TRADE AND THE TRANSITION TOWARDS CIRCULAR ECONOMY: A RESEARCH ON CURRENT GLOBAL PRACTICES AND RECOMMENDATIONS FOR VIETNAM

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MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY
MASTER THESIS
TRADE AND THE TRANSITION TOWARDS
CIRCULAR ECONOMY:
A RESEARCH ON CURRENT GLOBAL PRACTICES
AND RECOMMENDATIONS FOR VIETNAM
Specialization: International Trade Policy and Law
NGUYEN THI HANG
Hanoi – 2020
MINISTRY OF EDUCATION AND TRAINING

FOREIGN TRADE UNIVERSITY
MASTER THESIS
TRADE AND THE TRANSITION TOWARDS
CIRCULAR ECONOMY:
A RESEARCH ON CURRENT GLOBAL PRACTICES
AND RECOMMENDATIONS FOR VIETNAM
Specialization: International Trade Policy and Law
Code: 8310106
Student: Nguyen Thi Hang
Supervisor: Dr. Vu Kim Ngan
Hanoi – 2020
i
STATEMENT OF ORIGINAL AUTHORSHIP
I, Nguyen Thi Hang, hereby declare that this Master's Thesis has been written

solely by the undersigned under the guidance of my supervisor, Dr. Vu Kim Ngan,
Foreign Trade University, Hanoi, Vietnam. The contents and results of this research are
completely honest. The information, data and documents which are collected from
various sources for analysis and evaluation have been fully cited in the main content
and in the references list of this master thesis as well.
I also state that said Master's Thesis has not been submitted elsewhere for the
fulfilment of any other qualification.
I make this statement in full knowledge of and understanding that, should it be
found to be false, I will not receive a grade and may face disciplinary proceedings.
Student
Nguyen Thi Hang
ii
ACKOWLEDGEMENT
In order to complete this master thesis, I have been received enthusiastic guidance
and support from my lectures, family, my friends and experts in the field. From the
bottom of my heart, I would like to express my thanks to them.
Firstly, I would like to express the sincerest thanks to my supervisor, Dr. Vu Kim
Ngan who has supported, guided and encouraged me during the completion of this
master thesis from choosing the topic, outlining the main ideas, turning those ideas into
this thesis to editing this paper. Without her enthusiastic and excellent guidance and
support, I could not have completed this master thesis.
Also, I would like to express my special thanks to all lecturers of the Master of
International Policy and Law program, Foreign Trade University as well as World
Trade Institute who gave me the chance to broaden my humble horizon in the field of
trade policy and law, especially Professor Claudio Dordi, who was also my former
supervisor at the European Trade Policy and Investment Support Project (EU –
MUTRAP), for the valuable knowledge and experiences that he’s shared with me.

Last but not least, I would like to express my warm thanks to my precious family,
my colleagues and my dear friends who never stop supporting, encouraging and giving
me the favorable conditions for my master journey.
Especially, I would like to dedicate this Master thesis to my beloved
Grandfather, who was once a brave soldier on the Dien Bien Phu battlefield, who raised
me and was my role model of hardworking spirit, positive attitude and morality. I
might not become who I am today without him. I am typing these lines in tears of grief
right after his funeral. I regret that I could not manage to let him see his grandchild
graduate before he left for the other side. Now my grandfather has long gone, I truly
hope he is still there beside me and knows that I miss him so much.
I love you, Grandpa!
iii
TABLE OF CONTENTS
STATEMENT OF ORIGINAL AUTHORSHIP ................................................... i
ACKOWLEDGEMENT.......................................................................................... ii
LIST OF ABBREVIATIONS...................................................................................v
LIST OF FIGURES AND TABLES..................................................................... vii
ABSTRACT........................................................................................................... viii
INTRODUCTION.....................................................................................................1
CHAPTER 1: OVERVIEW AND THE SIGNIFICANCE OF CIRCULAR
ECONOMY ...............................................................................................................9
1.1. The need to promote circular economy........................................................9
1.1.1. Linear economy: the issue of resources efficiency & environmental
pollution...............................................................................................................9
1.1.2. The promotion of Circular Economy.....................................................13
1.2. The impact of circular economy on trade flows ........................................19
CHAPTER 2: OVERVIEW OF GLOBAL CIRCULAR ECONOMY
PRACTICES AND TRADE...................................................................................25
2.1. Overview of global circular economy practices.........................................25
2.1.1. WTO rules, domestic trade policies and circular economy...................25
2.1.2. Restrictive trade measures and circular economy .................................28
2.1.3. Circular economy initiatives in some countries ....................................30
2.2. Circular economy practices in China.......................................................33 2.3.
Circular economy practices in the EU........................................................37 2.3.1.

