A circular economy aims to transform the current linear economy into a circular model to reduce consumption of finite material resources by recovering materials from waste streams for recycling or reuse, using products longer, and exploiting the potential of the sharing and services economy. Circular economy policies and initiatives largely take place domestically at the national or regional level. However, they have important interlinkages with international trade. International trade plays an important role in circular supply chains in materials and products, end-of-life value chains in waste and scrap, secondary raw materials and second-hand goods. In this light, how can trade contribute to a more resource efficient and circular economy? How would the circular economy transition have an impact on global trade patterns? And in what ways can we secure coherence in these two policy areas? On 25 March 2021, Shunta Yamaguchi, Rob Dellink and Elisa Lanzi of the OECD Environment Directorate discussed the role of international trade in the transition to a resource efficient and circular economy during an OECD Green Talks LIVE webinar. The presentation highlights findings from a series of recent OECD reports, including: "The consequences of a more resource efficient and circular economy for international trade patterns" and "International trade and circular economy: Policy alignment". The replay of the event can be viewed here: https://youtu.be/37slq02rf2k

1. INTERNATIONAL TRADE AND
CIRCULAR ECONOMY
Elisa Lanzi, Senior Economist
Rob Dellink, Senior Economist
Shunta Yamaguchi, Policy Analyst
Environment and Economy Integration Division
Environment Directorate, OECD
Green Talks LIVE webinar
25 March 2021
@OECD_ENV
#GreenTalks

2. 1
OECD work on circular economy
Trade
Plastics
• Business models for the
circular economy
• Government support
• Digitalization and the
Circular Economy
• Labelling and Digital
Systems
• Criteria for Sustainable
Plastics Design
• Plastic Waste Prevention
• Micro-plastics
• Global Plastics Outlook
(forthcoming)
Impact of Circular Economy on:
• Macroeconomic
Consequences
• Labour Market
• Trade flows
Macroeconomic
Modelling
Other related work
• Modelling impacts of a
circular economy transition
on trade
• Policy alignment between
trade and circular economy

3. Objective
• Share insights on international trade and circular economy based
on several OECD reports published recently.
Key questions
• What are the key interlinkages between circular economy and
trade?
• What are the impacts of a resource efficient circular economy
transition on international trade?
• How can we align trade and circular economy policies?
2
Objective and outline

4. INTERNATIONAL TRADE AND
CIRCULAR ECONOMY
-
MODELLING WORK

5. The OECD RE-CIRCLE project investigates how future
economic activity and materials use are linked
- Using a detailed description of the economy to identify the drivers
of materials use
- Linking these drivers to environmental impacts
- Distinguish raw and recycled materials
Main reports:
Baseline projections: “Global Material Resources Outlook to 2060”
(OECD, 2019)
Policy analysis: “Macroeconomic consequences of the transition
towards the Circular Economy” (Bibas et al., 2021)
4
An outlook for materials use

6. 0
25
50
75
100
125
150
175
1990 2000 2010 2020 2030 2040 2050 2060
Non-metallic minerals Metals Fossil fuels Biomass
Gigatonnes 5
Materials use will increase in the coming
decades
Source: OECD (2019), Global Material Resources Outlook to 2060
5

7. • Global assessment (12 large economies + 13 regions )
• 2060 time horizon
• 50+ economic sectors
• 60 materials
6
A detailed modelling framework
Multisectoral multiregional
model ENV-Linkages
Material extraction data
Recycling assumptions
Structural change
assumptions on demand
and production
Capital
accumulation
Total factor
productivity
Labour
Demographics
Trade
projections
Materials use
projections
Economic
projections
Environmental
impacts
Country
/sector
Country
/sector

8. 7
1.1%
0.9%
2.4%
1.2%
0.9%
1.9%
<0.1%
1.2%
1.0%
2.2%
1.3%
0.9%
1.4%
<0.1%
0
200
400
600
800
1000
1200
1400
1600
1800
Aluminium Copper Iron & steel Other non-ferrous
metals
Non-metallic
minerals
Mining products Recycling
products
2017 2060
Bln USD
Without additional policy action, no
significant change in materials trade patterns
Source: Dellink (2020), The consequences of a more resource efficient and circular economy for international trade patterns - a modelling assessment

9. -60%
-50%
-40%
-30%
-20%
-10%
0%
Aluminium Copper Iron and steel Other non-ferrous metals Non-metallic minerals
Scale effect Efficiency effect Trade effect
International trade can contribute to
reduced material use in 2040
8
Source: Dellink (2020), The consequences of a more resource efficient and circular economy for international trade patterns - a modelling assessment
8
8
Results in deviation from baseline projection
Policy package: tax on raw materials, subsidy to recycled materials, labour tax reduction

10. A material tax reform affects global
sectoral output and exports in 2040
9
-15%
-10%
-5%
0%
5%
10%
15%
20%
Aluminium
(primary)
Iron
and
steel
(primary)
Non-metallic
minerals
Copper
(primary)
Non-ferrous
metals
(primary)
Construction
[…]
Motor
vehicles
Other
machinery
and
equipment
Fabricated
metal
products
Other
mining
Recycling
Output Exports
>50%
Source: Dellink (2020), The consequences of a more resource efficient and circular economy for international trade patterns - a modelling assessment
Results in deviation from baseline projection
Policy package: tax on raw materials, subsidy to recycled materials, labour tax reduction

