PREFACE

The Industry Trade and Technology Review (ITTR) is a quarterly staff publication of the Office of

Industries, U.S. International Trade Commission. The opinions and conclusions contained in this report are

those of the authors and are not the views of the Commission as a whole or of any individual Commissioner.

The report is intended to provide analysis of important issues and insights into the global position of U.S.

industries, the technological competitiveness of the United States, and implications of trade and policy

developments.

The information and analysis in this series are for the purpose of this report only. Nothing in this

report should be construed to indicate how the Commission would find in an investigation conducted under

any statutory authority.

Inquiries or comments on items in this report may be made directly to the author, or to:

Director of Industries

U. S. International Trade Commission

500 E Street, SW

Washington, DC 20436

Fax: 202-205-3161

Industry Trade and Technology Review is posted on the Commission’s Internet site at www.usitc.gov

(Publications). Requests for copies of the ITTR, or to be added to the mailing list, should be addressed to the

Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, or

by fax: 202-205-2104.

Quarterly Review Staff

Larry Brookhart

Karl Tsuji

assisted by

Zema Tucker

Sharon Greenfield

Monica Reed

Contributing Authors

Gerald Houck

Lisa Ferens

Robert A. Rogowsky

Director of Operations

Acting Director of Industries
MARCH/APRIL 2004

Industry Trade and Technology Review Index of Articles

i

Listing of Published Articles

(June 1999 - April 2004)

June 1999

Energy services: Recent trends and future prospects

Market trends affecting the U.S. environmental services sector

Health care services: Strong fundamentals and innovations foreshadow growth in U.S. exports

and foreign direct investment

October 1999

Outsourcing by the pharmaceutical industry provides opportunities for fine chemical producers

worldwide 

Thailand’s financial crisis and progress towards recovery—Implications for U.S. trade

December 1999

Air transport services: International regulation and future prospects for liberalization

Renewed services trade negotiations in the WTO

March 2000

Machine vision: Vital technology for manufacturing industries

Agriculture in the WTO: The Seattle Ministerial and beyond

July 2000

Express services: Issues for negotiation in the World Trade Organization

Production-sharing update: Developments in 1999

Apparel market: New U.S. legislation places CBERA countries on a more equal competitive

basis with Mexico

October 2000

WTO agricultural trade negotiations: An update

Steel sector explores E-Commerce although wary of quick transition

Mexico’s emergence as a global automotive production center drives trade and investment

January 2001

U.S. metal mining: Recent trends and uncertainty discourage domestic exploration and investment

Factors affecting the competitive position of the Indian software industry

Manufacturing strategies of the North American major household appliance industry

March 2001

Apparel: Andean countries seek parity with Caribbean Basin countries to remain competitive in

the U.S. market

Chemical trade by the Central European countries: Difficulties of sector transition

Commercialization of hybrid automobiles: Prospective demand for light metals

July 2001

Trends in China’s steel consumption

Production-sharing update: Developments in 2000
MARCH/APRIL 2004

Index of Articles Industry Trade and Technology Review

ii

Listing of Published Articles—Continued

October 2001

E-commerce and nonferrous metals: Despite potential, adoption has been slow

Foreign direct investment in infrastructure services in OECD countries

December 2001

Evidence of trade, income, and employment effects of NAFTA

U.S. primary aluminum: Power costs and market conditions could cause long-term restructuring

March 2002

Dyeing and finishing of apparel fabrics

WTO agricultural trade negotiations: A second update

Aluminum metal matrix composites gaining greater market acceptance 

July 2002

U.S. telecommunication services: Industry and trade outlook

Mexico versus China: Factors affecting export and investment competition

Production-sharing update: Developments in 2001

October 2002

International trade in commercial equipment leasing services

International telecommunication markets: Accounting rate reform

December 2002

Major contraction of the domestic refined copper industry

Power generation and transmission equipment in the Latin American market

April 2003

WTO agricultural trade negotiations: Third update recapping the Doha Ministerial

Catalysts: An innovative industry responds to technological and competitive challenges

August 2003

Global copyright protection and the challenge of digital piracy

The measurement and effects of nontariff barriers to trade in basic telecommunication services

November 2003

Global trends in the information technology outsourcing services market

Production-sharing update: Developments in 2002

March/April 2004

International steel capacity and subsidy negotiations

Solid and hazardous waste services markets in Asia and the Pacific
MARCH/APRIL 2004

Industry Trade and Technology Review Contents

iii

CONTENTS

Page

International steel capacity and subsidy negotiations ..... 1

Elimination of excess capacity ................................................. 2

Trade subsidy discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Solid and hazardous waste services markets in Asia

and the Pacific ..................................................... 7

Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Market overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Trade and investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Market overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Trade and investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Market overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Trade and investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Market overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Trade and investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Appendix A: Key performance indicators of selected

industries and regions .............................................. A-1

Steel:

Figure A-1 Operating losses increase for integrated and specialty producers during

third quarter 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2

Table A-1 Imports of all types decrease significantly during third quarter 2003 and 

first 9 months of 2003 compared to year-earlier periods . . . . . . . . . . . . . . . . A-2

Table A-2 Steel service centers: Third quarter 2003 inventories decrease compared to

third quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3

Figure A-2 Steel mill products, all grades: Import penetration continues to decline

during third quarter 2003, after falling to multi-year low during

previous quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3

Automobiles:

Table A-3 U.S. sales of new passenger vehicles (cars and light trucks), domestic

and imported, and share of U.S. market accounted for by sales

of total imports and Japanese imports, by specified periods,

January 2002-December 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4

Figure A-3 U.S. sales of new passenger vehicles (cars and light trucks) decreased

in the fourth quarter 2003. For the quarter, the import passenger 

vehicle share of total U.S. sales decreased by a larger percentage

than the domestic vehicle share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
MARCH/APRIL 2004

Contents Industry Trade and Technology Review

iv

CONTENTS—Continued

Page

Appendix A: Key performance indicators of selected

industries and regions–Continued

Unwrought Aluminum:

Figure A-4 Imports continue to decline in the third quarter of 2003 due to lower imports

from Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5

Table A-4 Inventories in LME warehouses reached levels not seen since

February 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5

Flat glass:

Figure A-5 Japanese monthly average imports show increase during first 

8 months of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6

Services:

Figure A-6 Balance on U.S. service trade accounts, by quarter, 2002 and 2003 . . . . . . . . . A-7

Figure A-7 Surpluses on cross-border U.S. services transactions with selected

trading partners, by quarter, 2001-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7

North American trade:

North American trade highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8

Table A-5 North American trade, 1998-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9

#
OMB No.: 3117--0188

04/04

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TECHNOLOGY REVIEW (ITTR)
MARCH/APRIL 2004

Industry Trade and Technology Review Steel Negotiations

1

 The views expressed in this article are those of the author. They are not the views of the U.S. International

Trade Commission (USITC) as a whole or of any individual Commissioner. The author is Chief of Iron and Steel

Products in the Office of Industries. 2

 The White House, “Statement by the President Regarding a Multilateral Initiative on Steel,” June 5, 2001. 3

 Office of the President, Proc. 7529, “To Facilitate Positive Adjustment to Competition from Imports of Certain

Steel Products,” Mar. 5, 2002 (67 FR 105553). 4

 Office of the President, Proc. 7741, “To Provide for the Termination of Action Taken with Regards to Imports

of Certain Steel Products,” Dec. 4, 2003 (68 FR 68483).

1

International Steel Capacity and Subsidy

Negotiations

Gerald Houck1

gerald.houck@usitc.gov

(202) 205-3392 

International discussions, undertaken within the Organization for Economic Cooperation

and Development (OECD), to reach an agreement ending subsidies of steel production,

have been under way for over a year. While there is broad international support for the

idea, which would be expected to reduce the overbuilding of unnecessary new capacity and

possibly force the closure of uneconomic existing capacity, there are significant roadblocks

to reaching an agreement. Principal areas of disagreement include the scope of the

proposed agreement (e.g., as to products or operations for which subsidies would be

limited), allowable subsidies, and the treatment of developing countries. The United States

is insisting that countries should retain the right to countervail even those limited subsidies

that the proposed agreement might allow. Negotiations are currently ongoing to present a

final draft in May 2004.

On June 5, 2001, President Bush announced an “initiative to respond to the challenges facing the U.S.

steel industry.” The president cited a “50-year legacy of foreign government intervention and direct financial

support of their steel industries,” resulting in “significant excess capacity, inefficient production, and a glut

of steel on world markets.”2

 The initiative comprised three steps:

1. Negotiations with trading partners seeking the near-term elimination of inefficient excess

capacity in the steel industry.

2. Negotiations on the rules that will govern steel trade in the future and eliminate the underlying

market-distorting subsidies that led to the current conditions in the first place.

3. Initiation of an investigation of injury to the domestic steel industry by the U.S. International

Trade Commission under Section 201 of the Trade Act of 1974.

The third step, the Section 201 investigation, led to the imposition of temporary safeguards in the

form of tariffs and tariff-rate quotas on a number of steel products for a stated period of 3 years and 1 day,

effective March 20, 2002.3

 The safeguards were terminated by the President as of December 5, 2003.4
MARCH/APRIL 2004

Steel Negotiations Industry Trade and Technology Review

5

 High-level refers to the involvement of vice-ministers or directors-general in the process. 6

 The OECD has 30 member countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark,

Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico,

Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey,

United Kingdom, and United States. 7

 Other non-OECD participants are Argentina, Bulgaria, Egypt, Kazakhstan, Romania, and Taiwan. 8

 China only recently began its participation and has not yet contributed to the capacity discussions, but has been

invited to participate in these discussions.

2

Figure 1

Reported capacity closures by country, 1998-2005

Ukraine

5%

Russia

9%

European Union

15%

United States

26%

Other OECD Steel 

Study Group

22%

Japan

23%

 Source: OECD Steel Study Group

Elimination of Excess Capacity

The linkage of excess steelmaking capacity with underlying market-distorting subsidies is being

examined through discussions initiated by the OECD. In the summer of 2001, the OECD launched a “HighLevel Steel Initiative,”5

 aimed at:

! Promoting the elimination of inefficient excess capacity and monitoring the progress that is

being made by each country in facilitating structural change in the industry, and

! Identifying ways to strengthen multilateral disciplines on government measures and industry

practices that distort markets and, ultimately, contribute to global overcapacity.

In addition to OECD member countries,6

 a number of key non-OECD countries are participating

in these discussions, including Brazil, India, Russia, Ukraine, and, as of June 2003, China.7

With regard to the elimination of inefficient excess capacity, the governments agreed to share

information twice a year about capacity and related restructuring in their steel industries. The first review

was held in May 2003 and the second in October 2003.8

 The reviews indicate that 134 to 140 million metric

tons of capacity will be closed by 2005, but that absent a healthy increase in consumption, substantial excess

capacity will continue to overhang the market. Figure 1 shows the distribution of the steel capacity reported

to have been closed or expected to be closed. The United States, Japan, and the European Union (EU) have

reported the majority of the closures.
MARCH/APRIL 2004

Industry Trade and Technology Review Steel Negotiations

9

 See: Office of the U.S. Trade Representative, “The Multilateral Steel Agreement,” 1994 Annual Report.

