Trade rules slowing transition to circular economy, says ICC report

Paris and Geneva,

A major independent report published today by ICC spotlights the need for a significant overhaul of global trade rules if governments are to meet their stated aim of accelerating the adoption of circular business models.

A major independent report published today by ICC spotlights the need for a significant overhaul of global trade rules if governments are to meet their stated aim of accelerating the adoption of circular business models.

The study – The Circular Economy and International Trade: Options for the World Trade Organization – highlights that while international trade has a vital role to play in promoting resource efficiency and decoupling economic outputs from material inputs, policy responses to date have largely been designed at the national level and in an uncoordinated manner. The net result of this patchwork of interventions – from unilateral import bans to varying domestic product standards – has been to stoke trade frictions that inhibit the ability of companies to implement circular solutions which often rely on cross-border trade to achieve vital economies of scale.

The report is built around several real-life case studies – developed by the University of Adelaide’s Institute of International Trade through a series of stakeholder consultations with ICC’s global business networks over the past year – which illustrate the complexities and delays that businesses face in implementing circular approaches throughout their value-chains. In this connection, the analysis shows how:

  • the repurposing or recycling of electric vehicle batteries is significantly inhibited by divergences across jurisdictions in recycling regulations or definitions of what constitute waste.
  • the lack of common interpretation of European rules leads to delays or barriers to “waste” movements across EU jurisdictions – with countries adopting different lists of what is considered hazardous waste.
  • companies struggle to navigate national laws that do not effectively differentiate between products or materials which can be reused, repaired, repurposed, or refurbished versus those that should be recycled or disposed.
  • the reuse of “waste” materials is often limited by trade standards which only consider the origin of a product rather than its quality.
  • the application of punitive tariffs on secondary materials can significantly drive up the cost of deploying circular approaches.

Commenting on the release of the study, ICC Secretary General John W.H. Denton said: “The report shines a light on how well-intentioned national policies are inadvertently hindering the adoption of circular solutions in the real-economy. Simply put: the transition to a circular economy can only be enabled at scale by harnessing the power of cross-border trade to unlock economies of scale and comparative advantages. We hope our analysis will serve as a clarion call for a concerted global effort under the auspices of the World Trade Organization to enable new patterns of trade capable of meeting global climate and sustainability goals.”

The report concludes with a review of potential initiatives that could be undertaken through the World Trade Organization (WTO) to address trade frictions that currently hinder the development of a global circular economy. These range from cutting tariffs on goods and services related to circular approaches through to defining common principles or best-practices to limit the unintended consequences of domestic environmental regulations. ICC stands ready to engage with WTO members on the implementation of the report’s recommendations.

Christophe Bellmann, who authored the report, said: “The WTO Trade and Environmental Sustainability Structured Discussions initiative provides a unique opportunity to start an open discussion and enhance international cooperation on how trade policy can support a transition to a more circular and resource efficient economy. The ICC-commissioned study is an important contribution to this process.”

Professor Peter Draper of the Institute of International Trade added: This significant study addresses a key lacuna in the increasingly central trade and environment nexus, namely how the multilateral trading system could promote circularity in international trade. Through a focused mixed of diagnosis, analysis, and case-study illumination, the report elucidates the key blockages and proffers pragmatic suggestions for how WTO members might work to remove them. It is required reading for all interested in how the trading system can promote environmentally sustainable outcomes.”

Download the report

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