The circular economy and international trade

A recent UNCTAD report asks this question: Can international trade rules promote the circular economy?

First of all, for a sustainable world, the transition from a linear to a circular economy is essential.

A circular economy aims to decouple economic growth from the use of natural resources and ecosystems through the more efficient use of these resources.

It is also a driving force for innovation in the areas of reuse of materials, components and products, as well as new business models, such as system solutions and services.

At the WTO, developed countries have followed the «circular economy» narrative to gain market access in developing countries.

It has sometimes been argued that trade liberalization is indispensable to moving towards a circular economy, particularly as trade restrictions in the form of export bans can hamper circular economy activities related to reuse, repair, renovation, remanufacturing and recycling.

According to UNCTAD, calls for the liberalization of trade in remanufactured or recycled goods and waste date back to 2004, when the issues of non-tariff barriers affecting trade in remanufactured goods, such as medical equipment and medical equipment, were first raised. heavy duty vehicles and motor parts.

Circular economy

Some of the non-tariff barriers identified at that time with respect to remanufactured goods were: requirements to provide a “refurbishment certificate” signed by the consulate in the country of origin that guarantees that the imported product is “like new”; prohibitions on the import of remanufactured goods if the equivalent goods are manufactured in the country or if they can be substituted by goods manufactured in the country; requirements that imported remanufactured goods meet a «special needs» test; and requirements for certification by a chartered engineer that replacement parts have at least 80% of their original useful life remaining.

To remove these restrictions and liberalize trade in remanufactured goods, some WTO Members proposed a Ministerial Decision on Trade in Remanufactured Goods in 2010.

More than anything, the proposed Ministerial Decision was rejected because some developing countries expressed concern about the possible adverse impacts of these imports on the producers of new goods in their countries and on the transfer of new technologies.

Challenges

The danger was that second-hand, reconditioned or remanufactured goods could lock developing economies in outdated and less efficient technological solutions and therefore delay the achievement of environmental goals.

Concerns were also raised about the liberalization of trade in waste and scrap, as this would put additional pressure on waste management systems in developing countries, especially those that lack a strong regulatory framework for waste management and associated infrastructure capabilities.

Developing countries argued that restrictions such as bans on the export of scrap and scrap metal were used to promote domestic processing and value added.

In addition, second-hand clothing and footwear imports were found to have significant negative effects on the modernization of the textile and leather industries, especially in Africa.

They were also found to have adverse impacts on consumer health, human dignity, and culture.

While moving towards a circular economy is therefore vital to contain resource use and environmental degradation, there is little reason to combine the measures necessary to achieve this with trade liberalization.

Instead, UNCTAD concluded, the best way to achieve a circular economy is through appropriate national regulatory policies.