3

Figure 2

World steel capacity and production, 1998-2005

0

200

400

600

800

1000

1200

1400

1998 1999 2000 2001 2002 2003 2004 2005

Source: World Steel Dynamics Million metric tons

United States European Union

Japan China

Rest of World World production

Despite the closures of steel capacity in the developed world, total world steelmaking capacity is

growing. Most of the growth is occurring in China, which has rapidly increasing domestic consumption and

is, like the United States, a major importer of steel mill products. Figure 2 shows the trend in world

steelmaking capacity and production, including projected capacity increases through 2005. This chart shows

that the gap between steel production and capacity has been cut by roughly one-third in absolute numbers and

by about one-half relative to steel production since 1998. These reductions indicate an improving world

capacity situation, despite capacity increases that have exceeded the closures reported by the OECD.

Trade Subsidy Discussions

With respect to trade subsidies, discussions are ongoing in a “Disciplines Study Group” (DSG),

subordinate to the High-Level Group. In a meeting held December 18-19, 2002, negotiators agreed on

launching an initiative to eliminate steel subsidies. They indicated at that time that it was equally important

to address trade remedies–of which U.S. application of antidumping and countervailing duty (AD/CVD)

measures was the leading concern–but agreed to defer discussions of that subject. Nonetheless, the

administration of CVD legislation, particularly by the United States, appears to be affecting the completion

of an agreement, just as it had prevented the inclusion of a Multilateral Steel Agreement within the Uruguay

Round Agreement.9

 Many participants in these negotiations hold the view that an allowable subsidy should

not be countervailable; that is, once such a subsidy is “green-lighted,” this should be the end of consideration

for any CVD or remedy.

The DSG has held a series of meetings in February, May, July, October, and December 2003; and

most recently in early April 2004. The effort is to reach an agreement under which governments would agree

not to provide subsidies to steel or steel-related industries, with a few narrow exceptions. One exception that

all participants apparently agree upon would be for subsidies to allow or facilitate the permanent closure of
MARCH/APRIL 2004

Steel Negotiations Industry Trade and Technology Review

10 Metal Bulletin, “Spetrini Issues an April Deadline in Subsidy Talks,” Oct. 13, 2003. Earlier efforts to achieve

an anti-subsidy agreement for steel have ended in failure. During the 1970s, “soft” disciplines were agreed to in the

OECD at the time the OECD Steel Committee was established but were unsuccessful in application. During the late

1980s and early 1990s, negotiations were conducted on a Multilateral Steel Agreement, which had as one of its goals

the elimination of subsidies on steel products. The negotiations foundered over demands that the United States agree

to not consider permitted subsidies in its AD/CVD considerations. 11 OECD, Working Paper 34/REV, Elements of an Agreement to Reduce or Eliminate Trade-Distorting

Subsidies in Steel: Secretariat text on Articles 1,2,3,4,6,7, and 8, Sept. 18, 2003. 12 Kyoto Protocol to the United Nations Framework Convention on Climate Change. The European Union has

ratified the Protocol, indicating that it will reduce, during the period 2008-2012, its emissions of greenhouse gases

by 8 percent from its level of emissions during 1990. The United States signed the Protocol in Nov. 1998, indicating

its agreement to a 7-percent reduction in greenhouse gas emissions over the same period, but has not ratified the

Protocol. The Kyoto Protocol will not enter into effect until it is ratified by countries accounting for at least

55 percent of the total emissions for 1990 of the countries agreeing to limit or reduce their emissions. For that

reason, the Protocol will not enter into effect until it is ratified by either the United States or Russia, which together

accounted for 54 percent of the 1990 emissions.

4

steel facilities. There are, however, several important areas of disagreement, identified below, with the

possibility that the DSG may not be able to draft an agreement that all participants can endorse. Following

the October meeting, Joseph Spetrini, U.S. Deputy Undersecretary of Commerce for Import Administration,

who is acting as Chairman of the DSG, called for additional meetings in November and December, with a

goal of presenting a completed draft to the High-Level Group by the end of April 2004. Mr. Spetrini told the

delegates at the October meeting that if this deadline is not reached, the negotiators can consider the effort

a failure and go home empty-handed.10 At the December 4-5 meeting of the DSG, the main topics for

discussion were enforcement and related issues. 

In an effort to further progress towards an agreement, the negotiators have agreed to the creation of

an “informal drafting group”, which will prepare legal text for the agreement. Negotiators recognize that

there are significant areas of disagreement, yet hope that as proposed text for the entire agreement becomes

available, more progress can be made. The initial meeting of the drafting group was held on December 6-8,

2003, with a meeting of the DSG scheduled during February and April 2004, leading to a text for

consideration by the High-level Group at its meeting in May. 

 Several key issues divide the negotiators:

! Product coverage—The principal concern is that loopholes not be created that will defeat the

purposes of an agreement intended to reduce or eliminate excess steel capacity. In June, the

OECD proposed a compromise that would specifically include within the scope of the agreement,

government support for operations producing upstream “primary material” used in steelmaking

(i.e., coke, iron ore, pellets, pig iron, and ferroalloys). The OECD proposed “monitoring” of

subsidies that benefit certain downstream fabricated products (e.g., wire products, rail, and

advanced structural shapes) with a view to possible future inclusion within an agreement. The

United States and its NAFTA partners support the inclusion of these downstream products, while

other countries do not.

! Exceptions from prohibitions on government support—There appears to be broad agreement

on allowing subsidies for the permanent closure of entire facilities; beyond that there are wide

differences. The United States has opposed subsidies except for full plant closure.11 Others

supporting the U.S. view reportedly include Australia, Argentina, Brazil, Canada, Egypt, India,

and Taiwan. The EU, however, supports exceptions allowing subsidies for environmental

cleanup and for research and development. In particular, as a ratifier of the Kyoto Protocol,12 the

EU foresees the need for substantial subsidies to its steel industry to meet its treaty commitments.

Reportedly, China, Japan, Korea, Norway, Russia, Turkey, and Ukraine support the EU position.
MARCH/APRIL 2004

Industry Trade and Technology Review Steel Negotiations

13 These proposed exceptions include subsidies for employee training, recruitment of disadvantaged and

disabled workers, small and medium enterprises, and de minimis subsidies. 14 Regardless of the criterion selected, only a few of the nations currently participating in the negotiations would

be anticipated to qualify for special and differential treatment: Brazil, Bulgaria, China, Egypt, India, Kazakhstan,

Romania, Russia, South Africa, Turkey, and Ukraine appear to be those most likely to qualify. See: OECD,

Working Paper 34/REV. 15 Nancy E. Kelly, “Global Steel Subsidy Pact Facing New Hurdles,” American Metal Market, Oct. 20, 2003.

5

The EU also requests that the allowable subsidies include several categories permitted under the

EU “state aid code.”13 There is apparently no other support for this position. Discussions to

resolve differences center on the possible establishment of dollar-value caps that would limit the

amount of subsidies that could be granted and a time limitation on subsidies.

! Special and differential treatment—This is the reference given to special treatment for

developing nations, allowing subsidies otherwise prohibited by the agreement. In particular,

China, Brazil, and India state that government assistance is necessary for them to build

competitive industries. In general, developed countries maintain that economically viable

projects should be financed with private capital and without government subsidies. Under

consideration to resolve this question is a limited “cap approach,” under which objective criteria

would be used to determine a country’s eligibility for a subsidy allowance and the amount of the

allowance. For example, the eligibility might be established for countries with per-capita gross

domestic product below an agreed-upon threshold and the amount of the cap might be an annual

dollar value per ton of steel produced in a base year.14 Provisions also are being discussed to

gradually reduce the “cap” as a country progresses from developing status or increases its exports

of steel products.

! Notification—Views differ on whether countries should be required to provide notification in

advance for subsidies to be allowable. According to the supporters of pre-notification, those

subsidy programs that are pre-notified and screened to establish that they do not include

prohibited practices, would not be actionable, including immunity from trade-remedy measures

such as CVDs. Under a voluntary pre-notification proposal of the EU, immunity from

countervailing measures would be the incentive for voluntary compliance. This remains a major

issue to be resolved in the negotiations.

! Administration—Some countries visualize the proposed agreement as working within the World

Trade Organization (WTO) framework, utilizing the existing WTO dispute-settlement

understanding (DSU) procedures. Others object to the WTO model and the DSU procedures in

particular, and would establish a separate, free-standing agreement, with an expedited disputesettlement procedure. Another argument favoring a separate enforcement mechanism is that a

number of participants are not members of the WTO and special provisions would, in any event,

have to be made for their participation.

Outlook

Whether countries will eventually reach an agreement could also hinge on the continued participation

of most of the world’s significant steel-producing countries. The Deputy Secretary General of OECD,

Herwig Schlögl, recently expressed concern that some nations may drop out following completion of the draft

text in April.15
MARCH/APRIL 2004

Steel Negotiations Industry Trade and Technology Review

16 Section 421 in U.S. law, for example, allows a safeguard tariff to be imposed solely on Chinese products

rather than the global application required under normal WTO safeguard provisions. 17 Representatives of the OECD, telephone interviews with USITC staff, Nov. 28, 2003.

6

Of particular concern is the continued participation of China. In view of China’s status as the largest

steel-producing nation, with both steelmaking capacity and steel consumption growing at high rates, its

inclusion in the agreement is considered essential by most observers. China did not participate in the

discussions until June of 2003, but has since been taking a very active role. Other participants are, of course,

eager for China to adopt the agreement. In fact, China’s possible non-participation is viewed as a dealbreaker. China’s demands, however, are significant and depart from its WTO commitments. In particular,

China seeks the elimination of the WTO transition safeguards agreed to in its accession negotiations.16 China

also seeks status as a market economy for steel (non-market economy methodology in U.S. AD cases

typically results in higher AD margins). At the same time, China insists that it be treated as a developing

country, e.g., be granted special and differential treatment within the proposed Steel Subsidies Agreement.

China would also place the administration of the new agreement outside of the WTO.17 #
MARCH/APRIL 2004

Industry Trade and Technology Review Waste Services Markets: Asia-Pacific Region

 1 The views expressed in this article are the author’s. They are not the views of the U.S. International Trade

Commission (USITC) as a whole or of any individual Commissioner. The author is an international trade analyst in

the Services and Investment Division, Office of Industries.

 2 This article is an excerpt from a recently completed USITC study entitled, Solid and Hazardous Waste Services:

An Examination of U.S. and Foreign Markets (Inv. No. 332-455), publication 3679, Apr. 2004. Some material has

been added to this version of the text in order to provide context for the information presented herein. The complete

study is available on the USITC website (www.usitc.gov). A CD-ROM version or a printed copy of the report may

be requested by calling (202) 205-1809 or by writing to the Office of the Secretary, U.S. International Trade

Commission, 500 E Street, SW, Washington, DC 20436. Requests also may be faxed to (202) 205-2104.

 3 According to the World Bank, official waste generation estimates are considered to be extremely conservative

and could be more than double these amounts. World Bank, What a Waste: Solid Waste Management in Asia, May

1999. 

 4 Figures for hazardous waste generation are considered to be conservative estimates. The most common types of

hazardous waste generated in the region include solvents and pesticides. Asian Development Bank, Economic and

Social Division for Asia and the Pacific, State of the Environment in Asia and the Pacific 2000.

 5 Ibid.

7

Solid and Hazardous Waste Services Markets

in Asia and the Pacific

Lisa Ferens1

lisa.ferens@usitc.gov

(202) 205-3486

Solid and hazardous waste services markets in Asia and the Pacific are highly varied,

reflecting the diverse economies of the region. Waste-generation rates and the ability to

finance waste management efforts differ among low-, middle-, and high-income countries.

