THE INTERSECTION BETWEEN CIRCULAR ECONOMY AND THE WORLD TRADE ORGANISATION: INCLUSION OF DEVELOPING AND LEAST DEVELOPED ECONOMIES.

A popular Red Indian proverb says: ‘We did not inherit the earth from our fathers, we are borrowing it from our children.’ This mindset birthed principles such as blue, green, orange, and purple economy, sustainable development, and circular economy. Circular Economy is an innovative term that employs the chains of production and consumption to achieve sustainability goals.

The circular economy uses a zero-waste model, promoting sustainable consumption of products and services and reducing waste. Any leftover waste is sold as secondary raw materials, reused, refurbished, recycled, or refabricated.

According to Ellen MacArthur, the circular economy is a system where materials never become waste and nature is regenerated. In a circular economy, products and materials are kept in circulation through processes like maintenance, reuse, refurbishment, remanufacture, recycling, and composting. The circular economy tackles climate change and other global challenges, like biodiversity loss, waste, and pollution, by decoupling economic activity from the consumption of finite resources.

Trade lies at the very core of the circular economy. The World Trade Organisation (WTO) as the custodial of international trade has a huge role to play in the continued development of the circular economy. This can be done through its policy development and oversight functions. It is estimated that only 9 percent of the global economy is circular.

The gap between the Global North (Developed Countries) and the Global South (Developing and least developed countries) would worsen the adverse impacts of transitioning from a linear to a circular economy. First, the Global North is currently making the most of the circular economy and enjoying its dividends while the Global South is struggling to find its feet in all this.

Circular Economy has the potential of being beneficial to both the Global North and the Global South. However, a lot has to be done in bringing the full benefits to bear. Asides the benefits, circular economy is not without its challenges. While some of the benefits are resource conservation, preservation of the environment, job creation, skill development and enhances collaboration between key stakeholders, its challenges includes lack of widespread knowledge about circular economy, high cost of implementation, complexity and a scarcity of circular goods and services.

The WTO can help promote circularity in the following ways:

1. CLARIFICATION OF DEFINITIONS AND CLASSIFICATIONS: There is currently no universally accepted definition of a Circular Economy. Different economies have varying definitions of what they perceive Circular Economy to be. These economies emphasize unique aspects of circular economy that they deem to be most important. The definition here goes beyond clarifying what circular economy is to classifying which goods and services would qualify as circular products. There also has to be a way to collect information on circular goods as they cross the borders of different countries. This capturing is to be done in a standardized way and in a globally interoperable way.
2. REDUCTION AND EVENTUAL REMOVAL OF TECHNICAL BARRIERS TO TRADE: Technical Barriers to Trade otherwise known as TBTs are a likely source of challenge for the movement of circular goods between states. TBTs involve product-related technical regulations and standards such as labelling, packaging, and certification. TBTs are used by countries to protect national security, for safety reasons and to provide information to consumers among other reasons. A practical example of a TBT measure is requiring that every import of a specific fruit- strawberries into country A from countries B, C and D should not contain more than 10mg of preservatives per kilo of strawberries. This regulation implies that any import of strawberries that don’t meet this standard will be turned back and likely go to waste affecting trade and reducing the volume of import of the fruit. Circular goods are bound to face the same challenge as countries may introduce unreasonable standards that will affect their importation. Multilateral Trade Agreements (MTAs) and Regional Trade Agreements (RTAs) should be encouraged to address this and promote a circular economy.
3. TRADE FACILITATION: Cross-border transparency and accountability measures are important to promote a circular economy. Since the circular economy involves a lot of waste material, there needs to be an emphasis on protecting underdeveloped countries from being used as a dumping ground by more developed countries under the guise of promoting a circular economy. The Basel Convention which was adopted in 1989 established rules for nations to control and dispose of hazardous waste across international borders. Since its inception in 1992, the Basel Convention has undergone several amendments in an attempt to document and improve its classification of various wastes.
4. CAPACITY BUILDING: Training on the circular economy should be embedded in existing multilateral trade training programs, a global reparation fund should be established for the circular economy. Finally, the WTO should dedicate an initiative to promote a circular economy worldwide[1].
5. TRADE AND ECONOMIC COOPERATION AGREEMENTS: Aside from embedding circularity across the full range of WTO agreements, there needs to be an initiative by the WTO to tackle illegal waste trade[2]. As stated earlier, disposal of hazardous material should be closely regulated.