11. -1.2%
-1.0%
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
Canada
Chile
Mexico
USA
EU
large
4
Other
OECD
EU
Other
OECD
Aus.
&
NewZ.
Japan
Korea
Brazil
Other
Lat.Am.
Other
EU
Russia
Caspian
region
Other
Europe
Middle
East
North
Africa
South
Africa
Other
Africa
China
India
Indonesia
Other
ASEAN
Other
Asia
OECD
America
OECD
Europe
OECD
Pacific
Latin
America
Rest of Europe
and Asia
Middle East
& Africa
South and
South-East Asia
Domestic policy effect International policy effect Trade interaction effect
A global material tax reform has offsetting
effects on regional GDP in 2040
10
(−) (+) (+)
Source: Dellink (2020), The consequences of a more resource efficient and circular economy for international trade patterns - a modelling assessment
Results in deviation from baseline projection
Policy package: tax on raw materials, subsidy to recycled materials, labour tax reduction

12. Effects of material tax reform on
trade in materials commodities in 2040
11
Source: Dellink (2020), The consequences of a more resource efficient and circular economy for international trade patterns - a modelling assessment
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Canada
Chile
Mexico
USA
EU
large
4
Other
OECD
EU
Other
OECD
Aus.
&
NewZ.
Japan
Korea
Brazil
Other
Lat.Am.
Other
EU
Russia
Caspian
region
Other
Europe
Middle
East
North
Africa
South
Africa
Other
Africa
China
India
Indonesia
Other
ASEAN
Other
Asia
OECD
America
OECD
Europe
OECD
Pacific
Latin
America
Rest of Europe
and Asia
Middle East
& Africa
South and
South-East Asia
World
Exports Imports
Results in deviation from baseline projection
Policy package: tax on raw materials, subsidy to recycled materials, labour tax reduction

13. Findings from the modelling work
12
12
Baseline trends for coming decades imply a significant
shift in trade patterns
 Trade growth roughly on par with GDP growth, trade in materials-
related commodities also doubles by 2060
 Biggest growth in trade from emerging economies to developing
countries
A material tax reform affects trade beyond the
materials sectors
 Even a uniform global implementation of the policy package will lead
to shifts in competitive position
 Impacts come from mix of domestic and international effects
 Trade effect on materials use is significant (esp. for non-ferrous
metals)

14. INTERNATIONAL TRADE AND
CIRCULAR ECONOMY
-
POLICY ALIGNMENT

15. 14
Interlinkages between
trade and circular economy
National boundary
Repair
Recycling
(secondary raw materials)
Eco-
design
policies
Refurbishment and Remanufacturing
Reuse
(second-hand goods)
Trade in second-hand goods
Trade in waste for recovery
Trade in goods for
refurbishment and remanufacturing
Trade in secondary raw materials
Product-service-systems
Trade flows:
Trade in services
Source: based on Yamaguchi (2018)
Global supply chains
CE impacts on trade
Policy coherence Trade in waste, secondary material, second-hand goods
International co-operation

16. 15
Supply chains – material footprint
0
50
100
150
200
250
300
350
1990 1995 2000 2005 2010 2015
Index
1990 =
100
OECD
GDP
Domestic Material Consumption
0
10
20
30
OECD
Total
OECD
America
OECD
Asia
Oceania
OECD
Europe
BRIICS
Tonnes
/ capita
Material Consumption in 2017
Domestic Material Consumption per capita
Material Footprint per capita
Source: OECD (2019) Indicators – Gross Domestic Product; Domestic Material Consumption (DMC), Material Footprint

17. 16
Source: UN COMTRADE (2020), HS3915
Monthly global exports of plastics waste by destination: 2016 to 2018
Import restrictions are re-shaping the plastic
waste system
0
200
400
600
800
1000
1200
1400
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18
Kilotonnes
China HK, China Malaysia Viet Nam Germany Netherlands
United States India Other Asia, nes Thailand Rest of the world

18. • Non-discrimination (National Treatment and Most Favored Nation Treatment)
• General exceptions (GATT article XX(b) & (g))
• Technical Barriers to Trade (TBT) Agreement
- facilitate trade and harmonise technical regulations as widely as possible.
- encourages members to adopt international standards for policy making.
• Transparency, consultation, capacity building (GATT, TBT Agreement)
• Specific provisions on circular economy found in five draft agreements
• Circular economy related provisions found more broadly
- natural resources and waste management
- references to the Basel Convention
- specific provisions on food waste
17
Trade policies
Multilateral trade rules
Regional trade agreements
Source: Yamaguchi (2020) International trade and circular economy – policy alignment, https://doi.org/10.1787/ae4a2176-en.