Circular economy policy.........................................................................38 2.3.2. The
EU’s trade policies in relation to circular economy ......................40 2.3.3. The EU’s
implementation of CE Action Plan .......................................46 2.4. Implications for
Vietnam as a trade partner of the EU............................47 2.4.1. The EU – Vietnam
Trade Relation ........................................................47 2.4.2. The EU’s transition
towards circular economy and implications for Vietnam
.............................................................................................................48
CHAPTER 3: TRADE AND CIRCULAR ECONOMY IN VIETNAM: LAWS,
REGULATIONS AND PRACTICES ...................................................................51
iv
3.1. Legal framework for the circular economy ...............................................51
3.1.1. International commitments related to circular economy ......................51
3.1.2. Domestic legal framework as a platform for circular economy
development.......................................................................................................53
3.2. Circular economy-based practices in Vietnam..........................................55
3.3. Vietnam in the supply chain of the global circular economy ...................59
3.3.1. Global recycling industry........................................................................59
3.3.2. Vietnam’s trade in the transition towards circular economy................63
CHAPTER 4: RECOMMENDATIONS TO DEVELOP CIRCULAR ECONOMY
IN VIETNAM....................................................................................73 4.1. Future
prospect and the need to develop circular economy in Vietnam 73 4.2. Evaluation
of the feasibility to develop circular economy in Vietnam....74 4.2.1. Advantages of
Vietnam in developing circular economy......................74 4.2.2. Challenges for
Vietnam’s transition towards circular economy ..........75 4.3. Recommendations for
Vietnam to develop circular economy .................78 4.3.1. Development of a legal
framework for circular economy.....................78 4.3.2. Initiatives for
enterprises........................................................................80 4.3.3. International
cooperation for circular economy ...................................81
CONCLUSION........................................................................................................87
LIST OF REFERENCES .......................................................................................88
ANNEX 1: LIST OF SCRAPS ALLOWED TO BE IMPORTED FOR
PRODUCTION MATERIALS ................................................................................ i
ANNEX 2: LIST OF WASTES SUBJECT TO TEMPORARY SUSPENSION
FROM TEMPORARY IMPORT, RE-EXPORT OR MERCHANTING
BUSINESS ............................................................................................................... iv

ANNEX 3: SUMMARY OF KEY LEGISLATION AND POLICIES RELATED
TO CIRCULAR ECONOMY IN VIETNAM................................. vii ANNEX 4:
ALL 54 ACTIONS PLANS INCLUDED IN THE EU CIRCULAR ECONOMY
ACTION PLAN (2015)..................................................................... ix
v
LIST OF ABBREVIATIONS
Abbreviation Full version
AEC ASEAN Economic Community
AfDB African Development Bank
ASEAN Association of Southeast Asian Nations
CE Circular economy
CIEM Central Institute of Economic Management
COP Conference of the Parties
CPTPP Comprehensive and Progressive Agreement for Trans-Pacific
Partnership
CTE Committee on Trade and Environment
EBRD European Bank for Reconstruction and Development
EEU Eurasian Economic Union
EGS Environment Goods and Services
EIB European Investment Bank
EPR Extended Producer Responsibility
EU European Union
EVFTA EU-Vietnam Free Trade Agreement

FTA Free Trade Agreement
G7 Group of Seven
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GFN Global Footprint Network
HS Harmonized System
IEEP Institute for European Environmental Policy
MFN Most Favored Nation
NDCs Nationally Determined Contributions
NT National Treatment
OECD The Organization for Economic Cooperation and Development
vi
RCEP The Regional Comprehensive Economic Partnership
SCM Agreement The Agreement on Subsidies and Countervailing Measures
SDGs Sustainable Development Goals
SIA Sustainability Impact Assessment
SMEs Small- and Medium-sized Enterprises
SPS Agreement The Agreement on Sanitary and Phytosanitary Measures
TBT Agreement The Agreement on Technical Barriers to Trade
TTIP Transatlantic Trade and Investment Partnership

UK The United Kingdom
UN United Nations
UNCTAD The United Nations Conference on Trade and Development
UNIDO The United Nations Industrial Development Organization
VBCSD Vietnam Business Council for Sustainable Development
VCCE Vietnam Centre for Circular Economy
VCCI Vietnam Chamber of Commerce and Industry
VRP Vietnam Recycling Platform
WCO World Customs Organization
WSR Waste Shipment Regulation
WTO World Trade Organization
vii
LIST OF FIGURES AND TABLES
FIGURES
Figure 1.1: Linear economy model ...........................................................................10
Figure 1.2: Principle of circular economy: Making things last ................................11
Figure 1.3: Circular Economy to tackle the overlooked emissions ..........................12
Figure 1.4: The circular economy – an industrial system that is restorative by
design ........................................................................................................................15
Figure 1.5: Opportunities for trade in waste and secondary materials .....................24
Figure 2.1.The evolution of circular economy policy in China ................................35
Figure 2.2 Circular Economy development in China ...............................................37
Figure 3.1: Global waste traded internationally, by value and weight .....................59
Figure 3.2: Major exporters of plastics waste to China in 2016 ...............................60

