Trade and Circular Value Chains: Opportunities for Emerging Economies

After our previous World Circular Economy Forum (WCEF) 2022 Side Event's Success on Circular Economy Policies and Legislation: Experiences from Emerging Economies, we partnered up again with Chatham House and UNCTAD as co-hosts and International Trade Center  and the European Environmental Bureau as our knowledge partners for our WCEF2022 Side Event on Trade and Circular Value Chains supported by Sitra.

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From the fish on your plate to the computer on your desk, any product that we as consumers purchase and consume follows a long chain of involved producers to get to us. Globalization has increased the complexity in today's business value chains due to their diversification of products and services as well as components. For many businesses achieving high profit margins is important. Therefore, many leading businesses are outsourcing certain aspects of the work to other countries in order to obtain cheaper production.

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To implement a global circular economy, there needs to be circular flows between countries depending on their resources and capacities. Circular flows can be varied and include, for example, circularity-enabling goods such as secondary raw materials, circularity-enabling services such as leasing activities, package-less retail systems or technology systems for recycling. These circular flows have grown recently. For example, the value of trade in second-hand goods, secondary materials and waste has more than doubled between 2000 and 2019. It is expected that the circularity-related goods and services market will continue to grow as more and more economies are attempting a transition to circularity. 

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A circular economy will not only boost the secondary materials trade but also lead to less trade in primary materials. The OECD has estimated that by 2040 the use of primary non-ferrous metals are expected to decrease by 35–50%, primary iron and steel by 15%, and primary non-metallic minerals by around 10%. A reduction of the primary materials trade will have an impact on emerging economies that depend on these material flows. Therefore, circular trade policies will need to address such issues. At the same time, circular trade in value chains could also create socio-economic and environmental opportunities. For example, landfills where waste pickers collect the waste could be replaced by reprocessing hubs for the reuse, remanufacturing and recycling of materials. This would decrease environmental degradation and the negative health impacts caused to landfill workers. With an investment in training, waste pickers could be working in the new reprocessing hubs. Switching to a circular economy might reduce the number of jobs in the trade of goods overall but has the potential to increase the number of jobs in the trade of services with the boom in the need for digital tools and platforms to exchange secondary materials. 

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The circular economy clearly challenges the linear take-make-dispose approach of today’s trade policies. Throughout global supply chains, a lot of waste is created. Most sectoral global supply chains are not sustainable and far from circular. The current trade policy frameworks are not supportive of an adoption of circular value chains. Therefore, there is a need for trade policy measures and tools to be leveraged to make circular value chains possible and effective. Furthermore, this will require more communication, collaboration and capacity-building with governments of emerging economies, multilateral institutions and the global community. While there have been recent discussions in western countries on circular economy and trade, there are very few discussions that have happened on this pertaining to emerging economies.

 

This event was divided into two sessions: 

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In Session 1, on "Trade Policy and Circular Economy - Bottlenecks", we explored the policy frameworks (policy and regulatory tools) currently in place that could be leveraged or revised to support more circular value chains in developing countries

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In Session 2, on "Trade Policy and Circular Economy - Promising Solutions", we explored solutions to support more circular trade policy frameworks - through capacity-building and creating an enabling environment for circular trade.

 

This WCEF2022 Side Event was especially relevant ahead of the WCEF2022 Main Event on trade and circular economy led by Chatham House and planned to take place in Kigali, Rwanda. Its findings offered contributions to the discussions of the main event.