EU trade in support of a circular economy: Green recovery in the aftermath of the pandemic

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EU trade in support of a circular economy: Green recovery in the aftermath of the pandemic

The COVID-19 pandemic shocked the global trading system, affecting some countries and sectors more than others. The release of the EU Circular Economy Action Plan (CEAP) just weeks before the pandemic lockdowns formed an opportunity to evaluate the EU’s trade policy to support global recovery plans through circular economy opportunities.

This policy paper aims to determine the implications of the COVID-19 pandemic on global economy and trade, identifying related possible opportunities or obstacles to circular economy. It outlines the current trends in global and EU trade flows with focus on sectors identified in the EU CEAP and highlights how EU trade policy can support creating global partnerships and action on circular economy, including as part of the EU and third country recovery plans.

We find that trends across EU CEAP relevant sectors vary and the effects of the pandemic over the course of the year are not always easy to identify apart from the immediate impacts of national lockdown periods. Sectors showing clearest negative impacts due to pandemic include the vehicles and textiles whereas seemingly “COVID-resilient” sectors include electronics and e-waste, and extractive industries underpinning e-trade.

Key policy recommendations

In contrast to trade in goods, trade in services has clearly suffered due to the pandemic. This is significant in the circular economy context as its business models depend on trade in both goods and services, with services playing a key role in removing information barriers and disseminating circularity-enhancing practices. Consequently, strategies to ‘build back better’ with circular economy in the pandemic aftermath need to take into consideration the vulnerability of the service sector to future disruptions, seeking to understand how different services related to – and required by – circular economy are affected by trade disruptions.

In the pandemic aftermath, nothing in the trade patterns seems to take away the validity of pre-pandemic recommendations on supporting circular economy related trade to increase circular business opportunities globally, including the EU playing a driving role. Therefore, the EU should continue removing trade barriers to circular goods and services, to support a global shift to circular economy, by:

  • Using EU FTAs to remove barriers to advancing circular economy through trade, including both tariff and non-tariff barriers.
  • Championing a circular economy related trade cooperation and diplomacy both in the context of WTO and as part of wider EU foreign and development cooperation policy linked to trade.

In both contexts above the EU should seek to:

  • Champion an agreement on circular product and production standards and necessary definitions, supported by the necessary trade-facilitation mechanisms (e.g. digital passports processes).
  • Facilitate trade in circular economy services, hand in hand with products.
  • Encourage foreign direct investment (FDI) in circular economy as part of existing and new trade agreements, to boost FDI from severe drop due the COVID-pandemic while supporting green recovery.

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