Figure 3.3: Imports of plastic scraps coming to Vietnam (in tons) showing the top 10
export partners......................................................................................................65
TABLES
Table 1.1: Impact of circular economy on trade flows.............................................20
Table 2.1: Resource Efficiency & Circular Economy National Policy/Strategy......32
Table 2.2. Circular Economy Package 2015: Proposed amendments to four waste
management legal acts of the EU..............................................................................38
Table 2.3: The EU’s Circular Economy Actions and their trade implications.........49
Table 3.1. Non-profit alliances/initiatives with the concept of circular economy....57
Table 3.2: List of Vietnam’s regulatory documents for trade in waste and scraps as
recyclable materials for production...........................................................................67
Table 3.3: Used goods, waste and scrap banned from import to Vietnam ...............69
Table 3.4: List of scrap temporarily suspended from import into Vietnam..............70
viii
ABSTRACT
As a new approach in the way resources are treated, circular economy is gaining
attention worldwide for being the solution for the conflict between economic
development and environment protection. Research has shown that the transition
towards circular economy at both domestic and global level has close linkage to
international trade, i.e. the trade in second-hand goods, end-of-life products, secondary
materials and waste. The trade flows of such circular goods and relevant services
should be facilitated for the world to reach a global circular economy.
This study aims to determine whether that ideal circular trade is facing any
restrictions and the research results indicate that these trade flows are indeed being
blocked by some barriers namely import bans (e.g. China’s National Sword Policy &
Basel Convention) by “waste” importing countries including Vietnam. Based on a
review of the literature on theories of circular economy and trade policy, it is revealed
that such barriers are resulted from the lack of international cooperation for agreed
common standards and regulations. Legal review also presents with Vietnam’s existing
laws regulating trade in waste and scrap and the restrictions in place. On that basis, it is
recommended that Vietnam should promote its domestic circular economy, then
engage in collaboration through dialogues, trade agreements, and missions to lift

unnecessary trade barriers to circular goods & services, and participate in the
development of a harmonized system of standards. Further research is needed to
identify how circular economy could be integrated into trade policy and trade
agreements.
1
INTRODUCTION
1. Research rationale
As a matter of fact, the excessive exploitation and consumption of the earth’s
limited natural resources plus poor waste management and treatment are shown to lead
human beings to the exhaustion of resources and serious environmental pollution.
Notably, signs of climate change which is originated from human activities have
become more and more obvious as “global warming reaches above 1 degree Celsius
above preindustrial level”1
. Understanding the global challenges, countries are now
trying to settle the problems. 17 UN Sustainable Development Goals (SDGs) by 2030
and the Paris Climate Agreement are among those efforts to “save” humanity from
disasters. Circular economy – a new economic model – was later introduced and now
has gained much attention globally for its promising potential in achieving
sustainability as set forth in the Paris Agreement and SDGs.
Circular economy could be simply understood as "where the value of products,
materials and resources is maintained in the economy for as long as possible, and the
generation of waste minimized”2
, which seeks to combat pollution and achieve
sustainable development. Leading the movement towards circular economy is the EU,
its member states, China, etc. who have started their efforts for years with the
implementation of national action plans, strategies, and promulgation of relevant laws,
etc. Vietnam, among the most vulnerable countries to the negative impacts of climate
change3
, has also recently made its first baby steps in the circular economy shift by,
among others, organizing workshops to educate and promote circular economy to
relevant entities including policy making bodies and enterprises.
1
UN report, 2018
2 Material Economics (2018): The Circular Economy: A powerful force for climate mitigation; Arno Behrens
(2016): Time to connect dots: What is the link between climate change policy and the circular economy?, CEPS

Policy Brief, Nr. 337.
3
IPPC (2019), Global Warming of 1.5o
C. Available at:
https://www.ipcc.ch/site/assets/uploads/sites/2/2019/06/SR15_Full_Report_High_Res.pdf
2
It is reported by Ellen MacArthur Foundation and UNCTAD in 2016 that circular
economy can have massive impact on nations, on giant economies such as India and
China as examples, the report estimates that India, by adopting circular principles,
could create approximately $624 billion in additional economic value, 44% reduction
in greenhouse gas emissions, and a 38% reduction in the use of virgin materials all by
20504
. Similarly, circular economy in China could reduce emissions of fine particulate
matter by 50%, emissions of greenhouse gases by 23%, and traffic congestion by 47% -
all by 20405
.
However, the Circularity Gap Report 20196
finds that only 9% of the global
economy is circular, which means, only an annual rate of 9% of total weight of
minerals, fossil fuels, metals, and biomass that enter the economy are re-used, implying
a huge room for the transition from the linear “take-make-waste“
economy to a circular economy.
From a trade perspective, the transition requires comprehensive efforts of
different sectors and actors of the economies, including trade sector. It is argued in the
most recent relevant working paper of OECD that “the transition towards a more
resource efficient and circular economy has broad linkages with international trade
through the emergence of global value chains as well as trade in second-hand goods,
end-of-life products, secondary materials and waste“7
. Indeed, in a circular economy
“materials can be recycled and are injected back into the economy as new raw
materials.... These “secondary raw materials“ can be traded and shipped just like
primary raw materials“8
. According to modern trade theory, these materials and
products should flow into countries of relevant competitive advantages (i.e. in waste
sorting or recycling). Therefore, in order to promote global circular economy, it is
apparently essential to facilitate the cross border circulation of recyclable waste as
inputs and recycled products as outputs of
4
https://www.ellenmacarthurfoundation.org/publications/india#buypubs-anchor
5
https://www.weforum.org/agenda/2019/01/the-circular-economy-turns-waste-into-gold-so-lets-get-on-with it/
6 https://docs.wixstatic.com/ugd/ad6e59_ba1e4d16c64f44fa94fbd8708eae8e34.pdf
7
OECD, 2018
8
European Commission, 2015

