The Invisible Hand of Trade

Policy School Director Maria Ivanova and Policy School Senior Fellow Jamel Zarrouk co-authored a May 2026 guest essay on the plastics trade for the German publication Der Pragmaticus. English translation follows:

Plastics trade as commodity

That plastic waste is traded is no coincidence. International trade first enables a global system that encompasses the entire value chain from oil and gas extraction through polymer production to landfilling, incineration, or disposal of plastic in the environment. The waste stream is constantly directed towards countries with the least regulation and the lowest costs. Recycling rates are low because trade ensures that the problem is always shifted, but never solved. In this article, we want to show that plastic pollution is, in truth, not a matter of waste management, but a trade-driven problem of the entire lifecycle of plastic. The economic perspective helps to understand why the business with plastic makes the promised recycling unprofitable and therefore unlikely. Without changing trade, we will not end plastic pollution. Plastics are deeply embedded in global commodity flows.

The trade in it has a value of more than one trillion US dollars annually – that is five percent of global trade. The trade in plastic waste, about 6.6 million tons per year, makes up only a fraction of this value, but it is central to the system: it makes it possible to shift the disposal costs associated with plastic from where it originates to other parts of the world. Global plastic production has increased exponentially since the 1990s, driven by low oil prices and growing consumer markets. In line with this, the mountains of plastic waste also grew.

Waste at every step

Waste does not only arise when a bag of chips or a shampoo bottle is thrown away, but throughout the entire life cycle of plastic: in raw material extraction, manufacturing, processing and production, its transport, in use, and even in disposal.

In this sense, plastic waste is not a downstream by-product but part of the global system that produces, consumes and disposes across borders. Trade connects these elements: fossil resources are exported to the centres of plastic production, polymers, chemicals and intermediates cross borders multiple times before they become an end product that is also traded worldwide. Separate trade routes have emerged for plastic waste. The waste and its trade are not a system failure but part of it. For decades, global trade in plastic waste followed a simple pattern. High-income countries exported their waste, and China imported it: in 2017, China and Hong Kong accounted for almost 50 percent of global waste exports, with many even considering this ‘arrangement’ as the normal state of recycling. A turning point came with a shock in 2018.

The “National Sword”

With its policy of the “National Sword,” China broke through the deceptive normality and sharply restricted the import of contaminated recyclable material. Those who expected a structural change were quickly disappointed: the system did not change. It adapted. Trade flows were redirected towards Southeast Asia, Turkey and other new destination countries such as Indonesia. These were always countries with weak regulation and – compared to the countries of origin of the waste – low processing costs. In the EU, hubs for waste export emerged in the wake of the new trade flows. The Netherlands has now established itself as a hub and uses Rotterdam, Europe’s busiest port, to channel collected plastic waste abroad. The plastic waste shipped from Rotterdam mainly comes from Germany, Great Britain and France, is split in Rotterdam and dispatched as smaller cargo.

The “National Sword” reveals a characteristic of the global plastic waste trade: its elasticity. When a hub or destination country tightens regulations, trade flows shift to other locations, but the system itself does not change. Why? Behind the elasticity lies a strong economic incentive: exporting plastic waste is cheaper than processing it in places where sorting, recycling and disposal are expensive or politically controversial. Importing waste, in turn, promises low-cost raw materials—provided, of course, that it is valuable, single-type plastic waste. But this is usually not the case. The system merely redistributes environmental burdens. Another truth also emerged in 2018: how dependent the system had become on shifting burdens rather than recycling locally. If recycling had been the circular system it claimed to be, the waste would have been recycled.

The old plastic would have been transformed into new, equivalent plastic – a recyclable material useful for industry. Instead, the waste accumulated in the exporting countries and lost market value due to a lack of recycling. Part of it was diverted to Malaysia, Indonesia, India, Vietnam, and Taiwan, later to Turkey. Another part was stored or incinerated. The remainder ended up in informal or weakly regulated systems.