As per-capita gross domestic product rises in many Asian nations, consumption and waste

generation do likewise, and thus, demand increases for solid and hazardous waste

management services. Although trade in waste management services seems to be in its

infancy throughout the region, foreign direct investment in the construction of treatment

facilities and related infrastructure is growing rapidly. It is likely that opportunities for

trade and investment will increase as the regulatory environments of Asia-Pacific nations

mature, either through adoption of new laws or more consistent enforcement of existing

regulations. This article provides an overview of solid and hazardous waste services

markets across the Asia-Pacific region, followed by more specific assessments of the

Australian, Chinese, Japanese, and Malaysian markets for such services.2

 Australia and

Japan are highlighted due to the relatively large size and maturity of their solid and

hazardous waste services markets, China because of the rapid growth of its environmental

services market, and Malaysia given its relatively lengthy experience with environmental

regulation.

Waste generation in the Asia-Pacific region is increasing as economies grow and individual

consumption rises. The region as a whole generates an estimated 1.5 million metric tons of solid waste per

day, and is expected to reach at least 3 million metric tons by 2025.3

 The region also generated an estimated

233 million metric tons of hazardous waste4

 in 2000, of which China accounted for the greatest share

(56 percent), followed by India and Indonesia (with 35 percent and 5 percent, respectively).5

 Industrial solid

waste accounts for an estimated 87 percent of all nonhazardous solid waste generated in developed countries
MARCH/APRIL 2004

Waste Services Markets: Asia-Pacific Region Industry Trade and Technology Review

 6 Ibid.

 7 Of the $40.2 billion spent in 2000, $35.4 billion was devoted to solid waste services and $4.8 billion went

toward hazardous waste management. Data from Environmental Business International, Inc. (EBI), The Global

Environmental Market by Region, 2000.

 8 World Bank, What a Waste: Solid Waste Management in Asia.

 9 The informal sector comprises individuals who pick through waste at dumpsites for reusable products and then

find buyers for the materials.

 10 Asian Development Bank, State of the Environment in Asia and the Pacific 2000.

 11 Ibid.

 12 Ibid.

8

such as Japan and Australia. By contrast, in developing countries such as China, industrial solid waste

accounts for as much as an estimated 65 percent of solid waste generation.6

In 2000, the Asia-Pacific market for solid and hazardous waste management services was valued at

approximately $40.2 billion, or 30 percent of the $132.8-billion global market for such services. Japan

accounted for 85 percent of that market, Australia and New Zealand together for an additional 4 percent, and

the rest of Asia for the remaining 11 percent.7

 Expenditures for solid waste management, accounting for 88

percent of the total market for solid and hazardous waste services, greatly outweighed the 12 percent

dedicated to hazardous waste management. Urban areas in Asia together spend about $25 billion per year

on solid waste management, and are expected to double such expenditures by 2025.8

In the Asia-Pacific region, solid and hazardous waste management services are supplied by

governments, the private sector, and in many cases–especially in low-income countries–the informal sector.9

In high-income countries there is typically a high degree of government regulation, but private-sector

suppliers usually dominate the market for waste management services. In developing countries where waste

management systems are less evolved, governments frequently maintain greater control over the provision

of such services or grant monopoly rights to certain domestic companies. Throughout the region,

governments are increasingly contracting out certain waste management activities to private companies. For

example, in 2000, over 20 percent of Asia-Pacific municipal solid waste collection services were performed

by private companies under contract, particularly in Australia, Hong Kong, Malaysia, the Republic of Korea,

Singapore, and Thailand.10

Methods of solid waste treatment and disposal in the Asia-Pacific region are largely influenced by

regulation, land costs, and the evolution of waste management programs. Sanitary landfills are prevalent

throughout Asia and the Pacific, utilized by cities in low-, middle-, and high-income countries. Some

countries in the region, such as Japan and Australia, are tapping landfill gasses to generate electrical power.

Japan and Singapore are the only two countries in the region that rely on incineration as the predominant

means of solid waste disposal (75 and 70 percent, respectively).11 Australia, Korea, Indonesia, and Hong

Kong also have modern incineration facilities. Open dumping, which includes disposal in nonengineered,

nonsanitary landfills, is reportedly the most common method of solid waste disposal in low-income countries

throughout the region.12 This is likely due to weak regulation and an inability to finance modern methods

of waste management. 

Methods of hazardous waste management throughout the region vary according to the type of

substance being treated and the sophistication of treatment facilities. Most countries have regulations for the

storage and treatment of hazardous waste, although compliance levels vary widely. Middle- and high-income

countries are more likely to incinerate or chemically treat waste. In low-income countries, where regulation

and treatment options tend to be weaker, an unknown but allegedly significant portion of hazardous waste

is released into the environment. However, it is also not uncommon for governments in low- and middle-
MARCH/APRIL 2004

Industry Trade and Technology Review Waste Services Markets: Asia-Pacific Region

 13 Industry and government representatives, interviews with USITC staff, Beijing, China, and Kuala Lumpur,

Malaysia, Oct. 2003.

 14 Asian Development Bank, State of the Environment in Asia and the Pacific 2000.

 15 Signatories to the Basel Convention in the Asia and Pacific region include Bahrain, Bangladesh, Bhutan,

Brunei Darussalam, Cambodia, China, Cyprus, India, Indonesia, Iran, Japan, Jordan, Kazakhstan, Kiribati, Kuwait,

Kyrgyzstan, Lebanon, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Nauru, Nepal, Oman, Pakistan,

Papua New Guinea, Philippines, Qatar, Korea, Samoa, Saudi Arabia, Singapore, Sri Lanka, Syria, Thailand,

Turkmenistan, United Arab Emirates, Uzbekistan, Viet Nam, and Yemen.

 16 WTO member economies schedule market access and national treatment commitments under the General

Agreement on Trade in Services (GATS) in relation to one or more possible delivery channels or “modes of supply.” 

There are four modes of supply: mode 1, or cross-border supply, whereby a service provider mails, electronically

transmits, or otherwise transports a service across a national border; mode 2, or consumption abroad, whereby a

consumer, such as a tourist, medical patient, or student, travels across national borders to consume a service; mode 3,

or commercial presence, whereby a service provider establishes a foreign-based corporation, joint venture,

partnership, or other establishment, to supply services to foreign persons; and mode 4, or presence of natural

persons, whereby an individual, functioning alone or in the employ of a service provider, travels abroad to deliver a

service.

 17 Data from EBI, The Global Environmental Market by Region, 2000 spreadsheet.

 18 EBI, Report 2000: The U.S. Environmental Industry and Global Market, Sept. 2001.

9

income countries to require that companies store their hazardous waste until suitable methods of treatment

become available.13

The rate of recycling grew significantly in the Asia-Pacific region, from less than 10 percent in 1988

to 30 percent in 1998.14 Paper and paperboard are the most commonly recycled materials, but glass, metal,

and plastics are recovered as well. In middle- and high-income countries, governments and the private sector

frequently promote, fund, and/or operate recycling facilities. In the region’s low-income countries, recycling

is primarily by the informal sector.

Many Asia-Pacific countries are signatories to the Basel Convention and Montreal Protocol, and are

members of the World Trade Organization (WTO)—all which shape solid and hazardous waste management

markets to some degree. For example, members of the Basel Convention15 are subject to controls on

international trade in hazardous waste. Commitments on refuse disposal services under the General

Agreement on Trade in Services (GATS) vary widely throughout the region, with certain economies such as

Australia and Taiwan having scheduled full commitments on refuse disposal services provided through modes

2 and 3,16 but others such as Malaysia and New Zealand having not scheduled any such commitments. 

Australia

Market Overview

Australia has the second-largest environmental market in the Asia-Pacific region, behind Japan, and

the tenth-largest market worldwide.17 Australian environmental services revenues totaled $7.1 billion in 2000,

of which an estimated $1.3 billion were dedicated to solid waste services and $260 million to hazardous waste

services. Australia generates an estimated 14.4 million metric tons of solid waste per year, almost all of

which is managed (table 1). Approximately 96 percent of Australia’s managed solid waste is disposed in

landfills.18 The high rate of landfilling reflects the country’s abundance of affordable land and
MARCH/APRIL 2004

Waste Services Markets: Asia-Pacific Region Industry Trade and Technology Review

 19 Survey of Environmental Markets in APEC, Asia-Pacific Economic Cooperation (APEC) Committee on Trade

and Investment, June 2001.

 20 Asian Development Bank, State of the Environment in Asia and the Pacific 2000.

 21 Ibid.

 22 EBI, Report 2000: The U.S. Environmental Industry and Global Market.

10

Table 1

Selected characteristics of the Australian market for solid and hazardous waste services

Item Solid waste Hazardous waste

Waste

generation/treatment

Australia produces 14.4 million metric tons of solid

waste per year, almost all of which is managed.1

Australia generated 275,000 metric tons

of hazardous waste in 2000, almost all of

which was managed.2

Market size (2000) $1.3 billion.3 $0.26 billion.3

Employment (2002-03) 11,350 employed in solid and hazardous waste management industries.4

Trade Based on anecdotal information, the country is considered to be a net exporter of services.5

Imports account for 25 percent4

 of the domestic solid and hazardous waste management market.

Nature of Industry Competitive and moderately concentrated market: top 4 firms account for 57 percent of revenues

(includes solid and hazardous waste segments).4

Key market participants

(and location of parent)

Brambles Industries Ltd. (Australia and United Kingdom)

Collex Pty Limited (France)

SembSita Australia Pty Ltd. (France and Singapore)

Leighton Holdings Ltd. (Australia)

Waste Recycling and Processing Corporation of New South Wales (Australia)4

Principal methods of

waste treatment and

disposal

Landfills account for the largest share of solid waste

disposal in Australia (96 percent),3

 followed by

composting and waste-to-energy.

Specially engineered landfilling, longterm containment, and recycling.6

Key regulations Environment Protection Act 1970.6 Environment Protection (Prescribed

Waste) Regulations.6

Regulatory authorities Environmental Protection Authority (EPA); Regional Waste Management Groups (RWMG); and

local governments.6

GATS commitments Australian commitments grant full market access and national treatment for the provision of refuse

disposal services through consumption abroad (mode 2) and commercial presence (mode 3).7

Other measures affecting

trade and investment

Prospective foreign investors must obtain investment approval from the Foreign Investment Review

Board, which may deny specific foreign investment on the basis of national interest.8

 1 Organization for Economic Co-Operation and Development (OECD) Environmental Data, 1999 Compendium, Annex 1.

 2

 Asian Development Bank, State of the Environment in Asia and the Pacific, 2000, p. 174.

 3

 Environmental Business International, Inc., EBI Report 2000: The U.S. Environmental Industry and Global Market, Sept. 2001. 

 4

 IBIS World Pty Ltd., Waste Disposal Services in Australia, Aug. 20, 2003

 5

 A U.S. Government representative in Australia indicates that the country is likely a net exporter of solid and hazardous waste

management services based on a comparison of the foreign revenues of Australia’s leading solid and hazardous waste

management firm in 2003 and revenues generated in Australia’s domestic waste management market.

 6

 EPA Victoria, “Waste,” found at http://www.epa.vic.gov.au/waste, retrieved Dec. 3, 2003.

 7

 General Agreement on Trade in Services (GATS), Australia: Schedule of Specific Commitments, GATS/SC/6, Apr. 15, 1994.

