The EU needs to consider the impact of their environmental legislation on third countries or risk exacerbating unbalanced trade relations, hurting local economies that are reliant on EU markets and missing out on opportunities for enhanced trade, according to a new report today by the European Environmental Bureau.
Identifying the risk of potential adverse impacts of EU circular economy policies on countries outside Member States and taking measures to mitigate against them will be essential for the EU to build trust with these countries and more easily enable the adoption of circular economy practices globally.
Ongoing changes to EU environmental and social legislation could lead to various consequences for trading partners such as fewer imports from the EU as more material is processed domestically in Europe or exported products may no longer be adapted to the EU market.
It could also affect imports under stricter information requirements such as Digital Product Passports (DPP) which provides greater traceability for products. Anticipating associated impacts in non-EU countries could become increasingly strategically necessary to develop circular international value chains and reinforce the inclusiveness of trade relations.
The main aim of integrating beyond EU perspectives is the recognition of positive impacts while mitigating any risks for the trading partners economies. It should not reduce the ambition of EU policy, nor trigger lengthier policy development process. The recognition and mitigation effort of these spillover impacts is not only responsible but also beneficial economically, environmentally and socially.
Properly understood impacts could help trading partners to faster align industry practices and policies towards enhanced circularity (e.g., reusing recycled materials when manufacturing goods to reduce their overall footprint) while correcting the deterrent effects a more EU-centric approach could provoke (e.g., exporting low grade materials competing with local industry).
The report, produced by circular economy specialists at Eunomia Research & Consulting, focuses on developing a methodology to assess impacts of EU policies on third countries using exports from Vietnam to the EU and imports to Nigeria from the EU as examples. It highlights a need for better data and a more thorough approach to identifying what impacts regulatory changes will have on third countries, similar to what is already used for member states.
Stephane Arditi, Director for Climate, Circular Economy and Industry at the European Environmental Bureau said: “The EU must consider its role and impacts outside the Union when designing and implementing circular economy legislations, or risk alienating itself from the wider world and missing opportunities of enhanced and more inclusive trade relations By engaging with authorities and stakeholders early on with a bespoke approach and improving the flow and accessibility of data to measure impacts, they can mitigate negative effects, allay any fears or doubts third countries might have about the changes and secure necessary buy-in.”
The study shortlisted four indicators that can be used as the first step towards assessing circular economy policy impacts on third countries:
- Gross Value Added
- Number of jobs
- Greenhouse gas emissions
- Cohesion with EU policies
These represent a shorthand version of the economic, social, environmental and geo-political impacts that new regulations could have on non-EU countries and are already largely used to assess impacts of new policy for Member States of the Union.
There are however limitations to relying solely on scarce data and their limited perspective such as being unable to measure impacts on informal work sectors through the number of jobs in the country. Working with stakeholders in each country to identify and fill these knowledge gaps will be critical to gain a fuller understanding of impact.
The report proposes a methodology for the EU to assess impacts on third countries which involves identifying example countries with good data availability, finding the relevant sectors and impacts for assessment, identifying the data needs and involving relevant stakeholders. Once this groundwork has been done, the impacts can be modelled through the captured evidence, estimated through proxy impacts or discussed qualitatively provided there is some accompanying rationale.
Tanzir Chowdhury, Principal Economist at Eunomia Research & Consulting said: “We used Vietnamese exports to the EU and Nigerian imports from the EU as examples in this report but it’s key that the overall availability of data is improved to paint a better picture of how these policy changes might affect other non-EU countries. Our shortlist of indicators to assess these impacts is already used by the EU for Member States so replication should not be too onerous, however it’s only a starting point and we have made further recommendations on how this can be expanded.”