Trade and Circular Value Chains: Opportunities for Emerging Economies - WCEF2022 Side Event
One of the main outcomes of globalization has been an explosion in the volume of global trade. From businesses to governments, all actors have taken advantage of the related opportunities coming from trade. Among the products traded, primary and secondary materials have been increasingly crossing borders. In addressing these two particular kinds of goods, the discussion revolves around a possible framework for circular trade, connected to circular value chains. The latter, along with adherence to all circular principles, is now more of a necessity than an opportunity. In fact, the trade of circular goods can release pressure on the planet and people. However, in order to accelerate the transition to circular trade, it must be transformed into an opportunity. Addressing this fact, it is valuable to discuss the possible challenges that countries might face in their policy frameworks to achieve circular trade. Moreover, it is worth thinking about possible solutions to tackle these challenges.
On October 14th 2022, after our previous World Circular Economy Forum (WCEF) 2022 Side Event's success on “Circular Economy Policies and Legislation: Experiences from Emerging Economies,” Circular Innovation Lab partnered up again with Chatham House and UNCTAD as co-hosts and International Trade Center and the European Environmental Bureau as knowledge partners for another WCEF2022 Side Event on "Trade and Circular Value Chains: Opportunities for Emerging Economies" supported by Sitra. The event was divided into two sessions, bringing up the thoughts of nine speakers from different governments and organizations.
The first session focused on discussing the relevant challenges and key bottlenecks emerging economies might face in their policy frameworks regarding circular trade and the circular economy. Consequently, the second session addressed the promising solutions to tackle the different challenges and bottlenecks discussed in the first session.
Starting from the first session, all the speakers presented their valuable views on possible challenges regarding circular value chains. The first speaker, Dr. Rajesh Aggarwal, Chief of Business and Trade Policy at the International Trade Centre, highlighted what would eventually make emerging economies take advantage of new circular business models. Circular economy (CE) business models must be operated in an appropriate and regulated trade policy model to frame a competitive advantage for such countries. To achieve cost competitiveness, he stressed, it is essential to control the inflow of hazardous materials as well as ensure smooth and standardized trade facilitation measures for importing legally permissible goods.
Following the first contribution, Mr. Jocelyn Bleriot, Executive Lead of Institutions, Governments and Cities, Ellen MacArthur Foundation, talked about some of the aspects regarding “greening” supply chains. In doing so, he stated that it is essential to assist producing countries for European consumer goods, making sure that the informality of material collection systems can be professionalized. Moreover, he stressed the importance of proper training for people working in facilities, with the aim of preventing their exposure to toxic materials. Lastly, he suggested how policies like banning the imports of plastics by China can benefit circularity. In fact, the ban contributes to making the producing countries deal with the plastics they generate, trying to find sustainable solutions at a local level.
Mr. Shunta Yamaguchi, Policy Analyst at the OECD Environment Directorate, focused his contribution on finding a balance for countries between trade and circular economy objectives. Among the challenges experienced in balancing these two aspects are the burdensome process and delays associated with cross-border shipments of end-of-life products. Moreover, it is difficult to have a common classification and definition of second-hand goods. Also, the nature of customs control, which focuses on the physical characteristics of the traded product, can pose a problem. Additionally, trade restrictions, including the import and export of end-of-life products work against circular value chains. The last problem is illegal waste trade, which undermines legitimate traders. Lastly, there are upstream issues to secure recyclability, reparability and phasing out of hazardous substances.
Following this contribution, Mr. Christophe Bellmann, Head of Policy Analysis and Strategy, Forum on Trade, Environment & the SDGs (TESS), focused on the main challenges to achieving circular trade. One of the most critical challenges is how to distinguish goods based on circular economy consideration, he suggested. Adding to that, CE brings more complexity to the differentiation of goods based on their intended use. Finally, he supported the idea that the government should incentivize and promote the circular economy transition in trade.
After this session analyzing the bottlenecks policy frameworks may face in achieving circular value chains, the second session explored some solutions to them.
The first speaker was Ms. Leslie Sajous, International Consultant on Trade and Environment at the International Trade Centre. In proposing relevant policies, she pointed out how the effort to adjust the policy and regulatory framework of such developing economies needs to be contextualized in view of their respective economic, social, and environmental profiles. In fact, CE should be an additional component of any national industrial development plan, but it has to be tailored to each country’s framework.
The second speaker was Dr. Badri Narayanan, Head of Trade, Commerce and Strategic Economic Dialogue, NITI Aayog, Government of India. In his contribution, he made a comparison between the energy transition and the CE one. Just like shifting from fossil fuels to renewable energy happens in phases, we have to move from low-value plastics to high-value and reusable plastics and then to substitutes. In order to reach this target, policymakers should continue increasing tariffs on low- and high-value plastics while decreasing tariffs on substitutes.
The importance of recognizing the business case for the circular transition was stressed by Ms. Elisabeth Tuerk, Director of Economic Cooperation and Trade, UNECE. Cases where companies have benefited from going circular must be analyzed. In doing so, we have to dive into the nexus between trade and the circular economy, always taking into account the policy interaction with investment and innovation.
The fourth speaker of the second session was Mr. Stephane Arditi, Director of Policy Integration and Circular Economy, European Environmental Bureau. In his view, in order to circularize trade, we need to make CE trade stronger and more resilient. To ensure that, we need to work on models granting the development of global value chains where recycled materials become new raw materials for different productions.
At the end of the second session, Arpit Bhutani, COO of the Circular Innovation Lab, discussed the transparency of global supply chains. He stressed the fact that considering the difficulty of achieving transparency, merely trying to make global supply chains transparent won't be enough. In fact, transparency doesn’t work without clear classification standards. As a result, harmonization processes in the creation of digital product passports are much needed.
To conclude, there is still a long way to go for value chains to become circular, but the efforts that our speakers highlighted represent possible ways out. Understanding the main challenges policymakers might face and trying to find solutions for them is essential to addressing the blurred area of global trade. In this event, our speakers outlined both the bottlenecks and possible solutions for global value chains to go circular, contributing knowledge to the entire circular transition.
To learn more details on the key insights and take aways from the event, read the complete event report here.