 8

 Office of the U.S. Trade Representative, 2003 National Trade Estimate Report on Foreign Trade Barriers.

a public distaste for incineration, which was particularly acute during the late 1980s and early 1990s. The

unpopularity of incineration has reportedly prompted the country’s development of cleaner, more advanced

methods of waste disposal;19 however, these new technologies may be better suited to the hazardous waste

management industry. Australia generated an estimated 275,000 metric tons of hazardous waste in 2000,20

almost all of which was managed.21

In recent years, the Australian Government has strongly encouraged waste minimization and

recycling efforts among both private citizens and industry. Further, the government has undertaken an

ambitious effort to reduce by 50 percent the amount of all solid waste destined for landfills.22 Such efforts
MARCH/APRIL 2004

Industry Trade and Technology Review Waste Services Markets: Asia-Pacific Region

 23 A U.S. Government representative in Australia indicates that the country is likely a net exporter of solid and

hazardous waste management services based on a comparison of the foreign revenues of Australia’s leading solid

and hazardous waste management firm in 2003 and revenues generated in Australia’s domestic waste management

market.

 24 IBIS World Pty Ltd., Waste Disposal Services in Australia, Aug. 20, 2003.

 25 Australian Trade Commission, news release found at http://www.austrade.gov.au, retrieved Nov. 24, 2003.

 26 GATS, Australia: Schedule of Specific Commitments, GATS/SC/6, Apr. 15, 1994.

 27 Data from EBI, The Global Environmental Market by Region, 2000 spreadsheet. Figures include

environmental equipment, services, and resources such as water utilities.

 28 Although data on the entire environmental market size are available through 2002, data on environmental

market by sector are only available through 2000. EBI, Report 2000: The U.S. Environmental Industry and Global

Market, pp.18-20.

 29 China has three basic classifications of waste: municipal waste, industrial solid waste, and hazardous waste. 

11

may provide market opportunities for suppliers of technologically advanced and efficient sorting, recycling,

and incineration services. 

Treatment of solid and hazardous waste in Australia is primarily regulated through the Environment

Protection Act of 1970 and the Environment Protection (Prescribed Waste) Regulations. At the national level,

the Environmental Protection Authority establishes waste management guidelines, but each state is

responsible for crafting specific regulations that are enforced by local governments. Regional Waste

Management Groups were created to develop a more consistent approach in Australia by coordinating and

harmonizing nation- and state-wide waste management regulations.

Trade and Investment

Though trade data are not readily available, Australia is considered to be a net exporter of solid and

hazardous waste management services.23 Although heavy reliance on landfilling reduces opportunities in

other market segments, Australian imports of waste management services are estimated to account for

25 percent of the country’s solid and hazardous waste services market. The two most prominent foreign

companies operating in the sector include Collex Pty Ltd., whose largest shareholder is Vivendi (Onyx) of

France; and SembSita Australia Pty Ltd., which is 60-percent owned by SITA of France and 40-percent

owned by SembCorp Waste Management of Singapore.24 Australian exporters of solid and hazardous waste

management services focus largely on the Asia-Pacific and European markets. Most recently, the Melbournebased Cleanevent Group was awarded an $80 million cleaning and waste management contract for the 2004

Olympic Games in Athens, Greece.25 Australian GATS commitments grant full market access and national

treatment for the provision of refuse disposal services through consumption abroad and commercial

presence.26

China

Market Overview

The environmental goods and services market in China is small, but has been growing at an

impressive rate in recent years due in part to its increased involvement in world markets and accession to the

WTO. In 2002, the Chinese market for environmental goods and services totaled $7.15 million,27 which

represents a 117-percent increase over 1995 levels. Solid and hazardous waste management services

accounted for an estimated $890 million and $180 million, respectively, of China’s environmental goods and

services industry revenues in 2000 (table 2).28 Although data on waste generation rates29 tend to be

inconsistent, the Chinese Government estimates that in 2002, the country generated 160 million metric tons
MARCH/APRIL 2004

Waste Services Markets: Asia-Pacific Region Industry Trade and Technology Review

 30 Of the 950 million metric tons of industrial solid waste generated in 2002, 500 million metric tons were multiutilized, 170 million metric tons treated, 300 million metric tons put in storage until a suitable means of disposal can

be determined, and 26.35 million metric tons released to the environment. Chinese Government representative,

interview with USITC staff, Beijing, China, Oct. 15, 2003. 

 31 Estimates provided by Chinese Government representative, interview with USITC staff, Beijing, China,

Oct. 15, 2003. 

12

Table 2

Selected characteristics of the Chinese market for solid and hazardous waste services

Item Solid waste Hazardous waste

Waste

generation/treatment

160 million metric tons of municipal solid waste per

year; 45-50 percent of which is managed.1

950 million metric tons of industrial solid waste per

year; 85 percent of which is reportedly managed.1

10 million metric tons per year, most of

which is reportedly managed.1

Market size (2000) $0.89 billion.2 $0.18 billion.2

Employment (2001) (

3

) (3)

Trade Based on anecdotal information, the country is considered to be a net importer of services.4

Nature of industry Evolving market is highly fragmented and

decentralized; many municipalities regard waste

management as a free public service.1

Evolving market, not consolidated. Public

sector dominates but the government is

encouraging private sector initiatives.1

Key market participants

(and location of parent)

Public sector dominates the provision of services.1 Public sector dominates the provision of

services.1

Principal methods of

waste treatment and

disposal

For municipal waste: landfilling (45 percent) and open

dumping (55 percent).1

For industrial waste: recycling (53 percent), storing

(32 percent), and landfilling (18 percent).1

Incineration, chemical neutralization,

solidification, and landfilling.1

Key regulations Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by

Solid Waste, and Regulations on the Declaration and Registration of Pollution Discharge.1

Regulatory authorities State Environmental Protection Administration, Division of Solid Wastes and Toxic Chemicals.1

GATS commitments Foreign suppliers of refuse disposal services may only provide services in China through a joint

venture. However, foreigners may hold majority stakes in these joint ventures. China reserves the

right to restrict the foreign provision of refuse disposal services, with the exception of environmental

consultation services, through cross-border supply.4,5

Other measures

affecting trade and

investment

Reportedly ambiguous licensing guidelines make it difficult for foreign engineering firms to obtain

necessary permits except on a project-by-project basis.6

All land is owned by the state which grants fee-based usage rights for set periods. Compensation for

early repossession of land is assured by law in some cases but reportedly is inconsistent, with

unclear standards.6

 1 Chinese Government and industry representatives, and U.S. government representatives, interviews by USITC staff, Beijing,

China, Oct. 2003.

 2

 Environmental Business International, Inc., EBI Report 2000: The U.S. Environmental Industry and Global Market, Sept. 2001.

 3

 Not available.

 4

 Although trade in waste management services is minimal, some foreign companies are operating in China, primarily in the

design, construction, and operation of incinerators. There are no known Chinese companies exporting waste management

services. Chinese Government representatives, interview with USITC staff, Beijing, China, Oct. 2003.

 5

 World Trade Organization, China: Schedule of Specific Commitments, GATS/SC/135, Feb. 14, 2002.

 6

 Office of the U.S. Trade Representative, 2003 National Trade Estimate Report on Foreign Trade Barriers.

of municipal solid waste, of which an estimated 45-50 percent was managed; 950 million metric tons of

industrial solid waste, 85 percent of which was reportedly managed;30 and 10 million metric tons of hazardous

waste, most of which was reportedly treated.31
MARCH/APRIL 2004

Industry Trade and Technology Review Waste Services Markets: Asia-Pacific Region

 32 For example, coal dust is often used to make bricks, and steel can be stripped from waste and recycled. 

Chinese Government representative, interview with USITC staff, Beijing, China, Oct. 15, 2003. 

 33 Chinese Government representative, interview with USITC staff, Beijing, China, Oct. 15, 2003. 

 34 Ibid. 

 35 Ibid. 

 36 Chinese Government representative, interview by USITC staff, Beijing, China, Oct. 15, 2003. 

 37 For an explanation of GATS modes of supply, see footnote 16. WTO, China: Schedule of Specified

Commitments, GATS/SC/135, Feb. 14, 2002.

 38 Data from EBI, The Global Environmental Market by Region, 2000 spreadsheet. 

13

Until recently, the state was almost solely responsible for collecting and disposing municipal waste,

but is now encouraging private participation. At least 90 percent of the municipal solid waste that is managed

in China is deposited in landfills, largely owing to China’s abundance of inexpensive land and a shortage of

capital for investing in more sophisticated technologies. Incineration, while not widely practiced, is becoming

more acceptable as municipalities gain experience with this treatment method. However, a lack of capital

for the construction of new incineration facilities and the absence of the means of separating combustible

from noncombustible waste may impede more widespread use of incineration.

The Chinese State Environmental Protection Agency (SEPA) encourages companies to handle their

industrial solid and hazardous waste by means of multiple-utilization, that is, by finding alternate uses for

waste instead of sending it directly to landfills.32 The central government estimates that 45 percent of

industrial solid waste and 50 percent of hazardous waste is successfully reused. Hazardous waste is typically

treated by means of chemical neutralization, incineration, or solidification, with much of the remnant

ultimately ending up in landfills after treatment. However, because of limited technology and funding, and

thus limited treatment capacity, companies are frequently unable to treat all of their hazardous waste so they

must store it until treatment is possible. In response, the central government has planned to allocate

approximately $1.94 billion for the construction of hazardous waste treatment facilities throughout the

country during 2003-05.33 Funding will be provided by local, provincial, and foreign governments, as well

as by local and foreign industry.34

SEPA drafts and supervises the implementation of China’s environmental laws and regulations at the

national level, and coordinates with the Ministry of Construction, the Ministry of Health, and the

Development and Reform Commission, who are responsible for municipal, medical, and industrial waste,

respectively. Provincial and local governments are responsible for the implementation of solid and hazardous

waste regulations.35

Trade and Investment

Trade in solid and hazardous waste management services appears to be minimal, although several

international companies and donor agencies have designed and built waste treatment facilities in China.

However, the Chinese Government is actively encouraging foreign direct investment in the market through

joint ventures with Chinese companies. Foreign equity in Chinese waste management operations is limited

to 50 percent.36 China’s GATS commitments grant national treatment for the provision of refuse disposal

services through modes 1, 2, and 3, and grant market access through mode 2.37

Japan

Market Overview

Japan’s solid and hazardous waste services market is the largest in the Asia-Pacific region and the

second-largest in the world behind the United States.38 Solid and hazardous waste management revenues in

Japan totaled $30.2 billion and $3.9 billion, respectively, in 2000 (table 3), together accounting for 36 percent
MARCH/APRIL 2004

Waste Services Markets: Asia-Pacific Region Industry Trade and Technology Review

 39 Japan has two classifications of waste: generic, which includes all municipal solid waste; and industrial, which

includes both solid and hazardous waste generated in the process of industrial activity. 