3
the circular economy. However, the other “competitive advantages“ of countries
namely low labor costs and lax environmental enforcement are being taken advantage
of, evidenced by the statistics that import of waste are concentrated in a small number
of countries.9
To control these huge inflows of waste, countries like China and Vietnam
start imposing waste and scrap import restrictions in the course of environment and
human health protection. In this spectrum, Vietnam, as well as other countries, do have
regulations governing the import and export of the mentioned materials for production
and recycled products.
Nevertheless, the question is whether such trade restrictions and other relevant
regulations in trade policy of countries hinder the transition towards circular economy,
and what could be done in terms of trade policy to promote circular economy. Up to
date, specialized policies and legal framework towards the formation and development
of circular economy, which is supposed to cover trade sector, are not made available in
Vietnam. As a follower in the circular economy trend, it is necessary for Vietnam to
recognize the significance of circular economy, to learn from other countries‘
experiences to apply to its own transition; moreover, as a part of the global supply
chain, to understand its role in contributing to a global circular economy to develop
proper relevant trade policies.
2. Literature review
So far, quantitative data on the relationship between trade and circular economy
is rather limited. The number of qualitative researches on the potential linkages
between the two is not so considerable either.
Acknowledging that lack of research on the issue, OCED has published a
backbone concept paper on international trade and the transition towards an energy
efficient and circular economy in 2018, authored by Shunta Yamaguchi of the OECD
Secretariat, in order to map out potential issues to address and to guide
9
Doug Woodring (2019), Basel Convention Amendments on Plastics Could Hinder Efforts to Reduce Pollution.
Available at: https://www.linkedin.com/pulse/basel-convention-amendments-plastic-could-hinder efforts-
woodring
4
further research areas to explore on the topic. The research introduces circular economy

concept and how trade can come into play; highlights the various ways in which trade
and the circular economy can potentially interact with one another i.e. trade in waste
and scrap, second-hand goods, secondary raw materials, goods for refurbishment and
remanufacturing; and proposes further work to answer the ultimate question of how
could circular economy policies and trade policies be aligned to encourage the
decoupling of resource consumption from economic growth at the global level without
creating unnecessary barriers to international trade as well as undesirable
environmental consequences.
The concept paper was then followed by a research by Preston F., Lehne J., and
Wellesley L., in 2019 on circular economy priorities for developing countries. The
paper discussed the potential interrelation between domestic trade policies and WTO
rules and circular economy. A wide range of issues are brought to the table for
discussion namely the non-discrimination principle of the WTO which should also be
applied for circular goods and services, relevant protectionist trade measures, product
standards & classification, the integration of circular economy into trade agreements,
etc. It argued that domestic trade policies potentially provide an important means
through which national governments can encourage and incentivize the transition
towards circular economy.
The EU is one of the pioneers in the transition towards Circular Economy. The
block has even formulated a Circular Economy Action Plan to achieve the ultimate
goal. The effectiveness of the Action Plan and existing policies of the EU are then
evaluated by researchers including those of Institute for European Environmental
Policy. In their paper just published at the end of 2019, Kettunen M., Gionfra S., and
Monteville M. examine the interface between the EU circular economy, trade and
sustainable development. The paper investigates the role of trade in either incentivizing
or hindering the process of shifting to circular economy and highlights the need for
better policy coherence among circular economy, trade and sustainable development in
the EU.
5
UNIDO (2019) has also studied this issue recently. According to the organization,
there are several trade-related barriers that hinder recycling industry towards a circular
economy. The first barrier is regulatory requirements: the complexities and
inconsistencies of the international legal and policy framework, as well as the

