The Circular Economy, Trade, and Development: Addressing Spillovers and Leveraging Opportunities

This policy report, commissioned by the Permanent Representation of the Netherlands to the World Trade Organization, analyses the implications of the circular economy for trade with developing countries. As major economies — and the EU in particular — have adopted ambitious circular economy strategies, the report examines how this policy shift affects trade patterns, market access conditions, and development prospects for lower-income economies.

The report explores three main dimensions. First, it examines how circular economy measures — including recycled content requirements, extended producer responsibility (EPR) schemes, waste shipment regulations, and product durability standards — can function as non-tariff barriers to trade for developing country exporters. Firms in these countries often lack the financial, technical, and institutional capacity to meet the stringent product and process standards associated with circular economy regulations, potentially leading to market exclusion.

Second, the report analyses the implications of the circular economy for trade in secondary materials, refurbished goods, and waste. The shift toward circularity creates new trade flows in these categories, but existing trade rules and classifications are often ill-equipped to handle them. The report highlights challenges related to distinguishing between waste and secondary raw materials at the border, harmonising standards for refurbished products, and ensuring that circular trade does not result in the dumping of waste in developing countries.

Third, the report considers how trade policy — at both the multilateral (WTO) and bilateral (FTA) levels — can be leveraged to support an inclusive circular economy transition. It provides recommendations on how WTO agreements and rules can be used to facilitate access to circular economy goods, services, and technologies, and how regional trade agreements can incorporate provisions that promote circularity while safeguarding the interests of developing country partners.

The report concludes that without deliberate policy action, the global circular economy transition risks exacerbating existing inequalities between advanced and developing economies, with lower-income countries bearing a disproportionate share of the adjustment costs.