14

Table 3

Selected characteristics of the Japanese market for solid and hazardous waste services

Item Solid waste Hazardous waste

Waste

generation/treatment

238.4 million metric tons per year; most of which is

managed.1

Estimated 220 million metric tons in 2000,

most of which was managed.1, 2

Market size (2000) $30.2 billion.3 $3.9 billion.3

Employment (2001) (

4

) (4)

Trade Anecdotal information suggests that the country is an aggressive exporter of environmental services

in the Asia-Pacific region.5

Nature of industry Japan’s solid waste industry is considered to be highly

consolidated, with domestic firms dominating

Japanese market.1

Mature market, highly competitive, with

domestic firms dominant.1

Key market participants

(and location of parent)

Mitsubishi Heavy Industries (Japan); Ebara Corp. (Japan); Kubota (Japan); and Mitsui (Japan).1

Principal methods of

waste treatment and

disposal

Incineration (waste-to-energy) accounts for the largest

share of solid waste disposal in Japan (75 percent),

followed by landfilling and composting. Figures do not

account for recycling which is prevalent in Japan.6

Incineration, chemical treatment, and

storage.1

Key regulations Waste Disposal and Public Cleansing Law, Law for

Promotion of Effective Utilization of Recyclable

Resources.1

Law Concerning Special Measure Against

PCB Waste.1

Regulatory authorities Ministry of the Environment; Ministry of Health and Welfare; Ministry of Economy, Trade, and

Industry; and local governments.1

GATS commitments Japan grants market access and national treatment to foreign suppliers of refuse disposal services

through consumption abroad (mode 2) and commercial presence (mode 3), but indicates that the

number of licenses conferred to service suppliers of waste oil disposal at sea from vessels may be

limited.7

Other measures

affecting trade and

investment

Complicated and expensive licensing procedures for waste management service providers are

common throughout Japan.1

Foreign companies are unlikely to enter the market successfully without a joint venture with a

Japanese firm.1

 1 Japanese Government and industry representatives, and U.S. government representatives, interviews with USITC staff,

Tokyo, Japan, Oct. 2003.

 2

 An unknown but believed to be large quantity of hazardous waste in Japan is treated in-house by the waste-generating

companies, and therefore is not reflected in the market-size figures. 

 3

 Environmental Business International, Inc., EBI Report 2000: The U.S. Environmental Industry and Global Market, Sept. 2001.

 4

 Not available.

 5

 Although no foreign waste management firms are known to operate in the Japanese market, reportedly Japanese firms are

active throughout the Asia-Pacific region. Government and industry representatives, interviews with by USITC staff, Tokyo, Japan;

Kuala Lumpur, Malaysia; Beijing, China, Oct. 2003; and IBIS World Pty Ltd., Waste Disposal Services in Australia, Aug. 20, 2003.

 6

 Asian Development Bank, State of the Environment in Asia and Pacific, 2000, p. 180.

 7

 General Agreement on Trade in Services (GATS), Japan: Schedule of Specific Commitments, GATS/DC/46, Apr. 15, 1994.

of Japan’s environmental goods and services market. Japan generates an estimated 52.4 million metric tons

of municipal solid waste each year, most of which is managed.39 Municipal governments are responsible for

the construction of waste management facilities and the collection, transportation, and disposal of waste,
MARCH/APRIL 2004

Industry Trade and Technology Review Waste Services Markets: Asia-Pacific Region

 40 Asian Development Bank, State of the Environment in Asia and the Pacific 2000.

 41 Japan has approximately 2000 intermediary waste disposal facilities, mainly incinerators, where waste is

reduced before final disposal in one of nearly 2000 landfills. Japanese Government representative, interview with

USITC staff, Tokyo, Japan, Oct. 6, 2003. 

 42 Official data on industrial waste includes both solid and hazardous waste. The share of solid to hazardous

waste contained in this category is estimated to be 290.8 metric tons and 220 metric tons, respectively. Japanese

Government representative, interview with USITC staff, Tokyo, Japan, Oct. 3, 2003. 

 43 There is some overlap between the estimated 2,000 industrial landfills and the estimated 2,000 generic

landfills, but the extent of the overlap is unknown.

 44 PCBs act as a heat transmission material in electronic devices and high-pressure condensers in the manufacture

of processed foods. 

 45 PCBs used in electronic devices were allowed to remain in such devices.

 46 The 20,000 metric ton estimate is based on reports from the prefecture governments. The figure may be

understated as it is possible that companies under-report levels of PCB waste. Furthermore, some of the PCB waste

is missing and cannot be accounted for. 

 47 Incineration is a generally acceptable method of PCB disposal but is not acceptable to the Japanese public due

to concerns over toxic emissions. Japanese Government representative, interview with USITC staff, Tokyo, Japan,

Oct. 6, 2003.

 48 Two other significant bidders on the project were Tokyo Electric (which teamed with Mitsui), and Konsai

Electric, the first- and second-largest electric companies in Japan, respectively. Electric companies are some of the

biggest generators of PCB waste. U.S. Government representative, interview with USITC staff, Tokyo, Japan,

Oct. 6, 2003.

15

although such activities are routinely contracted out to private companies. The construction of waste

management facilities is usually subsidized in part by the central government, whereas waste management

services are funded through waste disposal taxes levied upon the public. An estimated 75 percent40 of

municipal solid waste in Japan is disposed of through incineration, followed by landfilling as the second-most

favored disposal option.41

Japanese companies generate 406 million metric tons of industrial solid and hazardous waste per

year,42 with the responsibility for treatment and disposal resting solely with the individual firms generating

the waste. Construction and operation of industrial waste management facilities are funded through private

investment and disposal fees paid by waste-generating firms. Several large manufacturers have incineration

facilities to treat their own waste, and in some cases have leveraged surplus capacity to enter the broader

waste treatment and disposal market. Together, there are roughly 7,000 incinerators, recycling facilities, and

chemical treatment plants for industrial waste, and approximately 2,000 industrial waste landfills in Japan.43

Japan faces a particular and high-priority challenge in the disposal of polychlorinated biphenyl

(PCB)44 waste. Following a 1968 cooking-oil contamination incident that resulted in widespread illness and,

in some cases, death, the government banned all manufacture and use of the substance. Companies using

PCBs were instructed to collect and store the waste until suitable disposal methods could be identified.45 As

a result, approximately 30,000 companies are currently storing an estimated 20,000 metric tons of PCB

waste.46 In 2001, the Government of Japan passed the Law of Special Measures Concerning Promotion of

Appropriate Disposal of PCB Waste, stipulating that existing waste be properly disposed of by 2016. The

Government is planning construction of five chemical disposal sites47 throughout the country and will contract

out the assessment of environmental impacts, construction, and operation of the new facilities to private

companies. These services will ultimately be funded by disposal fees. Although the government has not

disclosed the estimated cost of the entire project, it reportedly has awarded $260 million to Mitsubishi Heavy

Industries to construct the Tokyo facility.48 Japan has no regulations mandating that the facilities be built or
MARCH/APRIL 2004

Waste Services Markets: Asia-Pacific Region Industry Trade and Technology Review

 49 Japanese Government representative, interview with USITC staff, Tokyo, Japan, Oct. 6, 2003.

 50 U.S. Government representative, interview with USITC staff, Tokyo, Japan, Oct. 6, 2003.

 51 Clean Japan Center, Recycle Oriented Society: Toward Sustainable Development, Mar. 2000.

 52 According to a U.S. Government official, services trade data is not readily available in Japan because most

such business is done via joint venture where a contract is awarded to the Japanese partner and then a private deal is

made for payment to the foreign partner. 

 53 Japanese Government representative, interview with Commission staff, Tokyo, Japan, Oct. 7, 2003.

 54 GATS, Japan: Schedule of Commitments, GATS/DC/46, Apr. 15, 1994.

 55 Ibid.

16

operated by domestic firms.49 However, all prospective bidders must construct a demonstration plant, at an

estimated cost of $1 million, in order to obtain approval from the Ministry of the Environment to enter a bid.50

Recycling in Japan is typically carried out by private companies without the benefit of government

subsidies, except on an ad hoc basis. These companies generate earnings through recycling fees and resale

of materials. Some Japanese manufacturers are devising innovative applications for recycled materials, such

as substituting recycled plastics for coke in blast furnaces in steel mills. This practice yields both economic

and environmental benefits as the plastics emit fewer dioxins when burned, recycled plastic is cheaper, and

steel companies can receive compensation for removing the “waste” from municipalities.

Japan’s large solid and hazardous waste market is a product of that country’s substantial

environmental regulations. Japan’s Basic Law on the Environment (1993) encourages environmental

protection and sustainable development through numerous regulations that legislate, inter alia, waste disposal

and recycling.51 Waste disposal is primarily governed by the Law Concerning Disposal and Cleanup of

Disposed Waste, which dictates a standard waste disposal plan. However, it is the responsibility of individual

prefectures to tailor the plan to accommodate local needs. Recycling is governed by the Ministry of

Economy, Trade, and Industry (METI). International treaties affecting waste management to which Japan

is a signatory include the Persistent Organic Pollutants Convention (POP Convention) and the Basel

Convention.

Trade and Investment 

Japanese Government sources report that data reflecting trade in solid and hazardous waste services

are not readily available.52 However, anecdotal information suggests that Japan is an aggressive exporter of

environmental services in general, and that Japanese firms are active in the design and construction of waste

management facilities throughout the Asia-Pacific region. It is reported that only domestic companies

provide solid and hazardous waste management services in Japan, principally because it is not a highly

profitable industry and it is difficult to obtain waste management licenses from local governments due to

complex technical requirements.53 Domestic and foreign contractors are required to register with

municipalities in order to be eligible to operate.

Japan’s current GATS commitments grant full market access and national treatment for the foreign

provision of refuse disposal services, with the exception of some limitations regarding the disposal of waste

oil at sea.54 However, according to a Japanese Government official, joint ventures are widely viewed as the

only way for foreign companies to enter the market, and there are currently no such business arrangements

in Japan’s solid and hazardous waste management industry.55
MARCH/APRIL 2004

Industry Trade and Technology Review Waste Services Markets: Asia-Pacific Region

 56 Data from EBI, Environmental Markets in the Asia-Pacific, 1995-2000 spreadsheet.

 57 Industry representative, interview with USITC staff, Kuala Lumpur, Malaysia, Oct. 10, 2003.

 58 Asian Development Bank, State of the Environment in Asia and the Pacific 2000.

 59 Malaysia has two classifications of waste: solid waste, which includes municipal and industrial, and scheduled

waste, which encompasses 107 types of hazardous waste. Small and medium enterprises are more likely to underreport their waste and/or dispose of it illegally. Malaysian Government representative, interview with USITC staff,

Kuala Lumpur, Malaysia, Oct. 10, 2003.

 60 Malaysian Ministry of the Environment, Environmental Quality Report 2001. 

 61 Industry representative, interview with USITC staff, Kuala Lumpur, Malaysia, Oct. 13, 2003.

 62 American Chamber of Commerce member companies contend that Kualiti Alam’s services are limited, costs

are rising each year, and they sometimes have to store or export waste because Kualiti Alam cannot handle it in a

timely manner. Industry representative, interview by USITC staff, Kuala Lumpur, Malaysia, Oct. 10, 2003.