difference in national definitions of the materials in national legislation and the absence
of internationally agreed limits and tolerances of contaminants create obstacles for
international trade in recyclable materials. The second barrier is import bans on
recyclable materials, mostly for the purpose of protecting human health and the
environment from the negative effects of materials that are considered hazardous.
However, import bans reduce the availability of recyclable or recycled material in a
country. Last but not least, tariffs (border costs, customs duties, etc.) and non-tariff
barriers (permits, licenses, testing requirements and emission controls) also contribute
to the hindering of the cross-border movement of recyclable materials. And to settle the
issue, UNIDO recommends harmonization of national regulations (definitions, codes
and import/export requirements), modification of import bans (for non-hazardous
recyclables) and engagement through global or regional trade agreements for the
liberalization of trade in secondary raw materials, machinery and equipment used by
the recycling industry.
In Vietnam, Nguyen Hoang Nam (Institute of Strategy and Policy on Natural
Resources and Environment) appears to be the expert with most publications on
circular economy. In his researches, he and his colleagues have explained in details the
definition of circular economy, current circular economy practices, Vietnam’s legal
framework for circular economy implementation, and propose policy recommendations
for Vietnam. However, like other available researches in Vietnam, his have not touched
the trade dimension of circular economy. The international experiences or
recommendations discussed in his researches focus on the general implementation of
circular economy within the boundaries of nations rather than at a global scale.
Therefore, the role of trade has never been mentioned in any researches of his or his
Vietnamese colleagues.
6
3. Research objectives
The research aims at analyzing the new norm of “circular economy” and its
linkage to trade to provide an overall understanding of the norm and emphasize its
importance in facing global issues in general and in the sustainable development of
Vietnam in particular; conducting research on global practices of circular economy
promotion with a focus on the EU and China; studying Vietnam’s current circular

economy practices, and the status of trade in inputs and outputs of circular economy, its
domestic legal and policy framework, including trade-related regulations and policies
to evaluate the feasibility for Vietnam to develop circular economy; and on such basis,
providing general policy recommendations for Vietnam to develop circular economy in
general.
4. Research questions
• What is Circular Economy? Why it is needed? And how beneficial could it be?
• How the transition towards circular economy takes place around the world in
general and in trade sector?
o What other countries have done? (Focus on the EU and China) o
What are the take-aways for Vietnam?
• What are the existing conditions for the formation of circular economy in
Vietnam, including but not limited to socio-economic conditions, trade in inputs
and outputs of circular economy, and legal and policy framework?
o From trade perspective, where is Vietnam in the global supply chain of
the global circular economy? (Global recycling sector)
o What are the potential enablers and barriers towards the transition to
circular economy of Vietnam?
• What are the policy recommendations for Vietnam to develop circular economy in
general and in circular trade promotion ?
7
5. Scope of research
In a circular economy, there are four main stages in the life circle of materials (as
illustrated below), starting from the processing of primary materials in production
(Stage 1), consumption of final products (Stage 2) until being thrown away as waste,
materials at this stage is treated as waste (Stage 3) and then moved to the final stage
(Stage 4) of turning them into materials again (Secondary materials).
To realize that stage of “material reborn” in order to create a circular economy,
there must exist a recycling industry (at stage 4) to turn waste to resources. If recycling
industry is considered a living body, it needs recyclable waste to use as its food.

However, waste generated in the economy could be hazardous or non-hazardous; and in
practice, both hazardous and non-hazardous waste could be recyclable or non-
recyclable. These categories of waste are subject to trade regulations to be mentioned in
this research. For example, hazardous waste is regulated by the Basel Convention on
the Control of Transboundary Movements of Hazardous Wastes and Their Disposal
and recyclable waste is subject to regulations on import and export of waste and scrap
for recycling.
The focus of this research is the input recyclable waste in the final stage “from
waste to resources”, which involves its cross-border movement in the global value
chain.
Life cycle of materials in circular economy
Primary
Production
materials
4
1
From waste to
Consumption
resources
3 2
Waste
Management
Classification of waste within this
research Waste
non
Hazardous
hazardous
Non -
Recyclable
Recyclable
8
For this is a vast topic, the research only conducts a brief investigation of global
circular economy practices then focus further on the policies of the EU, China and
Vietnam.
6. Research methodology
This research uses an overall and comprehensive approach to collect and
summarize the recent studies, reports, articles, etc. which are related to this topic, of
which desk research for literature review and policies review plays the key role.
Methods also include comparative legal analysis to identify, compare and contrast

relevant laws and regulations in different jurisdictions and Socio-legal research
methods.
All the data and figures are obtained based on the secondary data provided by
some public organizations like the Ministry of Natural resource and Environment,
Ministry of Industry and Trade, Vietnam’s Customs, UN COMTRADE, European
Commission, etc.
7. Research structure
This research is divided into four separate parts in corresponding chapters.
Chapter 1 explains the significance of a circular economy. Chapter 2 studies global
circular economy policy practices, including trade policy practices with a focus on the
practices in the EU. Chapter 3 provides insight on circular economy in Vietnam, its
legal framework, existing circular economy practices and its trade in recyclables.
Finally, chapter 4 gives recommendations for Vietnam to develop circular economy
from trade perspective.
9
CHAPTER 1: OVERVIEW AND THE SIGNIFICANCE OF CIRCULAR ECONOMY
1.1. The need to promote circular economy
1.1.1. Linear economy: the issue of resources efficiency & environmental pollution
The need for resources
With a growing population of more than 7 billion people living on earth, our need
for resources also increases consequently. According to estimation by GFN (2018), we
now need 1.7 earths to meet the world’s resource needs today.10
The UN estimates that
since 1970, the world's total amount of raw materials used has tripled and could double
by 2050 without intervention. This is beyond the supply of the Earth’s natural
resources. Resource supply and resource efficiency apparently become the challenge
that we need to handle.
Waste management
Statistics in World Bank 2018 report shows that global cities in 2016 generated
about 2.01 billion tons of solid waste in urban areas with at least 33% of that being
managed in an environmentally unsafe way. With population growth and urbanization,
this figure could increase by 70% to 3.40 billion tons by 2050. By 2025, the value of

