Consumption of natural resources and materials, driven by the growth in world population and the rise of living standards, happens at an unprecedented pace, projectedto nearly double by 2060.It happens despite a shift from manufacturing to service industries, improvements in industrial efficiency and a global slowdown of the economic growth, led by China (OECD, 2019)In this context, the transition to a circular economy, i.e. extending improved design and servicing, and relocating waste from the end of the supply chain to the beginning, enjoying high-level policy support (UNIDO, 2018), becomes a global imperative.
The global transition to a circular economy is promising $4.5 trillion of new economic output by 2030 and a wide range of societal benefits. Despite these potential gains current world economy is only 9.1% circular, i.e. just 9% of the 92.8 billion tonnes of minerals, fossil fuels, metals and biomass that enter the economy are re-used annually, and the trend is negative (WEF, 2019; World Circularty Gap Report). We need to close a large circularity gap, support the transition to a
circular economy with effective policies and legal strategies on international, regional and national and sectoral levels. The Paris Agreement, 2030 Agenda and the SDGs, built on the ideas of reducing and, in the long run, decoupling the use of natural resources from economic growth and development, provide a normative basis for harmonizing decentralized initiatives for the transition to a sustainable circular economy.
At the moment, most of the efforts related to the transition to a circular economy are made on the national level. Current national policies considered or implemented by the governments can be grouped in three categories: (i) policies that drive technological change and efficiency improvements, (ii) pricing policies that drive various kinds of substitution (natural resource inputs and other factors of production, primary and secondary materials, new and remanufactured goods, or differentially materially intensive goods and services), and (iii) policies that drive changes in consumption patterns. (OECD, 2018, 2019)
In the context of the modern, globally interconnected economy suchgovernment policies and procurement practices promoting or hindering the progress of the transition to a circular economy cannot be detached from international trade and investment issues(G20, 2019; OECD, 2019). First, such policies affect the trade flows in primary and secondary materials and may result in deep structural shifts within and between the sectors and economies, the emergence of global value chains as well as trade in second-hand goods, end-of-life products, secondary materials or non-hazardous waste, as well as trade in related services with a reallocation of capital and labor along. (OECD, 2018,2019). Circularity can affect trade in both ways – produce adverse effects and positive effects on the appearance of new supply chains, efficient business models helping countries to growth with the resources already available in their territories (UNCTAD, 2018). The possible magnitude and the aggregate impact of these shifts and impacts are not clear and require sound studies and new macroeconomic models of assessment. Second, decoupling efforts of material consumption from economic growth cannot be fully captured and supported without proper consideration of international trade patterns and global supply chains, barriers and policies “through the whole life cycle of products” (ICTSD, 2018) Third, international rules do produce a considerable effect on management of the natural resources, quality of the investments and consumption patterns around the globe. Fourth, international trade and investment policies for the circular economy can link circularity and the international climate policy objectives through reuse of the products and materials that could reduce 33 percent of the carbon dioxide emissions embedded in products (UNCTAD, 2018).
In order to accelerate the global transition to a circular economy international leading international organizations, policy think tanks suggest policy options related to the aspects of the mutual supportiveness between trade, investment policies and transition to a circular economy. To a large extent, these calls have been triggered by the caseswe witnessed over the last two years with China’s import bans on waste and curbed imports of used textiles to some countries of East Africa (UNCTAD, 2018)Indeed, cross-border, particularly, bilateral trade in waste is increasing together with the concerns about the environmental impacts of such trade and the quality of waste management and technologies deployed in the destined countries. There is some evidence that bilateral trade in waste increases if there is divergence in environmental policy stringency between the trading partners. (OECD, 2019)
Trade in waste is only a consequence of how we use natural resources. The reduction of waste has to start from the beginning of the cycle. The OECD suggests a list of “the critical areas” at the interface between trade and circular economy, that includes trade in: waste, secondary materials, second-hand goods, and goods for refurbishment and remanufacturing. (OECD, 2018)
More research is needed in respect to: (i) the potential impacts of the circular economy transition on trade flows; (ii) the interaction of trade and domestic circular economy policies; (iii) trade in waste, scrap and secondary raw materials; and (iv) international co-operation on circular economy value chains, can be possible avenues to establish a better understanding of the interface between trade and the transition towards a circular economy (OECD, 2019)