 63 Industry representative, interview with USITC staff, Kuala Lumpur, Malaysia, Oct. 13, 2003.

17

Malaysia

Market Overview

The environmental goods and services market in Malaysia–which includes the solid and hazardous

waste services segment–has grown rapidly in recent years, totaling $840 million in 2002, a 40-percent

increase over 1995 levels.56 The Malaysian environmental services market experienced a temporary downturn

because of the 1997-98 Asian financial crisis. However, the Malaysian experience was comparatively less

severe than that of some of its neighbors, and the environmental market rebounded after a 1-year decline in

1998. Malaysia generates an estimated 5.5 million metric tons57 of municipal and industrial solid waste per

year, of which an estimated 45 percent is managed (table 4).58 The country generated 363,000 metric tons59

of hazardous waste in 2002, of which 90-95 percent was reportedly managed.60

The Malaysian Government has aggressively pursued privatization of infrastructure in the past decade

to include the waste management industry. In 1995, the government awarded a 15-year exclusive contract

for the management of all of peninsular Malaysia’s hazardous waste to a single firm, Kualiti Alam. This

Malaysian company receives its revenue from waste collection and disposal fees paid directly by companies

that generate waste. Because Malaysian companies are legally obligated to obtain treatment for their

hazardous waste, Kualiti Alam is assured steady revenue until its contract expires in 2013. Kualiti Alam

employs multiple hazardous waste treatment techniques, although incineration and chemical treatment are

the most prevalent. Although other modes of treatment operate at approximately 40-50 percent61 of capacity,

Kualiti Alam’s incinerator is stretched to full capacity and the company is forced to refuse some waste

shipments, and thus, some companies are storing their waste until Kualiti Alam can accept it.62 In response,

Kualiti Alam is actively pursuing the addition of plasma technology to its portfolio of treatment options.

Kualiti Alam views oil waste, sludge, and other hazardous waste recycling companies as its greatest

competition. Hence, Kualiti Alam offers manufacturers competitive pricing to match what they would receive

from recyclers or what they would save by implementing waste-reducing technologies.63

The management of solid waste is also undergoing privatization, though the process is not yet

complete. Treatment of solid waste in Malaysia, which is regulated by the Ministry of Housing and Local

Government, is much less sophisticated than that for hazardous waste, with most solid waste destined for open

dumps. However, as the privatization of the sector advances, more modern methods of handling and

treatment are emerging. In 1994, the Malaysian Government identified four domestic companies to receive

20-year concessions to collect, store, and dispose of solid waste in one of the four geographic areas devised

under the plan; however, the concessions will not be signed until the central government passes a bill, which
MARCH/APRIL 2004

Waste Services Markets: Asia-Pacific Region Industry Trade and Technology Review

 64 The law will possibly be signed in early 2004.

 65 Southern Waste won the contract that covers Jahor state.

 66 Industry representative, interview with USITC staff, Kuala Lumpur, Malaysia, Oct. 10, 2003.

 67 Percentage based on estimates of waste generation by Malaysian industry source.

 68 There is unfavorable public sentiment associated with privatization due to a failed effort with sewage

privatization. In that case the company awarded the project began charging sewage fees to the public and then did

not follow through with the project. 

18

Table 4

Selected characteristics of the Malaysian market for solid and hazardous waste services

Item Solid waste Hazardous waste

Waste

generation/treatment

5.5 million metric tons per year; an estimated

45 percent of which is managed.1

363,000 metric tons in 2002, 90-95 percent

of which was reportedly managed.1

Market size (2000) $0.12 billion.2 $24 million.2

Employment (2001) (

3

) (3)

Trade Anecdotal evidence suggests that the country is a net importer of services.4

Nature of industry Evolving market; 3 companies control 75 percent of

market.1

A single company has exclusive1 rights to

all incineration and chemical treatment

though 2013.

Key market participants

(and location of parent)

Alam Flora (Malaysia)1

Southern Waste (Malaysia)

Northern Waste (Malaysia)

Kualiti Alam (Malaysia)1

Principal methods of

waste treatment and

disposal

Open dumping (50 percent), landfilling (30 percent).5 Incineration, chemical treatment, and

storage.1

Key regulations Environmental Quality Act of 1974 (and subsequent amendments in 1985 and 1996),

Environmental Quality Regulations.1

Regulatory authorities Department of the Environment, and Ministry of Housing and Local Government1

GATS commitments Malaysia has scheduled no commitments on refuse disposal services.6

Other measures affecting

trade and investment

Foreign investors limited to 30-percent financial stake.1

Privatization of solid and hazardous waste management services resulted in exclusive, long-term

agreements for Malaysian firms.1

 1 Malaysian and U.S. Government and industry representatives, interviews with USITC staff, Kuala Lumpur, Malaysia,

Oct. 2003.

 2

 Environmental Business International, Inc., EBI Report 2000: The U.S. Environmental Industry and Global Market, Sept. 2001.

 3

 Not available.

 4

 Foreign waste management firms are present in niche areas of the Malaysian market, but Malaysian firms are not confirmed

as exporting such services. Malaysian and U.S. Government and industry representatives, interviews with USITC staff, Kuala

Lumpur, Malaysia, Oct. 2003.

 5

 Asian Development Bank, State of the Environment in Asia and the Pacific, 2000, p. 180.

 6

 GATS, Malaysia: Schedule of Specific Commitments, GATS/SC/52, Apr. 15, 1994.

transfers authority over solid waste management from local governments to the central government.64 As

such, two of the selected companies never fully began work, and two others–Alam Flora and Southern

Waste65–proceeded at their own risk.66 

Alam Flora was awarded the lucrative Pahang and Selang regions that include the city of Kuala

Lumpur and account for an estimated 54 percent of generated waste.67 Alam Flora currently manages

approximately 6,000 metric tons of waste per day, much of which goes into properly engineered landfills.

The company is paid by the 24 municipal governments that it serves, a system that the company favors as it

is perceived that direct billing would not be well received by residents.68 As the company’s operations

mature, it plans to build incinerators and more economical and environmentally sound landfills. Alam Flora

predicts that in the next 20 years all local landfills will be capped and the country will rely on two superlandfills (likely abandoned tin mines) and two high-volume incinerators. These projects are not currently
MARCH/APRIL 2004

Industry Trade and Technology Review Waste Services Markets: Asia-Pacific Region

 69 Industry representative, interview with USITC staff, Kuala Lumpur, Malaysia, Oct. 10, 2003.

 70 The Government of Malaysia has instituted and promoted recycling programs, but industry sources contend

that efforts to date fall short of what is needed to generate widespread participation. Industry representative,

interview with USITC staff, Kuala Lumpur, Malaysia, Oct. 10, 2003.

 71 Industry representative, interview with USITC staff, Kuala Lumpur, Malaysia, Oct. 10, 2003.

 72 Ibid.

 73 Design and construction of waste treatment facilities by foreign firms, especially Japanese firms, are prevalent,

but operation of such facilities by foreign firms is not.

 74 WRC recovers silver, copper, nickel, and gold from wastewater sludge (N151 metal hydroxide sludge) from

electronics manufacturers. However, it noted that its business is declining as many electronics companies are

moving to China and/or becoming more technologically efficient, thereby reducing mineral waste. In 2000, the

company exported 2,000 metric tons of sludge, but exported only 300 metric tons during Jan.-Oct. 2003.

 75 GATS, Malaysia: Schedule of Specific Commitments, GATS/SC/52, Apr.15, 1994.

19

viable due, in part, to the fact that the trash volume generated in Malaysia is not high enough to justify the

rail transportation costs.69

Few companies provide recycling services in Malaysia as this industry segment is not considered to

be lucrative enough due to a lack of participation by the public. Industry sources state that more effective

and consistent public awareness campaigns are needed to motivate the population to recycle waste products.70

Currently there are no recycling laws in Malaysia, although the government set a 3-percent recycling goal

for 2003, which the country has reportedly met.71 The government intends to increase this recycling goal by

1 percent per annum until it reaches 22 percent in 2023. According to a Malaysian industry source, the

country will have difficulty establishing a viable recycling industry because it is not poor enough to spawn

an effective informal recycling sector, but it is not yet developed enough to support a modern, efficient

recycling system.72

Trade and Investment

Trade and investment in solid and hazardous waste management services in Malaysia is considered

to be minimal owing to the monopolistic structure of both industry segments.73 As monopoly contracts are

phased out, opportunities may arise for foreign firms to enter the market. However, current regulations limit

foreign investment in waste management firms to a 30-percent equity stake. Despite the rather closed market,

a handful of foreign companies have found market opportunities. For example, U.S.-based World Resources

Co. (WRC), is active in reclamation of precious metals from industrial waste. Although the company actually

exports the waste to the United States before treating and recycling the metals, it provides collection and

transportation services in Malaysia.74 The Government of Malaysia has not made any specific GATS

commitments on refuse disposal services.75

Outlook

As developing countries in the Asia-Pacific region continue to strengthen and enforce environmental

regulations, the demand for proven, cost-effective treatment methods is likely to increase. Japanese

companies having already invested in construction of waste management infrastructure, feasibility studies,

environmental impact assessments, etc., will likely be in a favorable position to seize upon emerging market

opportunities in those countries. 

In Japan, demand for environmental services will likely grow, especially as public awareness

increases about environmental issues. Although there is not currently any notable competition within the

Japanese waste management market, owing to the propensity toward long-term contracts with established
MARCH/APRIL 2004

Waste Services Markets: Asia-Pacific Region Industry Trade and Technology Review

 76 Japanese Government representative, interview with USITC staff, Tokyo, Japan, Oct. 7, 2003.

20

companies, industrial waste management is becoming more competitive as new technologies emerge.76

Market segments that may experience particularly rapid growth in the future include environmental

management consulting and pesticide disposal.#
MARCH/APRIL 2004

Industry Trade and Technology Review Key Performance Indicators

A-1

APPENDIX A

Key Performance Indicators of Selected

Industries and Regions1

Title Author1 Page

Steel Harry Lenchitz

(202) 205-2737

hlenchitz@usitc.gov

A-2

A-3

Automobiles Laura A. Polly

(202) 205-3408

polly@usitc.gov

A-4

Unwrought Aluminum Judith-Anne Webster

(202) 205-3489

webster@usitc.gov

A-5

Flat Glass Vincent DeSapio

(202) 205-3435

desapio@usitc.gov

A-6

Services Cynthia Payne

(202) 205-3410

payne@usitc.gov

A-7

North American Trade Ruben Mata

(202) 205-3403

mata@usitc.gov

A-8

A-9

1 The data and views presented for the following indicators are compiled from the industry sources noted and are

those of the authors. They are not the views of the United States International Trade Commission as a whole or of

any individual Commissioner. Nothing contained in this information based on published sources should be construed

to indicate how the Commission would find in an investigation conducted under any statutory authority.
MARCH/APRIL 2004

Key Performance Indicators Industry Trade and Technology Review

A-2

-30

-20

-10

0

10

20

Q1

1999

Q1

2000

Q1

2001

Q1

2002

Q1

2003

Percent

Integrated Minimill Specialty

Figure A-1

Operating losses1

 increase for integrated and specialty producers during third quarter 2003

 1

 Operating income (loss) as a percent of sales. Integrated group comprises 3 firms. 

Minimill group comprises 7 firms. Specialty group comprises 4 firms.

Note.--As of first quarter 2003 integrated group includes l previously untracked firm, and no 

longer includes l previously tracked firm, reflecting ownership changes in the industry.

Source: Individual company financial statements.

STEEL

• OAO Severstal, the second-largest steel producer in Russia, completed the acquisition of substantially all the

assets of Rouge Industries, Inc. and its primary operating subsidiary, Rouge Steel Co., on January 30, 2004. 