the global waste management industry is expected to hit USD $530 billion, from
$330.6 billion in 2017. 11
As natural resources become increasingly more expensive and difficult to source,
the solution is to keep existing products and materials in circulation for as long as
possible, extracting the maximum value from them. However, looking at the linear
economy model (Figure 3) of extraction, transformation (production), utilization
(consumption) and disposal that has been in operation for more than 150 years since the
Industrial Evolution, it appears to only cause resource depletion and
10
https://www.footprintnetwork.org/our-work/ecological-footprint/
11
https://www.amcsgroup.com/newsroom/blog/global-waste-and-recycling-market/
10
waste increase rather than to be a proper solution. This traditional model has shown its
drawback of a great pressure on the environment in the context of climate change,
environmental pollution due to the poor management of waste and the exhaustion of
natural resources plus the high price of resources in general. Taking plastic waste as an
example, by 2050, it is estimated that the volume of plastic waste discharged into the
sea will be more than the total volume of fishes. 12
Figure 1.1: Linear economy model
Source: Circular Tayside website13
In order to minimize harm to the quality of life, it is necessary to have solutions
to recycle waste, use recycled materials as input materials for production to save
natural resources. The rational management and use of natural resources with the
principle of "Closing the loop" through the efficient use of renewable raw materials and
waste management by recycling to minimize value optimization has been embedded in
the theory of circular economy, where products and materials are kept flowing in the

economy for the longest. This circular economy can be achieved by designing products
with their whole life cycle in mind, allowing them to be maintained in use for longer,
then reused and refurbished to extend their lifetime, and, when their life is deemed
over, recycled to create new products from old without the need for virgin raw
materials.14
12
Ellen MacArthur Foundation, 2016, P.17
13 Extracted from https://circulartayside.co.uk/what-is-the-circular-economy/
14
https://circulartayside.co.uk/what-is-the-circular-economy/, accessed on Feb 8, 2019
11
Figure 1.2: Principle of circular economy: Making things last
Source: Circulartayside.co.uk15
The efficient use of resources can enable economic growth while also ensuring
resource security and environmental sustainability. The promotion of business models
which reduce the extraction of primary raw materials, increase the use of secondary
materials, and generate less waste is central to achieving resource efficiency and a
circular economy.16
Climate change
According to a report on countries' efforts to combat climate change published at
the UN Conference on Climate Change (COP24) in 2018, although the world has
achieved certain results through actions to prevent global warming, but the temperature
increase is still very high. With current policies, the Earth's temperature at the end of

the 21st century will increase by 3.3 degrees Celsius compared to the pre-industrial
period. The UN, meanwhile, affirms that the goal of raising 1.5 degrees Celsius - a
threshold considered safe for Earth - is still possible, but requires urgent and
unprecedented levels of action.
15 https://circulartayside.co.uk/what-is-the-circular-economy/
16
https://www.teriin.org/policy-brief/g20-enable-business-models-circular-economy
12
The Circularity Gap report shows that in response to climate change,
governments' policies must focus on developing renewable energy, improving energy
efficiency and ending deforestation.17
In order to reduce pollutant emissions and waste,
economies should pursue a "circular" model and reuse products and scraps. The Ellen
MacArthur Foundation reports that today’s efforts to combat climate change have
focused mainly on the critical role of renewable energy and energy-efficiency
measures. However, meeting climate targets will also require tackling the remaining
45% of emissions associated with the making of products. A circular economy offers a
systemic and cost-effective approach to tackling this challenge.18
The Foundation
explains that when applied to four key industrial materials (cement, steel, plastic and
aluminum) circular economy strategies could help reduce emissions by 40% in 2050.
When applied to the food system the reduction could amount to 49% in the same year.
Overall such reductions could bring emissions from these areas 45% closer to their net-
zero emission targets19
.
Figure 1.3: Circular Economy to tackle the overlooked emissions

Source: Ellen McArthur Foundation, 2019
17
Circle Economy (2019), the Circularity Gap Report
18
Ellen MacArthur Foundation (2019), Completing the picture how the circular economy tackles climate
change. Available at:
https://www.ellenmacarthurfoundation.org/assets/downloads/Climate_Executive_Summary.pdf 19
Ibid.
13
In a circular economy, waste is minimized, reused and recycled. In the face of an
increasing global population and expanding cities, the world's resources are gradually
exhausted with climate change being likely to be more serious. Therefore, many
experts believe that circular economy, which focuses on reusing materials and waste, is
considered a solution that can help countries adapt and move forward in an
environmentally friendly way. The efficient use of this material could support the
realization of the key goal in the Paris Agreement on combating climate change to keep
the temperature rise not more than 2 degrees Celsius above pre-industrial levels.
Circular economy could solve the math of human need for resources, waste
management and climate change, such an approach change from linear to circular
economy is inevitable.
1.1.2. The promotion of Circular Economy
1.1.2.1.Overview of Circular Economy
1.1.2.1.1. History of circular economy
As reported in the Summary of the Second World Circular Economy Forum, held
on 22 – 24 October, 201820
, the work on circular economy builds on contemporary
ideas developed by, namely, the Ellen MacArthur Foundation and others such as
Walter Stahel (performance economy), William McDonough and Michael Braugart
(cradle to-cradle design), Janine Benyus (biomimicry); and Amory and Hunter Lovins
and Paul Hawken (natural capitalism), and Gunter Pauli (blue economy systems).
In 2018, Walker and his colleagues presented in their research that the notions of
a circularity and non-linear thinking are not new, the principle of early circular
economy strategies were initially designed to focus on waste management, embedded
in “3Rs theory: Reuse – Reduce – Recycle” but gradually evolved to include more
systematic approaches for the whole economy to include the 6Rs (reuse, recycle, re-
design, remanufacture, reduce, recover). Under current circular

20
WCEF, 2018, https://enb.iisd.org/download/pdf/sd/enbplus208num27.pdf
14
economy systems adopted by the Ellen MacArthur Foundation, products are designed
to be restorative and regenerative, where products are utilized at their highest value. 21
In 2008, China became the pioneer in the transition towards circular economy
with its adoption of the first circular economy promotion law in the world. China was
then followed by other countries with a considerable number of both national and
multinational initiatives (See further in Section II). For example, in 2016, Finland
became the first country in the world to ever develop a national Roadmap towards a
circular economy named “Leading the Cycle – Finish Road Map to a Circular
Economy 2010 – 2025”, which was then included in the organization of the first World
Circular Economy Forum 2017.
1.1.2.1.2. Definition of circular economy
Lately, Kirchherr, Reike and Kekkert (2017) have discovered 114 different
definitions of circular economy. Their analysis’s findings indicate that circular
economy is frequently conceptualized as the combination of reduce, reuse and recycle
activities and the definitions show few explicit linkages of the circular economy
concept to sustainable development22
.
Circular economy emphasizes the management and regeneration of resources in a
closed loop to avoid waste generation. Resource utilization comes in many ways, from
redesigning, reducing, repair, reuse, recycling, material sharing or leasing. Circular
economy could be simply understood as one in which products are recycled, repaired or
reused rather than thrown away, and in which waste from one process becomes an
input into other processes23
. Ellen MacArthur Foundation, in its 2012 report has
defined circular economy as “an industrial system that is restorative and regenerative
by intention and design. It places the “end-of-life” concept with restoration, shifts
towards the use of renewable energy, eliminates the
21
Zhe Liu, Michelle Adams, Tony R. Walker (2018), Are exports of recyclables from developed to
developing countries waste pollution transfer or part of the global circular economy? 22
https://www.sciencedirect.com/science/article/pii/S0921344917302835. Access on 04.02.2020 23
https://logscale.fi/en/global-policy-and-funding-key-for-circular-economy/
15
use of toxic chemicals, which repair, reuse, and aims for the elimination of waste

through the superior design of materials, products, systems, and, within this, business
models”.
Figure 1.4: The circular economy – an industrial system that is restorative
by design
Source: Ellen MacArthur Foundation, Circular Economy systems diagram (Feb, 2019),
www.ellenmacarthurfoundation.org. Drawing based on Braungart & MacDonough,
Cradle to Cradle (C2C)
Circular Economy now has received much attention globally and there is still no fixed
definition for circular economy. The circular economy concept has been applied
differently due to diverse cultural, social and political systems globally. 24
For instance,
the CE has been implemented as the national development strategy in
24
Geng et al., 2013
16
the U.K, or for waste management as in some European countries like Denmark,
Switzerland, and Portugal, or aimed at reducing land use for waste disposal by focusing
on solid waste avoidance and closed-loop recycling, solid waste management in Japan,
or to achieve the goal of profitable product development, and improving industry

