Options to Incorporate Circular Economy Provisions in Regional Trade Agreements

This report by the International Institute for Sustainable Development (IISD) and Sitra explores how Regional Trade Agreements (RTAs) can be used to facilitate the global transition to a circular economy (CE). It identifies specific policy levers—including tariff liberalization, services market access, technical standards, investment protections, subsidy reforms, and public procurement—that can be integrated into trade agreements to promote resource efficiency and discourage linear 'take-make-waste' economic models.

• The circular economy (CE) can be integrated into RTAs through several structural options: horizontal chapters (such as environment or sustainable development), targeted annexes attached to Technical Barriers to Trade (TBT) chapters, or a dedicated, holistic chapter on the CE. While a dedicated chapter sends a strong political signal, the report notes that the legal impact depends more on drafting than location.
• Trade in goods related to the CE faces significant classification challenges because the Harmonized System (HS) does not distinguish between hazardous and non-hazardous wastes, nor does it always 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 CE-related products, removing export restrictions on non-hazardous recyclable materials, and applying more flexible rules of origin to reduce barriers for products like electric vehicles, where batteries are often sourced from third countries.
• Liberalizing services is critical for the CE because circular innovation relies on new business models such as product-as-a-service, sharing platforms, and digital solutions. RTAs can go further than the WTO in providing market access for supportive services like circular design, engineering, and digital trade.
• To prevent regulatory heterogeneity from becoming a non-tariff barrier, RTAs can promote the harmonization, equivalence, or mutual recognition of CE standards. This is particularly urgent for rapidly growing sectors like EV batteries, where a lack of coordination could lead to trade friction.
• Investment provisions in RTAs should be designed to protect the 'right to regulate' to avoid a 'chilling effect' where governments fear investor-state dispute settlement (ISDS) challenges when implementing CE regulations in sectors like mining or waste management.
• RTAs can be used to reform economic incentives by increasing transparency for subsidies that hinder circularity (such as fossil fuel or primary plastic production subsidies) and creating 'safe harbours' for beneficial subsidies that support secondary raw materials and recycling.
• Government procurement represents a significant portion of GDP and can be leveraged via RTAs to support the CE by confirming the right to use environmental criteria in procurement and committing to best practices for circular purchasing.

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} }