Severstal and former Rouge employees agreed to a 3-year contract for more than 2,000 workers. See

http://www.severstal.ru and http://www.uaw.org 

• AK Steel Corp. and the United Steelworkers of America (USWA) reached agreement on issues related to the

labor dispute at the company's Mansfield Works in Ohio on January 26, 2004. The company and the union

agreed to seek National Labor Relations Board (NLRB) approval for the dismissal of all NLRB charges against

each other. See http://www.aksteel.com and http://www.uswa.org 

• Republic Engineered Products, Inc. emerged as a new company after the purchase of substantially all of the

assets of Republic Engineered Products LLC by Perry Strategic Capital Inc. The transaction, valued at

$277.5 million, was approved by the U.S. Bankruptcy Court in Akron, Ohio and completed on December 19,

2003. See http://www.republicengineered.com 

• The U.S. Bankruptcy Court in St. Paul, Minnesota approved a joint purchase of the assets of Eveleth Mines LLC

by Cleveland-Cliffs Inc. and Laiwu Steel Group, one of the largest steel producers in China, on November 25,

2003. The iron ore mining and pelletizing assets of Eveleth Mines, which ceased operations and filed for Chapter

11 bankruptcy protection in May 2003, will be acquired by United Taconite LLC, a new company owned

70 percent by Cliffs and 30 percent by Laiwu. See http://www.cleveland-cliffs.com 

Table A–1

Imports of all types decrease significantly during third quarter 2003 and first 9 months of 2003 compared to

year-earlier periods 

Item Q3 2003

Percentage

change, Q3 2003

from Q3 2002 YTD 20031

Percentage

change, YTD 2003 

from YTD 2002

Producers’ shipments (1,000 short tons) . . . . . . . . . . . 27,974 10.6 79,898 6.8

Finished imports (1,000 short tons) . . . . . . . . . . . . . . . 4,433 -33.7 13,937 -20.0

Ingots, blooms, billets, and slabs (1,000 short tons) . . . 1,219 -50.6 3,589 -45.5

Exports (1,000 short tons) . . . . . . . . . . . . . . . . . . . . . . 1,731 14.6 6,388 44.3

Apparent supply, finished (1,000 short tons) . . . . . . . . . 30,676 0.7 87,447 -0.4

Ratio of finished imports to apparent supply (percent) 14.5 2

-7.5 15.9 23.9 1

 Preliminary.

2

 Percentage point change.

Note.–Because of rounding, figures may not add to the totals shown.

Source: American Iron and Steel Institute.
MARCH/APRIL 2004

Industry Trade and Technology Review Key Performance Indicators

A-3

STEEL

Table A–2

Steel service centers: Third quarter 2003 inventories decrease compared to third quarter 2002

Item June 2003 Sept. 2003

Percentage

change, Sept.

2003 from

 June 2003 Q3 2002 Q3 2003

Percentage

change, Q3

2003 from

 Q3 2002

Shipments (1,000 short tons) . . . . . . . . 4,045 4,276 5.7 12,310 12,428 1.0

Ending inventories (1,000 short tons) . . 12,836 13,251 3.2 13,968 13,251 -5.1

Inventories on hand (months) . . . . . . . . 3.2 3.1 (1

) 3.6 3.1 (1)

 1

 Not applicable.

Note.–Metals Service Center Institute data collection and presentation methods have been updated. Data presented

for third quarter 2002 have been updated and differ from previously published data.

Source: Metals Service Center Institute.

• U.S. steel service center inventory continued to decline during third quarter 2003. Ending inventory quantities

declined by more than 5 percent, and inventories on hand declined by one-half month during third quarter 2003

compared to third quarter 2002 (table A-2), according to the Metals Service Center Institute.

See http://www.ssci.org

• The American Institute for International Steel import market survey (January 2004) predicts decreased imports of

semifinished, cold-rolled sheet, corrosion resistant, cut-to-length plate, structurals, and stainless sheet during the

next 3 to 5 months. The survey predicts no significant changes in imports of hot-rolled sheet, wire rod, and pipe

and tube. Imports of merchant bar are predicted to trend slightly upward.

See http://www.aiis.org

• World crude steel production for 2003 exceeded 1 billion tons, an increase of almost 7 percent, compared with

2002, according to the International Iron and Steel Institute. While production in North America and the

European Union remained essentially flat, China’s production increased by more than 21 percent between 2002-

2003. See http://www.worldsteel.org

• Domestic steel mill capability utilization fell to less than 80 percent during third quarter 2003, the lowest utilization

level in more than 2 years, as exports trended downward from recent record levels (figure A-2). See

http://www.steel.org

0

20

40

60

80

100

Q1 2002 Q1 2003

Percent

0

2

4

6

8

Capacity utilization (left scale) Import penetration (left scale)

Finished imports (right scale) Exports (right scale)

Figure A-2

Steel mill products, all grades: Import penetration continues to decline during third quarter 2003, 

after falling to multi-year low during previous quarter

Note.--Capability utilization is the raw steel tonnage produced divided by the tonnage capability to 

produce raw steel for a sustained full order book.

Source: American Iron and Steel Institute.
MARCH/APRIL 2004

Key Performance Indicators Industry Trade and Technology Review

A-4

0

1000

2000

3000

4000

5000

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

1,000 units

Total sales--cars Total sales--cars/light trucks

Domestic sales--cars Domestic sales--cars/light trucks

Import sales--cars Import sales--cars/light trucks

Figure A-3

U.S. sales of new passenger vehicles (cars and light trucks) decreased in the fourth quarter 2003. For the 

quarter, the import passenger vehicle share of total U.S. sales decreased by a larger percentage than the 

domestic vehicle share 

3,999,358

3,225,695

1,258,701

1,757,326

773,663

498,625

Note.—Domestic sales include U.S.-, Canadian-, and Mexican-built vehicles sold in the United States; these 

same units are not included in import sales.

Source: Automotive News ; prepared by the Office of Industries.

2000 2001 2002 2003

AUTOMOBILES

Table A–3

U.S. sales of new passenger vehicles (cars and light trucks), domestic and imported, and share of U.S.

market accounted for by sales of total imports and Japanese imports, by specified periods, January 2002-

December 2003

Percentage change 

Item

Oct.-Dec.

2003

Jan.-Dec.

2003

Oct.-Dec. 2003

from

July-Sept. 2003

Jan.-Dec. 2003

from 

Jan.-Dec. 2002

U.S. sales of domestic passenger vehicles (1,000 units) 3,226 13,370 -9.1 -1.6

U.S. sales of imported passenger vehicles (1,000 units) 774 3,308 -13.7 1.3

Total U.S. sales (1,000 units) . . . . . . . . . . . . . . . . . . . . . 3,999 16,678 -10.1 -1.0

Ratio of U.S. sales of imported passenger vehicles to 

total U.S. sales (percent) . . . . . . . . . . . . . . . . . . . . . . . 19.3 19.8 -4.1 2.3

U.S. sales of Japanese imports as a share of the total 

U.S. market (percent) . . . . . . . . . . . . . . . . . . . . . . . . . 9.8 10.5 -9.3 0.2

Note.–Domestic passenger vehicles include U.S.-, Canadian-, and Mexican-built cars and light trucks sold in the

United States. Imported passenger vehicles do not include cars and light trucks supplied by Canada and Mexico.

Source: Compiled from data obtained from Automotive News. 

• Sales in 2003 were down 1.0 percent over 2002 levels, making 2003 the fifth-best passenger vehicle sales year in

U.S. history. However, the combined market share of the Big Three's domestic brands slipped to a historical low -

60.2 percent - down 1.5 points from 2002. The Big Three's share of car sales was 44.9 percent, down from 46.7

percent in 2002; their share of light truck sales was 73.7 percent, down from 76.4 percent in 2002. 

• Six of the 11 Japanese brands sold in the United States set sales records, and two others sold more cars and

trucks than in 2002. The combined sales volume for Japanese brands increased by 3.3 percent, and their

combined market share rose by 1.2 percentage points, to 28.8 percent. 

• Combined sales for European brands were up by 2.1 percent, and combined market share rose by 0.3 percentage

points, to 7.2 percent. Korean brands maintained their 2002 combined market share of 3.8 percent in 2003, despite

the fact that there were two manufacturers in 2003 as opposed to three in 2002. Daewoo dropped out of the market

in late 2002, leaving Hyundai and Kia as the only two Korean brands in the U.S. market. 

• Light trucks accounted for 53.2 percent of the passenger vehicle market in 2003, up from 50.6 percent in 2002. 

Prior to 2002, cars always outsold light trucks. 
MARCH/APRIL 2004

Industry Trade and Technology Review Key Performance Indicators

A-5

0

200

400

600

800

1000

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

1,000 metric tons

0

10

20

30

40

50

60

70

80

Cents per pound

Imports (Y1) Exports(Y1) Price (Y2)

Figure A-4

Imports continue to decline in the third quarter of 2003 due to lower imports from Russia

 1

Unwrought aluminum and aluminum alloys.

 2

Quarterly average of the monthly U.S. market price of primary aluminum ingots.

Source: Compiled by USITC staff based on data obtained from the U.S. Geological Survey.

1

1

1 2

UNWROUGHT ALUMINUM1

• The price of aluminum remained stagnate during 2003 because of increasing production worldwide but sustained

demand by the Chinese may change the outlook. According to industry analysts, a shortage of alumina (the raw

• material used to produce aluminum), due to high levels of purchases by the Chinese for their rapidly expanding

primary aluminum industry, may result in higher aluminum prices in 2004. 

• Consolidation continues in the aluminum industry as Alcan’s bid for Pechiney was approved by both EU and U.S.

regulatory authorities. However, regulatory approval of the deal required that Alcan divest of some key properties

in order to meet anti-monopoly provisions in both Europe and the United States. 

• According to Alcoa, a recent surge of aluminum plate from South Africa (of comparable quality to U.S.-made

plate) contributed to Alcoa’s filing of an antidumping petition before the U.S. International Trade Commission

(ITC). In December 2003, the ITC determined that there was a reasonable indication that a U.S. industry is

materially injured by reason of imports of certain aluminum plate from South Africa that are allegedly sold in the

United States at less than fair value.

Table A-4

Inventories in LME warehouses reached levels not seen since February 1995

 Percentage change

Item Q3 2002 Q2 2003 Q3 2003

Q3 2003

from 

 Q3 2002

Q3 2003

from 

Q2 2003

Primary production (1,000 metric tons)............ 702 674 668 -4.8 -0.9

Secondary recovery (1,000 metric tons) ........... 759r 738 738 -2.8 0.0

Imports (1,000 metric tons)..................... 773 746 666 -13.8 -10.7

Import penetration (percent) . . . . . . . . . . . . . . . . . . . . 35.7 36 33.1 1

-2.6 1-2.4

Exports (1,000 metric tons) . . . . . . . . . . . . . . . . . . . . . 66 56.0 60 -9.1 7.1

Average nominal price (cents/lb) . . . . . . . . . . . . . . . . 63.5 67 67.1 5.8 1.0

LME inventory level (1,000 metric tons) . . . . . . . . . . . 1,290 1,142 1,372 6.4 20.1

1

 Percentage point change

Note.–Revised data indicated by “r.”

Sources: Compiled from data obtained from U.S. Geological Survey and World Bureau of Metal Statistics.

1

Product coverage includes only unwrought aluminum and certain aluminum alloys for improved data comparability.
MARCH/APRIL 2004

Key Performance Indicators Industry Trade and Technology Review

A-6

Figure A-5

Japanese monthly average imports show increases during first 8 months of 2003

0

500

1000

1500

2000

2500

3000

1999 2000 2001 2002 2003

1,000 square meters

0

5

10

15

20

25

30

Million dollars

United States (left scale) All countries (right scale)

United States (right scale) All countries (left scale)

Source: Compiled from “World Trade Atlas: Japan” at http://www.globaltradeatlas.Com, using official statistics 

provided by the Government of Japan.

