng Peiyan, said last month as he urged stronger enforcement of environmental regulations.

In July, Wang Qinhua, industry policy director of the Chinese Ministry of Commerce, said China planned to broaden the factors considered in evaluating exporters' qualifications to include environmental protection and workers' social security.

"It's welcome, it's definitely something China should be doing," Cavey at Macquarie Securities said. "But the first question is how will this be enforced at the local level, which is always the problem in China."