6.1 Develop shared definitions and classifications
Shared or mutually recognized definitions and classifications for circular goods are essential for enabling efficient trade that supports the circular economy transition. Yet there remains an absence, or divergence in the interpretation, of definitions and classifications of goods in terms of their circularity. For example, many countries regard remanufactured goods as equivalent to used goods. Remanufacturing is also hampered by the difficulty of moving broken or end-of-first-use goods across borders. Despite these remanufacturing ‘cores’ being destined for a new life, they can often be legally classified as waste. As a result, remanufactured goods (and cores) tend to be viewed as inferior to new ‘like’ equivalents and face higher import tariffs or non-tariff trade restrictions such as import prohibitions, core-export prohibitions and complicated bureaucratic processes (see Section 3.3). Divergence in definitions is compounded by limited incorporation of the various circular trade flows into the Harmonized System (HS) of codes (see Section 3.2).
The following actions are therefore proposed to overcome these challenges:
Work towards shared definitions for circular goods. Willing WTO member states and industry representatives can begin by conducting a stock-taking exercise on best practices, existing definitions and classification of products with respect to circularity, and by identifying potential gaps and opportunities for increasing uptake of shared definitions and classifications. Such an initiative must also specifically seek clarity on the definitions that differentiate true ‘waste’ from those products that still have life left in them. The aim must be to create a path for agreeing international standards for remanufactured products and cores. Any such definitions should be based on strong conceptual work, with a clear objective of respecting planetary boundaries, rather than trying to define it on the basis of current practices.
Ensure circular economy-relevant information is captured in cross-border trade, in a way that is globally interoperable. A working group including relevant stakeholders such as the WCO and national border and environmental agencies would be able to identify practical solutions on how to better capture and communicate circular-relevant information on goods at national borders in a way that is globally interoperable and compatible with the HS system.
6.2 Reduce technical barriers to trade
Technical standards (which are voluntary) and regulations (which are mandatory), as well as conformity assessment procedures (CAPs) for products and their production or disposal methods, can enable or inhibit circular trade flows. Standards and regulations relating to circularity are growing in use and apply to multiple levels (see Section 5.1 and 5.2). They concern products and materials (e.g., recycled content, durability and information requirements such as digital passports), industrial processes and production (such as cleaner production, sharing and use of by-products and industrial symbiosis), consumer information (i.e. labelling) and recovery routes (such as quality standards for secondary raw materials). Unilateral circular economy-related standards and regulations have increased in number recently, creating a complex patchwork of requirements for companies operating across several markets.
The main challenge regarding the development of national circular economy standards and regulations relates to regulatory divergence and sometimes contradictory requirements across different jurisdictions. This divergence generates additional costs for companies and disincentivizes investment in circular solutions. In light of the challenges raised by standards, regulations and CAPs in terms of technical barriers to trade, the following actions are recommended:
Map circular economy standards with implications for trade and move towards greater alignment. Including a CE-related policy as an environmental category within the WTO notification system would help improve the mapping of circular economy standards and regulations. Alongside this, support is required to build the capacity of countries to report more frequently and accurately on such policy developments. A prioritization and knowledge-sharing exercise between a ‘coalition of the willing’, hosted by the likes of TESSD, GACERE or regional CE coalitions, would be useful to identify the evolving areas (or lack thereof) of regulations and standards most critical for CE trade and where opportunities for mutual recognition exist. Individual countries must proactively consider the unintended trade barriers that domestic circular policy and legislation may create, and must include those most affected in the policymaking process.
Seek mutual recognition agreements to align conformity assessments. To address the current limitations of CAPs, mutual recognition agreements (MRAs) would allow countries to recognize ahead of time the technical competence of relevant bodies to perform conformity assessment checks. Governments should also attempt to meet their obligation under the technical barriers to trade agreement to provide technical assistance and facilitate knowledge-transfer to other members, particularly developing economies. Support could range from providing help to create regulatory bodies for conformity assessment, to detailing necessary methods for meeting technical regulations and managing conformity assessment with standards.
6.3 Improve trade facilitation measures
Trade facilitation refers to a distinct collection of measures that help simplify the legal and technical procedures enabling products to enter or leave a country. Challenges for circular trade facilitation include the complexities of product classification and cumbersome permitting processes, particularly for products classified as hazardous. Trade facilitation can be important in overcoming current barriers to circular trade, particularly for developing and emerging economies that do not currently have as efficient measures in place (see Section 5.4). To help achieve this, the following actions are recommended:
Digitize the Basel Convention PIC procedure for low-income countries. The PIC procedure within the Basel Convention requires exporters of certain types of waste (mostly hazardous) to receive prior consent from the national environmental agency in the importing country (see Box 5). Currently, many countries do not use an electronic PIC procedure at all, resulting in delays and lack of transparency on decisions.
Building on existing efforts in this area, develop a dedicated capacity-building initiative for automating and digitizing the PIC procedure. This would enable border and environmental agencies in low-income countries lacking the resources, digital infrastructure and skills-base to participate in an e-PIC system. Such an initiative could initially focus on problematic circular trade flows like plastics and used electronics and e-waste.