19. Policies for resource efficiency & circular economy
OECD survey 2017
Source: OECD (2020) "Improving resource efficiency and the circularity of economies for a greener world", https://doi.org/10.1787/1b38a38f-en.
2
2
2
5
5
6
2
2
2
6
6
1. EPR & PS
2. Taxes, subsidies
3. Eco-design
4. Procurement
5. Eco-labeling
6. Standards
6
1
1
1
2
3
2
2
4
2
3
2
4
2
1

20. Standards on organization and management of the circular economy
• UK (2017), France (2018),
• ISO (on-going from 2019)
Standards on recycling facilities
• e.g. e-Stewards, R2 Standard, EuCertPlast
Product related standards for the circular economy
• Material content standards (recycled content, hazardous content)
• Recyclability and reparability standards
• Standards on sustainable production
• Material quality standards (e.g. secondary raw materials)
• Product quality standards (e.g. second-hand goods)
19
Circular economy related standards with
implications for the TBT Agreement
Source: Yamaguchi (2021) International trade and circular economy – policy alignment, https://doi.org/10.1787/ae4a2176-en.

21. 20
Towards a mutually supportive agenda
National approaches
CE Policies Potential Actions
CE policies
in general
Design and implement in a non-discriminatory fashion
Notify policies that may have significant trade effects
EPR and PS
schemes
Examine how schemes account for end-of-life value chains.
Better understand the fate of waste shipments abroad to secure
the environmentally sound management of waste at destination.
Tackle illegal waste trade by increased enforcement, data collection
Tackle potential free-riding through cross-border online sales:
• single electronic registries
• peer-review reporting systems
• requirements for online sellers to display their producer responsibility
organisation registrations online
Source: Yamaguchi (2021) International trade and circular economy – policy alignment, https://doi.org/10.1787/ae4a2176-en.

22. 21
Towards a mutually supportive agenda
National approaches (cont…)
CE policies,
trade flows
Potential Actions
Circular
economy
related
standards
Align national standardisation initiatives on the circular economy
• with international standards, where appropriate
• in accordance with the WTO TBT Agreement
Notify regulations and standards to the WTO in a timely manner
• secure appropriate time for stakeholder consultation
• in accordance with the WTO TBT Agreement.
Trade flows Revisit national definitions of waste, second-hand goods, and goods
for refurbishment and remanufacturing,
• to facilitate trade that may contribute to the circular economy
• to distinguish them from unwanted fractions
Source: Yamaguchi (2021) International trade and circular economy – policy alignment, https://doi.org/10.1787/ae4a2176-en.

23. 22
Towards a mutually supportive agenda
International approaches
CE policies,
trade flows
Potential actions
EPR and PS
schemes
Co-ordinate efforts to tackle free-riding from online sales
Circular
economy
related
standards
Place efforts for harmonisation of circular economy related standards
and mutual recognition of conformity assessment procedures
Engage in development of international standards (e.g. ISO TC-323)
Develop international standards that are critical for CE:
• material quality of secondary raw materials
• sustainable production, environmentally sustainable supply chains
Trade flows Clarify different definitions and classifications of waste, secondary
materials, second-hand goods, goods for refurbishment and
remanufacturing across jurisdictions & HS codes
Place efforts to secure better data on waste trade, illegal waste trade,
trade in secondary raw materials, and second-hand goods
Establish international/regional dialogues for better understanding
Source: Yamaguchi (2021) International trade and circular economy – policy alignment, https://doi.org/10.1787/ae4a2176-en.

24. 23
Summary of analysis and stakeholder consultations
• Trade impediments for circular business models need to be addressed
• Trade leading to negative environmental consequences needs to be avoided
• Environmentally sustainable just transition for the extractive sector is vital
• Promising areas (e.g. secondary raw materials, refurbishing & remanufacturing)
• Challenging areas with potential trade-offs between environmental protection and
economic efficiency (e.g. trade in waste and scrap, second-hand-goods)
• Typically require the movement of people, information and data
• Definitions & classifications, standards, regulations, trade facilitation, innovation
Trade can contribute to a circular economy via economies of scale
Circular economy concept should extend to supply chains
Circular economy opportunities for end-of-life value chains are mixed
Trade in services appear critical for circular business models
Better transparency & traceability of value chains needed
Source: Yamaguchi (2021) International trade and circular economy – policy alignment, https://doi.org/10.1787/ae4a2176-en.
OECD (2020) Workshop on international trade and circular economy – summary report, https://www.oecd.org/env/workshop-trade-circular-economy-summary-report.pdf

25. FINAL REMARKS AND
FUTURE DIRECTIONS

26. 25
Final remarks and future directions
• Summary
– Trade and the Circular Economy are interlinked
– Trade and CE policies need to be coherent and mutually supportive
• Future work
– Securing resilient value chains for the circular economy:
Standards, trade facilitation mechanisms, digital technology and innovation
– In-depth analysis of specific trade flows, e.g. plastics, e-waste
– Recent developments with implications for trade: Covid-19, reshoring

27. 26
Thank you for joining
the discussion!
@OECD_ENV
#GreenTalks
Access reports: http://oe.cd/trade-ce
For more information, contact:
Shunta.Yamaguchi@OECD.org
Rob.Dellink@OECD.org