The Global North represents the economically developed societies of Europe, North America, Australia, Israel, and South Africa, amongst others, the Global South represents the economically backward countries of Africa, India, China, Brazil, and Mexico amongst others. While Global North countries are wealthy, technologically advanced, politically stable, and aging as their societies tend towards zero population growth the opposite is the case with Global South countries. While Global South countries are agrarian based, dependent economically and politically on the Global North, the Global North has continued to dominate and direct the Global South in international trade and politics [3].

In order to include countries of the Global South in the circularity movement, the following steps have to be taken- transparency and traceability, subsidiarity, non- discrimination, and international collaboration.

Transparency and traceability in supply chains would enhance circularity. Lack of transparency and traceability opens the door to illegal or hazardous waste trading, often through the misclassification of goods (for instance, labeling broken or outdated electronics as reusable). Improving supply-chain transparency and traceability will strengthen border checks by making it easier and more efficient to verify the origin of goods, increasing both efficiency and security.[4].

Subsidiarity acknowledges that actions should take place at various levels of authority, depending on the specific circular trade issue being addressed. It prioritizes resolving issues at the lowest appropriate level of jurisdiction to ensure effective solutions. Consequently, decisions should be made as close as possible to those who will be directly impacted by them[5]. This means that circular economic policies should be applied at the grassroot levels then upwards. International policies should only be made when extremely necessary such that they would be more effective than national policies.

The WTO principle of trade without discrimination outlines that: (i) countries cannot normally discriminate between their trading partners (most-favoured-nation – MFN); and (ii) imported and locally produced goods should be treated equally, at least after the former have entered the market (national treatment)[6].

Non-discrimination of circular trade flows ensures that materials can be shipped to regions that have the necessary economies of scale, specialized infrastructure and trained workforce to make circular processes (repair, remanufacturing, recycling) economically viable.

To foster domestic circularity, WTO members can implement various measures to discourage the import of unsustainable or polluting goods while adhering to the principle of non-discrimination. They can also promote the import of goods that support circularity by reducing or eliminating customs duties on items such as repair, remanufacturing, or recycling equipment.[7].

International cooperation is key to developing effective and fair governance mechanisms, alongside coordinated policies and interoperability across regional, national, and local levels, to facilitate an inclusive circular transition. The most effective cooperation minimizes potential conflicts and relies on transparent, efficient, and impartial dispute resolution processes that safeguard countries from coercion by others.

In conclusion, the intersection of the circular economy and the WTO offers a promising avenue for addressing global sustainability challenges, but its success hinges on the inclusion of developing and least developed economies. By promoting trade policies that support circularity and investing in capacity-building for these economies, the global community can work towards a more equitable and sustainable future. The WTO must continue to evolve to ensure that its rules facilitate, rather than hinder, this transition, fostering a global trade environment that is both economically and environmentally sustainable. Through careful planning, international cooperation, and a commitment to inclusivity, the circular economy can serve as a catalyst for sustainable development worldwide, benefiting all economies, regardless of their level of development.

[1] Antionne Oger and Pierre Leturcq (Forum on Trade, environment and the SDGs (TESS), ‘Unlocking the Potential of International Trade to Promote a Global Secondary Marked and the Transition to Circular Economy: What Role for the WTO?’ 28th June 2024, <https://tessforum.org/latest/unlocking-the-potential-of-international-trade-to-promote-a-global-secondary-market-and-the-transition-to-a-circular-economy-what-role-for-the-wto> accessed 3rd September 2024.

[2] See footnote [1].

[3] Lemuel Ekedegwa Odeh, ‘A comparative analysis of global north and global south economies’, January 2021, <https://www.researchgate.net/publication/265425871> accessed 19th September 2024.

[4] Jack Barrie et al, Trade for an inclusive circular economy, A framework for collective action, June 2022, <https://www.chathamhouse.org/2022/06/trade-inclusive-circular-economy> accessed 19th September 2024.

[5] Jack Barrie et al, Trade for an inclusive circular economy, A framework for collective action, June 2022, <https://www.chathamhouse.org/2022/06/trade-inclusive-circular-economy> accessed 19th September 2024.

[6] World Trade Organization, ‘Principles of the trading system’, (2022) <https://www.wto.org/english/thewto_e/

whatis_e/tif_e/fact2_e.htm.> accessed 19th September 2024.???

[7] Jack Barrie et al, Trade for an inclusive circular economy, A framework for collective action, June 2022, <https://www.chathamhouse.org/2022/06/trade-inclusive-circular-economy> accessed 19th September 2024.