Options to Incorporate Circular Economy Provisions in Regional Trade Agreements

The report analyzes how regional trade agreements (RTAs) can be used to scale the circular economy (CE) by integrating specific provisions into trade policy. It suggests that while the European Union is leading in including CE in its agreements, most RTAs remain embryonic in this regard. The authors propose a comprehensive framework for CE integration, including the front-loading of tariff elimination for circular goods, the liberalization of supportive services, the harmonization of technical standards to remove barriers to trade, and the reform of subsidies to discourage non-circular production. The report emphasizes that the legal effectiveness of these provisions depends on their drafting rather than their location within an agreement, though a dedicated CE chapter would signal strong political commitment.

• The circular economy (CE) is critical for addressing the triple crises of climate change, biodiversity loss, and unsustainable resource use, with the potential to provide 45% of the solution for reaching net-zero carbon dioxide emissions by 2050.
• Current references to the circular economy in regional trade agreements (RTAs) are largely in their early stages, though the European Union is leading by including CE in draft agreements with partners such as Mexico, Australia, New Zealand, Mercosur, Chile, and the United Kingdom.
• Trade in goods related to the CE faces classification challenges because the Harmonized System (HS) does not distinguish between hazardous and non-hazardous wastes, nor does it consistently differentiate secondary raw materials from waste or second-hand goods from new products.
• RTAs can accelerate the CE transition by front-loading the elimination of tariffs on circular goods, removing export restrictions on non-hazardous recyclable materials, and applying more flexible rules of origin for CE-related products.
• Liberalizing services is essential for the CE because circular innovation relies heavily on new business models involving digitalization, design, engineering, and product-as-a-service systems.
• Technical barriers to trade (TBTs) can be reduced through RTAs by promoting the harmonization of standards, mutual recognition of conformity assessments, and cooperation on voluntary labeling for product durability and reparability.
• Investment provisions in RTAs should be designed to preserve the right to regulate for the CE and avoid 'chilling effects' where investors challenge environmental regulations in international arbitration.
• RTAs can be used to reform subsidies by increasing transparency for those affecting the CE, phasing out harmful subsidies for fossil fuels or primary plastic production, and creating 'safe harbours' for beneficial subsidies for recycling and secondary raw materials.
• Public procurement can be leveraged within RTAs to support the CE by confirming the right to use environmental criteria in purchasing and committing to procurement processes that prioritize circularity.

APA

Bellmann, C., & Sell, M. (2021). Options to Incorporate Circular Economy Provisions in Regional Trade Agreements. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-05/circular-economy-regional-trade-agreements.pdf

Chicago

Bellmann, Christophe, and Malena Sell. Options to Incorporate Circular Economy Provisions in Regional Trade Agreements. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-05/circular-economy-regional-trade-agreements.pdf.

Wikipedia

{{cite report |last1=Bellmann |first1=Christophe |last2=Sell |first2=Malena |title=Options to Incorporate Circular Economy Provisions in Regional Trade Agreements |publisher=International Institute for Sustainable Development |date=April 2021 |url=https://www.iisd.org/system/files/2021-05/circular-economy-regional-trade-agreements.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bellmann2021options, author = {Bellmann, Christophe and Sell, Malena}, title = {{Options to Incorporate Circular Economy Provisions in Regional Trade Agreements}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = apr, url = {https://www.iisd.org/system/files/2021-05/circular-economy-regional-trade-agreements.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }