EU plans for a circular economy may harm trade relations with third countries that depend on its markets if imbalances are not identified and tackled in time, according to a report from Eunomia Research & Consulting (Bristol, UK; www.eunomia.co.uk) conducted for the European Environmental Bureau (EEB, Brussels; www.eeb.org).

The study said these imbalances could affect imports into the EU as more material is processed domestically in Europe, and exported products may no longer suit the EU market, for example because of stricter information requirements under Digital Product Passports.

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“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,” said Stephane Arditi, the EEB’s director for climate, circular economy and industry. “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.”

Eunomia used Vietnam as an example in the report because it is a significant partner for the EU in electronics and also has both existing and emerging auto-parts manufacturing industries. In particular, the country has experienced large investments in recent years to kickstart the production of batteries for electric vehicles.

Nigeria was chosen as it is the EU’s biggest trade partner in Africa and that continent’s biggest importer of used vehicles. EU member states have a history of shipping electronic and electrical equipment to the African nation, including legally and otherwise, the EEB said, noting however that Nigeria’s e-waste recycling sector is not well-regulated. 

Using these two countries and sectors as examples, the study focuses on developing a methodology for the EU to assess its impacts and identify economic, social, environmental and geopolitical risks and opportunities.

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The study shortlists four initial indicators for assessing circular policy impacts, namely gross value added, the number of jobs, greenhouse gas emissions, and cohesion with EU policies. 

Given that these indicators are already used to gauge the impact of EU policies on member states, they can also be used to estimate the effects on third countries, the EEB says.

Its research also highlights the need for involving relevant stakeholder groups for collecting some of the necessary data, as well as identifying any data gaps. Moreover, there is also a need for longer-term engagement by the European Commission with such stakeholders to continually improve the gathering of data and exchange of information, the bureau added. 

“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,” said Tanzir Chowdhury, principal economist at Eunomia. He added that replicating these indicators should “not be too onerous, however it’s only a starting point and we have made further recommendations on how this can be expanded.”

While the report aims to provide a foundation for future work, the EEB says further progress is required to minimise the risks and maximise opportunities for third countries. These may include investments into circular economy infrastructure such as reuse centres and recycling facilities, technical assistance to help companies comply with EU product requirements, or incentives to companies or countries that promote a circular economy business model. 

The bureau also suggests that it would be valuable to conduct further studies into the EU’s Strategy for Sustainable and Circular Textiles, as an example. This is another policy expected to have a significant impact on third countries because of the volume of textile imports into the EU and the region’s used textile exports overseas.