The role of international trade in realizing an inclusive circular economy

Abstract

Unsustainable production, consumption and disposal of the world’s resources are primary causes of the triple threat of pollution, climate change and biodiversity loss. This linear model is also a significant cause of social injustice, with most resource consumption and wealth accumulation occurring in the Global North and the worst environmental impacts and threats to human health in the Global South. Increasing geopolitical tension and the likelihood of further global supply-chain shocks and disruptions exacerbate these issues. A transition to an inclusive circular economy is essential to help address these challenges. An inclusive circular economy seeks to achieve absolute decoupling of resource use and environmental impact from equitable economic prosperity and human development. It does this by slowing, narrowing and looping the flow of materials through the economic system, while regenerating natural systems and designing out toxicity. By focusing equally on environmental issues, human needs, sustainable livelihoods, decent work and social justice, an inclusive circular economy can make important contributions to human development, to poverty reduction and to improved well-being around the world. International trade will play a key role in delivering an inclusive circular economy. Circular trade encompasses any international trade transaction that contributes to realizing a circular economy at the local, national and global levels. This includes trade in circular economy-enabling goods, services and intellectual property (IP); second-hand goods for reuse, repair, remanufacturing or recycling; refurbished and remanufactured goods; secondary raw materials (biotic and abiotic); and non-hazardous waste, scrap and residues (biotic and abiotic) that can be safely recovered or valorized. Circular trade offers many economic, environmental and social benefits. Trade in circular economy-enabling goods, services and IP allows countries and companies to access the necessary skills and equipment to implement new circular business models (such as leasing and renting), or to conduct reuse, repair, remanufacturing and recycling activities. Trade in used goods for reuse, repair or remanufacturing enables affordable access to essential goods and services for those in secondary markets, and generates local demand for industry and employment. Trade in secondary raw materials and waste destined for recovery enables the aggregation of materials in areas of highest demand to maximize economies of scale, making it economically attractive to transform waste into resources for new production. However, poorly regulated circular trade can have negative impacts. Many grey areas and loopholes currently exist in the global trading system – enabling high levels of illicit waste shipments, causing pollution and increasing human exposure to toxic chemicals. Meanwhile, high volumes of used goods can also flood secondary markets – threatening local industries and overwhelming local waste management systems. Under certain circumstances, overdependence on circular trade flows may also increase exposure to supply-chain risks and shocks. The distribution of value captured from circular trade flows is currently highly uneven, with most of the value remaining in the Global North. Growing geopolitical trends – such as economic nationalism and deglobalization – will likely lead to countries pursuing resource security in their circular strategies, rather than collective sustainability objectives. The resulting actions will inevitably create ripple effects along global value chains, potentially having a negative impact on other countries and exacerbating existing inequities. Any solution to overcome circular trade barriers will therefore require a collaborative and coordinated global response to ensure that all countries and territories benefit equally from the transition. This research paper presents an alternative pathway for the circular transition – towards a global trade regime that enables fair, inclusive and circular societies worldwide. The paper identifies five areas where collective action is necessary. First, the development of a shared language on circularity, starting with the definition and classification of goods. Second, the lowering or removal of technical barriers to trade. These include regulatory divergence and contradictory trade requirements among different jurisdictions. Third, the improvement of trade facilitation measures to address the complexities of product classification and cumbersome permitting processes, particularly for those products classified as hazardous. Fourth, dedicated capacity-building support from the international community to mitigate the impacts of increasing circular trade barriers and changing patterns of demand through targeted assistance programmes. Finally, a concerted effort by governments to embed circularity and inclusivity within trade and economic cooperation agreements.