In response to United States President-elect Donald Trump’s threats to impose a 25 per cent tariff on Canadian imports and his escalating hostile rhetoric, Canada and its allies must urgently explore new international trade strategies. Trump’s proposed tariffs could reduce trade and hurt the economy if left unchecked.
The World Trade Organization and its members have an opportunity to counter potential adverse effects of forthcoming U.S. policies by diversifying trade with other countries and increasing international trade through the circular economy.
A circular economy requires that a variety of stakeholders — consumers, businesses, governments, non-governmental organizations, and academia, among others — co-operate to transition away from a linear economy (buy, use, throw away), and, instead, repurpose materials and energy.
Read more: Explainer: what is the circular economy?
Building a circular economy is critical because wasted materials and energy not only damage the environment, but are also growing increasingly scarce and expensive. My recent study examines whether higher rates of industrial circularity can increase a nation’s trade.
To address these economic, security and environmental issues, industries must prioritize the development of circular systems. The future of our economic security and natural environment requires a cross-sector effort to advance circularity.
Increasing global trade
One of the most conspicuous examples of waste’s impact is the five ocean garbage patches — massive, floating islands of debris. In developed countries, municipal services remove trash from sight, making it easy to forget its environmental consequences. However, many developed countries — including Canada — export their waste to developing countries that have less capacity to deal with the issue.
Sometimes it takes the actions of other countries to put pressure on developed countries to change. When China restricted imports on certain types of waste, developed countries had to figure out how to deal with their own waste, rather than exporting it. This has included improved recycling, but it also created opportunities for business innovation.
Making waste tradeable requires processing and innovation to repurpose materials into usable goods. The circular economy, therefore, presents an opportunity for the trade of new, more environmentally friendly products to consumers.
Increasing global trade by using waste instead of throwing it away also offers openings for emerging and developing economies to participate in more international trade. They can build new businesses that take advantage of circular international business opportunities. Now more than ever, emerging and developing economies need more sources of income and employment.
The circular economy also stimulates business activity by encouraging collaboration between organizations, resulting in the creation of new companies. It will create employment opportunities while saving materials and energy.
Circularity and international trade
Europe has taken the lead in advancing the circular economy as part of the European Green Deal. Italy stands out as a noteworthy example.
Italian legislation has supported the development of eco-industrial parks, where companies collaborate locally on sustainable business practices, such as selling material outputs to each other to reduce waste.
Italy has also developed research, clean production, distribution, and post-consumption waste projects to embed circularity into its economy. For example, Italy encouraged the use of recycled and compostable materials in packaging and products through corporate tax credits while taxing virgin materials in construction.
Even Italy’s fashion industry is involved, with research initiatives like Circular Threads targeting Northern Italy’s textile sector. Consumer groups have signalled their support through the Circular Consumption Charter, which is backed by 18 Italian consumer associations.
However, European companies still need clearer economic information that connects investing in circular business models with tangible financial benefits. This is where my recent study comes in.
Circular economy boosts trade
Using several years of data from all 27 European Union countries, my study found a clear connection between circular material use and international exports of the largest types of waste trade — metals, plastics and chemicals.
The EU tracks annual circular material use rates by country. My analyses showed that across material types, higher national circularity drives international trade in waste and scrap. In other words, countries with higher circularity rates engaged in more international trade.
This direct link highlights the potential for firms to invest in the business of the circular economy. Once this fact is understood, then the international market opportunities await.
But what is the best way to support the development of circularity across industries? Research has debated whether policies or research and innovation are most effective tools for change.
Building a circular economy
My study found that circular economic policies, research and innovation — separately and combined — significantly improve countries’ industrial circular capabilities. Among these measures, stringent environmental policies that impose costs on polluting proved particularly effective, similar to how carbon taxes work.
My study was made possible by the European Union’s commitment to providing publicly available data on circularity across member states. This level of co-operation is a model all nations would benefit from. Cross-sector partnerships have also resulted in the creation of successful eco-industrial parks.
Establishing more of these hubs would be a tremendous step forward and enable more circular trade across borders. Canada is already a leader in this space, with examples like Burnside Industrial Park in Halifax.
Read more: The circular economy: Four million business models and counting
Established in the 1970s and supported by Dalhousie University’s Eco-efficiency Centre, this park is one of the largest in northeastern North America. It hosts roughly 2,000 enterprises and 30,000 employees. Collaborative partnerships at the park have included waste exchange in wooden pallets, metals and packaging.
Burnside Park is just one of many examples of how Canada can build its economic security through industrial ecology. However, to reduce dependence on the U.S., Canada needs its businesses and eco-industrial parks to diversify into international markets. Europe has become a critical partner with initiatives like the EU’s Horizon Europe program helping to make international connections.
Globally, the World Trade Organization could serve as an inclusive forum to expand discussions and initiatives aimed at furthering the circular economy to distribute wealth, improve the environment and reduce tensions on an international level.
Although consumers may push for a circular economy, firms need strong economic incentives to invest in change. My research provides strong evidence that lucrative international markets reward business investment in circularity. In the face of potential international economic instability, Canada and its allies have incentives to grow and diversify the global economy through circular economy international trade.
Deborah de Lange has received funding from SSHRC and ESRC and has been a member of the Liberal Party of Canada.
This article was originally published on The Conversation. Read the original article.