Pilot cross-border transparency and traceability for circular economy trade flows. Groups of willing countries must form plurilateral pilot schemes to test technological and procedural solutions for improved transparency and traceability of circular trade flows. The pilots should compare and contrast the unique challenges related to specific trade flows (for example, the differences between e-waste and scrap metals), and also help identify technical challenges to secure, real-time data transfer between the many different stakeholders involved in the process of trade (from producers to logistics companies and retailers) and its regulation (from border and customs agencies to environmental agencies and port authorities; discussed in Section 5.4).
6.4 Expand capacity-building programmes to prevent a circular trade divide
Just as with the growing digital divide between the Global North and Global South, a circular trade divide is already beginning to emerge (see Section 4.1). This divide will likely persist or even become wider due to existing global inequities in development, digital capabilities, finance and infrastructure. Businesses in developing countries (particularly MSMEs) will experience the biggest technical barriers to trade as a result of developed countries enhancing their circular standards and regulations and implementing further environmental measures such as the EU’s carbon border adjustment mechanism. Dedicated support and targeted assistance programmes are needed to mitigate the impacts of increasing trade barriers and changing patterns of demand.
Embed circular economy in existing multilateral capacity-building programmes. Circularity must become a core pillar in the pursuit of ‘greening’ the WTO’s Aid for Trade initiative and the agenda of UN Capacity Building Task Force on Trade, Environment and Development. Aid for Trade should focus on key areas for capacity-building, such as infrastructure investment to enable domestic circular activities; trade infrastructure and customs systems; enforcement of laws around illegal waste shipment; circular production skills and training; and policy development.
Establish a global ‘repairation’ fund. There remains a substantial gap between the access to circular investment funding in the Global North and that available to the Global South. The establishment of a global ‘repairation’ fund would provide investment and financing for local governments, social entrepreneurs and worker co-ops working on circular solutions such as recycling, remanufacturing and repair.
Create a dedicated WTO initiative for raising awareness of circular trade. As with circular investment, awareness about the potential benefits of participating in circular trade remains low among the international trade community and national policymakers. A dedicated WTO initiative on the circular economy and trade could include collective dialogue, research and information-exchange on the areas outlined in the framework for inclusive circular trade. Such an initiative could also encourage participating countries to set targets and make voluntary commitments on circularity.
6.5 Embed circularity and inclusivity within trade and economic cooperation agreements
As outlined in the previous areas for action, international trade cooperation and coherent policy approaches across jurisdictions are important for delivering inclusive circular trade. Trade and economic cooperation agreements (whether bilateral, regional or plurilateral) are important mechanisms for fostering such cooperation (see Section 5.4). The following recommendations are proposed:
Embed circularity across the full spectrum of trade and economic cooperation agreements. There is a significant opportunity to further embed circularity in several specific areas of trade and economic cooperation agreements, such as on technical barriers to trade. These include: encouraging participation in the preparation and use of international CE standards; clarifying mutual areas for investments in the circular economy (such as preserving the right to establish non-discriminatory regulations); and public procurement processes and best practice. A shortlist of goods necessary for conducting activities (as defined by the EU taxonomy for sustainable activities) that contribute substantially to the circular economy, but are currently subject to high tariffs, would be valuable in this respect.
Given the many outstanding questions on this topic, a collective and extensive consultation with a wide range of relevant stakeholder groups is necessary. Such a consultation could be led by a consortium of relevant groups within the WTO such as the TESSD Working Group on Circular Economy or the Friends Advancing Sustainable Trade (FAST) Group.
Another area for consideration is that of ‘like’ products. The ability to differentiate measures applied to imported similar products based on their circularity (such as their durability, recyclability, repairability or use of recycled materials) would allow countries to accelerate their domestic transition to a circular economy. However, the level of circularity of products is currently irrelevant in determining ‘likeness’. Relevant forums such as the TESSD Working Group and various regional circular economy alliances must initiate discussion on current rules pertaining to ‘like’ products and whether they restrict efforts by individual countries to transition to a circular economy and protect their environment.
Initiate discussions on the impact of ‘linear’ subsidies. Subsidies supporting ‘linear’ economic activities will reduce economic incentives for circular trade. A valuable exercise would be to evaluate the scale, nature and environmental impact of ‘linear’ subsidies for different kinds of circular trade flows and where opportunities exist to replace them with incentives for circularity.
Create and support long-term initiatives to tackle illegal waste trade. To genuinely tackle the trade in illegal waste, a long-term, well-resourced and globally coordinated approach to policing is necessary. Such an approach could build on the work of the Green Customs Initiative and the findings from Project Demeter, and be coordinated by existing organizations such as Europol, INTERPOL, the Secretariat of the Basel Convention, UNEP and the WCO. Individual governments must also commit to reporting illegal waste crime incidents in a timely manner.
