Lead Recycling: A Case of Unfair Competition – Part One

The US rightly seeks to protect domestic industries facing unfair foreign competition, using anti-dumping action and countervailing duties to protect domestic firms facing imports from countries where local firms benefit from government subsidies or support that allows them to sell at below economic cost in export markets.

But foreign government support is only one form of unfair competition, and an equally damaging factor can be the complete opposite of support — and that is failure to enforce laws or standards. For example, Chinese firms do not have the huge R&D cost of developing technologies; they can steal the designs from Western firms and bring out a copycat product, often inferior but outwardly the same, and deny the original manufacturer sales both in their home and export markets.

US and European governments do try to pressure China and other developing countries to apply better standards, but it is a tough long-term challenge without taking aggressive action; although many would argue that’s what’s required. But closer to home, we have a prime example of another form of unfair competition: moving manufacturing operations to jurisdictions where environmental standards are so lax, or non-existent, that whole industries are being threatened in the US. That example is lead recycling.

On a number of levels, the massive export of battery-lead recycling from established firms in the US to operators in Mexico is a crime, but the root cause of the problem is environmental standards for the industry are lower in Mexico than in the US; not only that, what standards there are in Mexico are rarely enforced, as a NY Times article explains.

Lead battery recyclers in the United States now operate in sealed, highly mechanized plants ” like labs working with dangerous germs. Their smokestacks are fitted with scrubbers, and their perimeters are surrounded by lead-monitoring devices. In Mexico standards vary; a few meet relatively robust international expectations, although not full US EPA standards, but many are no more than a team of men with hammers smashing up the plastic cases, pouring the acid out and melting the lead down in furnaces with no emission controls. Lead dust is released from the physical break up of the batteries and lead-laced emissions are pumped into the atmosphere from the furnaces and smokestacks.

In the last three years, the EPA has reduced the allowable lead levels in both smokestack emissions and ambient air by a staggering amount in the US, the article states. American recyclers estimate the cost of compliance for a typical plant at $20 million. Battery brokers are therefore shipping growing quantities of spent batteries south, where recycling costs are a fraction of the US. Even established US firms such as Johnson Controls, the largest manufacturer of auto batteries in the world, is shipping increasing quantities south hundreds of thousands of tons, according to the article.

The company operates one licensed recycling plant in Mexico and is constructing another. No suggestion is being made that standards are poor at Johnson Controls’ Mexican operations and the firm states their Mexican plants would be upgraded in 2013 to meet full EPA standards, but the firm is the respectable tip of a highly unsavory iceberg. Exide, which has five recycling plants in the US and no plans to recycle in Mexico, inferred that the only reason recycling is off-shored to Mexico is to skirt US regulations. As a result, US recyclers are being starved of battery supplies and priced out of the market; some smaller operators are down to one shift a day.

Continued in Part Two.

–Stuart Burns