In August 2023, TULIP published a new report (pdf below), commissioned by GIZ, focused on how the World Trade Organization and Regional Trade Agreements (RTAs) can be leveraged to advance a circular economy transition from the vantage point of developing countries and least-developed countries. The study makes ten high-level observations:
While the WTO has an important role to play as a convening platform and can create guidance and agreements at a multilateral level, RTAs have more flexibility to develop innovative approaches relevant to the circular economy. Therefore, both are important in strengthening the link between the circular economy and trade regimes and have a different, yet complementary, role to play.
In addressing the role of trade to advance an inclusive circular transition, it is critical to define a clear conceptual framework. Indeed, trade and the circular economy for developing countries can be approached from a variety of different angles: including increasing trade in end-of-life products; leveraging trade to facilitate a circular transition in a developing country; or focusing on anticipated shifts in trade flows as a result of a circular transition. This study has focused on three carefully chosen entry points, focusing on both the major challenges and opportunities trade and the circular economy presents for developing countries and LDCs.
In analysing the role of trade agreements – both the WTO and RTAs – as an instrument to advance an inclusive circular economy, this study has found that a tension exists between trade agreements, which generally allow or prohibit a measure based on their trade distortive effect, and trade‑related measures to advance an inclusive circular economy, which predominantly focus on the distinction between circular and linear products or "wanted" and "unwanted" end-of-life products. This conceptual misalignment finds expression, inter alia, in the fact that discrimination in favour of circular products, or import bans on "unwanted" secondary products, which is required under the Basel Convention, is WTO‑compatible only when these measures meet the conditions in the exceptions clause, such as GATT Article XX. While policy space exists for countries to adopt circular measures, this intrinsic misalignment warrants looking more fundamentally at ways in which the trade regime and the circular economy objectives can be better aligned.
Various provisions in the WTO and/or RTAs, including on TBT, intellectual property, trade facilitation, and government cooperation can be leveraged to promote and inclusive circular transition. However, the existence of these provisions in and of themselves will have little impact if they are not proactively linked to circular economy objectives. What is required is proactive engagement by the WTO membership and RTA parties to find ways to ensure that relevant trade provisions are actually having an impact on promoting an inclusive circular transition.
The absence of relevant international standards for the circular economy is problematic. As a result, most standards and regulations on circularity are adopted at the national level, which can become non-tariff barriers. It is therefore critical that, as countries develop their national regulatory approaches to the circular economy, they also participate in ongoing international efforts to develop commonly agreed upon circular economy standards that could significantly facilitate trade. At the same time, the WTO membership has a role to play in finding agreement on commonly accepted definitions on end-of-life products that can be used to facilitate trade.
A fundamental change that would need to happen to better align trade agreements with the circular economy concerns improving customs officials' ability to distinguish between different types of circular goods. Indeed, for trade to have a positive effect on an inclusive circular economy transition, it is critical that customs officials have the ability to differentiate between different types of end-of-life products. While contaminated, hard-to-recycle waste is "unwanted" and should not come into a country, easy-to-recycle waste might be desirable if a country seeks feedstock to develop a recycling plant. A large amount of technical work must be done to ensure that the HS enables product differentiation based on their circular characteristics.
To strengthen the link between the WTO and an inclusive circular economy transition, it would be important to develop a non-binding guiding document, which could serve as a reference for countries seeking to leverage the WTO to advance a circular economy transition. The benefit of engaging in discussions that centre on a non-binding outcome is that it will be easier to see results and allow Members to focus on technical issues relevant to the circular economy. In particular, non-binding guidelines on the circular economy can set out common principles for standards, regulations and Conformity Assessment Procedures, but could also include ideas to identify and liberalize tariffs on circular products or include a list of technologies considered to be critical for a circular economy transition. A non-binding guiding document on the circular economy could also form the basis on which a JSI on the environment/inclusive circular economy transition can be developed, to further strengthen links between trade and the environment.
To strengthen the link between the WTO and an inclusive circular economy transition, it is critical for developing countries to actively participate in ongoing discussions at the WTO, including TESSD. Indeed, failure to do so presents a missed opportunity to identify challenges and engage in opportunities that could be critical to advancing a circular economy. Developing countries' resource constraints, which are often pointed to as a reason for a lack of participation, could potentially be addressed by appointing a focal point for different groups of developing countries and LDCs, e.g. the African, Caribbean and Pacific Group of States (ACP Group), the African Group, or LDCs. These focal points could represent different groups of developing countries, and share what has been discussed in the committee, as well as various points that developing countries want to make.
To make the WTO work for an inclusive transition, it is imperative that developing countries adopt a pragmatic approach to circular economy-relevant initiatives and negotiations that seeks to understand how the country can benefit from these initiatives. A pragmatic approach presupposes that the developing country has a clear idea of the economic and social challenges relevant to the circular economy transition, and has identified the types of goods, services, and technologies it would need to develop a more circular economy. This could be done as part of a circular economy roadmap or other overarching national circular economy strategy, which would underpin a clear vision for trade policy. In other words, some key actions that are necessary to make the WTO work for an inclusive circular economy must take place outside the WTO framework.
While most circular economy references in existing RTAs are expressed in cooperation provisions or best endeavour clauses in TSD/environment chapters of an RTA, it will be important to mainstream circular economy. In addition, a key recommendation is to also consider including a chapter specific to circular economy, focused on both tariff and non-tariff barriers, similar to renewable energy chapters in EU RTAs. This would not only increase awareness of the role of trade in advancing the circular economy transition; it would also enable adopting a more comprehensive and, at the same time, more granular, approach with respect to the circular economy. Especially in RTAs between developed and developing countries, cooperation provisions will also be critical.