Instead, the waste accumulated in the export countries and lost market value due to a lack of recycling. Some was redirected to Malaysia, Indonesia, India, Vietnam and Taiwan, later to Turkey. Another portion was stored or incinerated. The rest ended up in informal or poorly regulated systems. Export drives up recycling costs Around the world, only about nine percent of all plastic waste is currently recycled. The reasons for the low rate are structural and economic in nature. The first problem is material complexity. Plastic products are synthesised from different polymers and contain additives, laminates, dyes, fillers and stabilisers which make separation and recovery difficult. Once materials and waste collections are mixed and contaminated, their value drops drastically. In practice, the waste becomes non-recyclable. The second problem is economic in nature.

New plastics benefit from economies of scale, can be produced massively and cheaply using established infrastructure at consistent quality. Recycling, on the other hand, requires small-scale, costly collection, sorting, cleaning and processing. While citizens are therefore encouraged to separate and recycle, the markets reward the creation of new material. Recycling fails against competition with a system geared towards disposable items. Trade now further amplifies these effects: for high-quality and reusable materials such as PET bottles, domestic trade markets exist. Low-quality and contaminated waste is exported to countries that can either poorly dispose of it or only recover small proportions. As a result, the majority of exports end up in landfills, are openly burnt, or simply dumped elsewhere.

The logic behind this is as follows: Due to global disparities in labour costs and regulation, trade effectively shifts the least valuable fractions of plastic waste to where profit can still be extracted, because labour costs and environmental standards are lower and/or less strictly enforced than in the higher-income countries where the plastic waste originates. Additionally, the export of plastic waste has the side effect of making global consumer goods trade more efficient by filling freight containers that would otherwise return empty from consumer markets. The resulting low transport costs reduce incentives to recycle plastic domestically and increase the incentive to export. Today, trade therefore sends plastic waste precisely to where the chances of recycling are lowest. Cost shifting: consumer societies with high plastic consumption rely on the consequences of their consumption being dealt with elsewhere.

Importing countries may see short-term economic benefits, but in reality they bear the costs of plastic production and consumption in the form of contaminated soils and water, toxic emissions, unsafe and sometimes hazardous working conditions, as well as long-term health risks. They are import countries precisely because they have few or no structures for proper disposal. At the international level, efforts are being made to respond. In the Basel Convention, the international framework for the transboundary movement of hazardous wastes adopted in 1989, stricter controls and higher standards were recently agreed. Since 2021, the convention also takes into account that plastic waste occurs throughout the entire life cycle, encompassing both production residues and consumer waste.

Challenges of regulation

However, downstream regulation has its limits: stricter controls merely shift the problem if they are not enforced uniformly. Regulations that only apply at the waste stage cannot prevent incorrect labelling or illegal trade, nor can they positively change the system. The described dynamics, on the other hand, highlight the central role of international trade throughout the entire lifecycle of plastics: plastic waste is a commodity, and trade policy is therefore crucial for production, consumption, waste generation and recycling. For these reasons, international organisations such as the WTO carry particular weight: they target trade dynamics directly. Initiatives like the WTO Dialogue on Plastic Pollution and Environmentally Sustainable Trade in Plastics (DPP) can improve transparency, harmonise standards and reduce the fragmentation of legal regulations. When effectively linked with the UN negotiations on a global plastic treaty, the DPP could help transform the system that currently simply relocates waste into a circular and environmentally sound system.

However, trade-related measures also carry risks: the upcoming ban on plastic waste exports to non-OECD countries by the European Union, which is expected to come fully into effect in November 2026, has the potential to reshape global waste flows as comprehensively as China’s ‘National Sword.’ It is likely that certain waste fractions will remain in the EU, increasing the pressure to expand domestic recycling and incineration capacities.

At the same time, there is concern that lower-value waste quantities will increasingly be redirected to OECD states such as Turkey or Eastern Europe, as has been increasingly the case over the past few years. At the same time, it will become more attractive to use informal rerouting and misclassification. Eternity potential The dilemmas show that plastic pollution is not simply a waste crisis, but a feature of the current system. How much plastic is produced and disposed of is determined solely by economic incentives and global trade flows. As long as this system persists, plastic waste will continue to circulate.