Putting Out The Trash.(Business)

Byline: Daniel Gross; With Reporting By Eleazar David Melendez

America's junk exports are enriching the developing world and helping the planet too.

Kramer Metals, a 50-employee third-generation scrap-metal operation in Los Angeles, is doing a brisk business packing salvaged iron and steel into 14.5-metric-ton containers and shipping it off to Asia. "About 60 percent of our ferrous scrap goes into export containers," says CEO Doug Kramer. "It doesn't all go to China. Some of it goes to Korea, and some of it goes to Thailand."

Economists and consumer-safety advocates make a big deal out of all the junk Americans import from China -- tainted pet food, lead-laced toys and enough cheap plastic toys to fill a landfill the size of Montana. And American industries are clearly being drenched by the rising tide of Chinese imports ($288 billion in 2006). But as imports from China soar, American exports to China -- and other points in Asia -- are quietly rising at an even more rapid pace. Would it surprise you to learn that a lot of those exports are -- junk?

In an act of macroeconomic karma, materials thrown out by Americans -- broken-down auto bodies, old screws and nails, the precious magazine you hold in your hands -- are the second largest export to China ($6.7 billion in 2006), second only to aerospace products. Offshored American trash is also finding its way to many other parts of Asia, as well as Europe and Latin America. The result is a $65 billion U.S. scrap industry that employs 50,000 people, who constitute part of a surprisingly virtuous circle. The demand of developing-world factory bosses for junk -- which they use to make all the retail junk Americans buy -- creates jobs, tamps down the growth of the trade deficit and might help save the planet.

Scrap materials are the alpha and the omega of the industrial process. Consumers create scrap when they use goods; factories consume scrap to create new goods. As the developing world has industrialized, its demand for scrap has soared. According to Stan Lancey, chief economist at the American Forest & Paper Association, U.S. exports of recovered paper to China -- where paper was invented around 100 B.C. -- soared from 348,000 metric tons in 1994 to nearly 9.1 million metric tons in 2006, worth $1.07 billion. This year, China has accounted for 58 percent of U.S. scrap-paper exports. Zhang Yin, China's wealthiest woman, built her multibillion-dollar fortune through Nine Dragons Paper, which buys scrap paper in the United States and peddles it to Chinese mills.

Meanwhile, exports of ferrous scrap (it sounds like a Scottish breakfast but means waste iron and steel) to China have risen from 166,000 metric tons in 1998 to 2 million metric tons last year. Junk dealers reaped $1.5 billion selling scrap copper to China in 2006. All told, China's ravenous factories hoovered up 42 percent of U.S. scrap exports in 2006.