FLAT GLASS

Background

 

• Although the U.S.-Japanese agreement on Japanese market access for imports of flat glass which sought to

increase access and sales of foreign flat glass in Japan expired on December 31, 1999,1

 the U.S. Government

continues to engage the Japanese Government in discussions over access to the Japanese market. Most recently,

in the 2003 Trade Forum discussion held in July 2003 under the U.S.-Japan Partnership for Economic Growth, the

U.S. Government “highlighted the continuing problems that prevent market entry, including the need for tighter

enforcement of rules against anticompetitive behavior.”2

 The U.S. Government also has urged Japan to modify

regulations to facilitate use of energy-efficient glass in Japan. 

• U.S. and Japanese negotiators have agreed that Japan’s Ministry of Trade and Industry (MITI), in conjunction with

the Japan Fair Trade Commission (JFTC), should monitor Japanese flat-glass manufacturers and the glass

distribution system in Japan to promote competition in the sector.3

 

Current

 

• Increased Japanese demand for imported flat glass, encouraged by a somewhat more positive outlook for the

Japanese economy, resulted in an increase in average monthly Japanese imports in 2003 from all countries by 8

percent, compared with levels in 2002, to 2.7 million square meters. The average monthly value of total Japanese

flat glass imports in 2003 increased by 7 percent, compared with levels in 2002, to $16.6 million. In 2002, the

quantity of average monthly Japanese imports remained unchanged compared with the same imports in 2001, and

decreased 20 percent in value during the same period. 

• Average monthly Japanese imports from the United States increased by quantity and value during full-year 2003

compared with 2002 (up 10 percent to 291,000 square meters and up 16 percent to $5.2 million, respectively) due

largely to increased demand in Japan for higher-value, construction-related flat-glass products from the United

States. Average monthly imports from the United States for full-year 2002 had decreased 32 percent in quantity

and 54 percent in value over the same imports for full-year 2001.

1

Office of the United States Trade Representative (USTR), The President’s 1999 Annual Report on the Trade

Agreements Program, p. 227, downloaded from http://www.ustr.gov/reports/tpa/ 2000index.html on Mar. 3 2004. 2

USTR, 2004 Trade Policy Agenda and 2003 Annual Report of the President of the United States on the Trade

Agreements Program (final draft), 2003, pp. 21-22. 3

USTR, Fourth Annual Submission by the Government of the United States to the Government of Japan on

Deregulation and Competition Policy, Oct. 12, 2000, p. 32.
MARCH/APRIL 2004

Industry Trade and Technology Review Key Performance Indicators

A-7

0

2

4

6

8

10

Q4-2001 Q1-2002 Q2-2002 Q3-2002 Q4-2002 Q1-2003 Q-2-2003 Q-3-2003

Billion dollars

European Union Japan Canada

Figure A-7

Surpluses on cross-border U.S. services transactions with selected trading 

partners, by quarter, 2001-20031

 1Private-sector transactions only; military shipments and other public-sector 

transactions have been excluded.

Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of 

Current Business, Jan. 2004, pp. 92-95.Business Transportation Tourism 

Royalties 

and 

license 

fees

Other

Finance 

Insurance

Education 

-6

-4

-2

0

2

4

6

8

Billion dollars

Fourth quarter 2002 First quarter 2003 Second quarter 2003 Third quarter 2003

 1 Data for telecommunication services are to small to be revealed graphically. 

 2 Includes passenger fares, freight and port services.

Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, Jan. 

2004, p. 83.

Figure A-6

Balance on U.S. service trade accounts,1

 by quarter, 2002 and 2003

2

SERVICES
MARCH/APRIL 2004

Key Performance Indicators Industry Trade and Technology Review

 1 Crude petroleum prices rose by 22 percent in 2003 compared with 2002, whereas natural-gas prices climbed by

73 percent. The volume of crude petroleum imported from Canada grew by 7 percent, and from Mexico, by

6 percent.

 2 Statistics Canada, “Canadian Economic Accounts 2003,” found at http://www.statscan.ca/daily/english/html,

retrieved on Feb. 27, 2004.

 3 The Americas, “Canada Records Surprisingly Strong Growth,” Wall Street Journal, Mar. 2, 2004.

 4 Zoltan Pozsar, T, “GDP Analysis - Canada,” Economy, found at http://www.economy.com/dismal/pro/release,

retrieved on Feb. 18, 2004.

 5 David Givens, “First Take”, Economy, found at http://www.economy.com/dismal/pro/release retrieved on

Feb. 17, 2004.

 6 “Economic Summary,” Mexico Watch, Mar. 1, 2004, p. 3.

A-8

NORTH AMERICAN TRADE HIGHLIGHTS

U.S. trade with its North American Free Trade Agreement (NAFTA) partners is highlighted in table A-5. The following

is a summary of key developments in 2003.

• A burst of U.S. economic activity and higher prices in the energy sector fueled a 5-percent ($16.6-billion) rise in

U.S. imports from its NAFTA partners in 2003 compared with 2002. Escalating prices for petroleum, petroleum

products, and natural gas accounted for much of the increase in imports from both Canada and Mexico.1

 By

contrast, more restrained gross domestic product (GDP) growth among its NAFTA partners–and especially

Mexico’s sluggish assembly industry–held the overall rise in U.S. exports to 1 percent ($3.2 billion). As a result,

the U.S. merchandise trade deficit with Canada ($75.3 billion) increased by $7.3 billion, while the deficit with

Mexico ($54.1) rose by $6.0 billion.

• The year-to-year increase in U.S. imports from its NAFTA partners lagged far behind the 22-percent rise in

imports from China in 2003, and was below the 6-percent growth in U.S. imports from all other suppliers.

 

• Despite, the Canadian economy’s modest GDP growth of 1.7 percent in 2003,2

 consumption of U.S. exports rose

by 4 percent ($6.2 billion). The driving force in the Canadian economy in 2003 was a build up of business

inventories, and record orders by the transportation and computer industries. Additionally, brisk Canadian

business investment in plant and equipment in 2003 boosted demand for U.S. exports of machinery and

equipment after 2 years of decline.3

• The Canadian dollar’s 15-percent appreciation against the U.S. dollar during 2003 stymied export growth of most

manufactured goods to the United States,4 in contrast to rising exports in the energy sector. Although U.S.

imports of auto parts from Canada expanded by $1.2 billion in 2003, imports of motor vehicles declined by $0.6

billion; telephone equipment, by $0.5 billion; and computer hardware, by $0.2 billion.

• Strong U.S. demand for energy products during 2003 in a tight global energy market with higher

prices–attributable to caps on exports by members of the Organization of Petroleum Exporting Countries (OPEC)

and the 9-percent GDP growth in China (challenging the United States as the world’s leading consumer of

petroleum)–resulted in the value of U.S. imports from Canada increasing by 6 percent ($13.5 billion) in 2003.

• Mexico’s GDP growth of 1.3 percent in 2003 also primarily reflected higher prices paid by the United States for its

imports of petroleum.5

 The 2.7-percent increase in U.S. manufacturers’ shipments in the United States did not

translate into increased demand for assembly services in Mexico, and escalating prices for electricity and intense

competition from China slowed the flow of foreign direct investment into Mexico. Manufacturers’ shipments in

Mexico fell by 2 percent in 2003 and employment in companies registered under the Maquiladora Program was

reduced by 12,500 jobs.6

• The downward trend in U.S. exports to Mexico nearly mirrored the decline in manufacturing in Mexico as exports

fell by 3 percent ($2.9 billion) in 2003. The bulk of U.S. exports to Mexico remained intermediate products

(machinery, materials, components, and other industrial inputs) destined for companies operating under Mexico’s

Maquiladora Program and PITEX.
MARCH/APRIL 2004

Industry Trade and Technology Review Key Performance Indicators

 7 John Cristman, “Mexico’s Economic, Political Update and Trade Forecasts: Projections and Implications for

Investment in Mexico 2004-2008," Global Insight, Mar. 10, 2004.

A-9

NORTH AMERICAN TRADE HIGHLIGHTS

Table A-5

North American trade, 1998-2003

Percent

 change

Item 1998 1999 2000 2001 2002 2003 2002/03

————Value (million dollars)——————————

U.S.-Mexico trade:

Total imports from Mexico . . . . . . . 93,017 109,018 134,734 130,509 134,121 137,199 2

U.S. imports under NAFTA:

Total value . . . . . . . . . . . . . . . . 68,326 71,317 83,995 81,162 84,747 87,750 4

Percent of total imports . . . . . . 73 65 62 62 63 64 1

1

Total exports to Mexico . . . . . . . . . 75,369 81,381 100,442 90,537 86,076 83,108 -3

U.S. merchandise trade balance

with Mexico2 . . . . . . . . . . . . . . . -17,648 -27,637 -34,292 -39,971 -48,045 -54,091 -13

U.S. -Canada trade:

Total imports from Canada ...... 174,685 198,242 229,060 216,836 210,518 224,016 6

U.S. imports under NAFTA:

Total value . . . . . . . . . . . . . . . . 111,675 115,715 123,052 113,179 115,807 119,416 3

Percent of total imports . . . . . . 64 58 54 52 55 53 1

-2

Total exports to Canada ........ 137,768 145,731 155,601 144,621 142,543 148,749 4

U.S. merchandise trade balance 

with Canada3 . . . . . . . . . . . . . . -36,918 -52,511 -73,459 -72,215 -67,975 -75,267 -11

1

Percentage-point change.

2

 The negative (-) symbol indicates a loss or trade deficit. The $48.0-billion deficit in U.S. merchandise trade

with Mexico in 2002 was partially offset by a $4.7-billion U.S. surplus in bilateral services trade. 3

 The $68.0-billion deficit in U.S. merchandise trade with Canada in 2002 was partially offset by a $5.8-billion

U.S. surplus in bilateral services trade. During the first three quarters of 2003 the U.S. surplus in bilateral services

trade totaled approximately $7 billion, not seasonally adjusted.

Source: Compiled by USITC staff from official statistics of the U.S. Department of Commerce. Statistics on U.S.

services trade with Canada and Mexico are based on preliminary data provided in U.S. Department of Commerce,

Bureau of Economic Analysis, “U.S. International Transactions Accounts Data,” tables 10 and 10a, found at

http://www.BEA.DOC.GOV/BEA/International/BP_web/list.CFM?ANON=92.

• Higher petroleum prices largely accounted for the net 2-percent ($3.1-billion) growth in U.S. imports from Mexico in

2003. The 10-percent depreciation of the Mexican peso vis-a-vis the U.S. dollar in 2003 reportedly slowed the shift

in sourcing by U.S. companies away from Mexico towards China, and probably prevented an absolute decline in

U.S. imports from Mexico.7

• Leading categories of manufactured goods exhibiting U.S. import increases from Mexico in 2003 were auto parts

($1.3 billion); telephone equipment ($0.5 billion); television receivers ($0.3 billion); measuring, testing, and

controlling instruments ($0.3 billion); and medical goods ($0.3 billion). Manufactured goods with the largest

decreases in imports from Mexico were motor vehicles ($1.5 billion); computer hardware ($1.3 billion); toys, dolls,

games, sporting goods, and bicycles ($0.6 billion); and apparel ($0.5 billion). Except for motor vehicles, the

declines in U.S. imports from Mexico in these sectors reflected a loss of U.S. market share to imports from China.