management in China.
The research in 2018 of Walker et al. has found that current applications of the
CE follow three thematic categories including eco-industrial network establishment;
application to specific waste or recyclable resource streams, such as wood, paper,
plastics and metals; and system-wide technical innovation to redefine products and
services to design waste out, whilst minimizing negative environmental and economic
impacts. However, these three CE themes are generally accepted within an individual
developed country’s jurisdiction, yet is considered waste or pollution transfer once
waste circulation or reutilization is exported to a developing country.25
1.1.2.1.3. Benefits of circular economy
What we are facing now is the paradox caused by economic development and
environmental protection. Now, we seem to have the answer for circular economy
brings both economical and environmental benefits. Economically, the new economic
model named “circular economy” presents “the opportunity to gradually decouple
economic growth from virgin resource inputs, encourage innovation, increase growth,
and create more robust employment”.26
The potential benefits of shifting to a circular
economy also extends into the natural environment by designing out waste and
pollution, keeping products and materials in use, and regenerating, rather than
degrading, natural systems, by which we achieve the global climate targets.
The 2016 report of the Ellen MacArthur Foundation and the United Nations
Conference on Trade and Development (UNCTAD) estimated that India could generate
economic value rising to US $ 218 billion in 2030 and US $ 624 billion in
25
Walker et al., 2018
26
https://www.ellenmacarthurfoundation.org/explore/the-circular-economy-in-detail
17
by 2050, by enforcing the principles of a circular economy in three areas: construction
activities in cities; agriculture and food; vehicle fabrication and motion technology. The
report also points out that the it could help the South Asian nation reduce its
greenhouse gas emissions by 23% by 2030 and 44% by 2050, while significantly
reducing material use. For China, the authors of the report point out that the application
of the principles of circular economy in cities can create more affordable goods and
services for urban residents, reducing greenhouse gas emissions by 23% and traffic

congestion by 47% by 2040. Statistics show that during the period 1980-2010, China's
economic size expanded 18 times, but energy consumption increased by only 5 times
thanks to the application of new circular economy approach.
As Schoroeder has pointed out in 2018, circular economy can have a direct
impact on more than 10 of the total 17 UN sustainable development goals; 134 of 169
specific targets are closely related to circular economy27
. Therefore, circular economy
strategies could help lower-income countries ‘leapfrog’ to a more sustainable
development pathway that avoids locking in resource-intensive economic practices of
the dominant linear consumption and production system.28
In its research paper 'An Inclusive Circular Economy. Priorities for Developing
Countries’ (May 2019), Chatham House notes that, under the right enabling conditions,
the circular economy could provide new opportunities for economic diversification,
value creation and skills development – going beyond waste management and
recycling. With enough investment, developing countries could leapfrog developed
countries in digital and materials innovation aimed at sustainable production and
consumption patterns.
1.1.2.2. The so-far transition towards Circular Economy
Being potentially beneficial, the transition towards circular economy has
become a global trend today. Political interest in the transition to a more resource
27 Available at: https://onlinelibrary.wiley.com/doi/full/10.1111/jiec.12732. Accessed on Feb 04, 2020. 28 Patrick
Schroeder, Paul Dewick, Simonove Kusi-Sarpong, Joerge S. Hofstetter (2018), Circular Economy and power
relations in global value chains: Tensions and trade-offs for lower income countries.
18
efficient and circular economy is emerging in various corners of the world. At the
international level, efforts towards a resource efficient economy began in the late 2000s
and have achieved increased emphasis more recently in the framework of the G7
Alliance on Resource Efficiency, UN Sustainable Development Goals, and the
European Union Circular Economy Action Plan. At the national level, policy action has
taken place for instance in China, Finland, France, and the Netherlands in establishing
circular economy roadmaps, Japan in implementing the Fundamental Law for Sound
Material-Cycle Society, and the United States in launching the Sustainable Materials
Management Action Plan (OECD, 2018).

A pioneer in promoting circular economy is Japan. The country enacted the Basic
Act for Establishing a Sound Material-Cycle Society in 2001 and the Fundamental Plan
for Establishing a Sound Material-Cycle Society in 2003, showing its leadership
through the G8/G7 process and the Region 3R Forum in Asia and the Pacific. European
Commission does not lag behind either. It adopted a Circular Economy Package in
2015 to stimulate Europe’s transition towards a circular economy. The Package was
then followed by a Circular Economy Finance Support Platform in 2016 and EU
Strategy for Plastics. Joint actions are also seen with the handshake of the EU and
China with the signing of a joint Memorandum of Understanding on Circular Economy
Cooperation at the 20th
EU-China Summit in 2018.
In 2018, the World Economic Forum, the World Resources Institute, Philips, the
Ellen MacArthur Foundation, the United Nations Environment Program and more than
40 partners launched the Circular Economy Promotion Forum to promote initiatives to
expand this economic model. So far, there have been about 34 countries with 118
typical models of implementation of this shift, starting from the formulation of
strategies, action plans, to the promulgation of economic policies and laws in order to
determine the responsibilities of manufacturers, citizens and the state, promote the
development of environmental industries, create a market to provide waste treatment
services to mobilize private resources and reduce investment.
19
In Vietnam, some circular economy models were implemented with certain
effects, however, it has not been focused yet. Therefore, to promote the development of
the circular economy in Vietnam, it is necessary to institutionalize and legalize the
circular economy, aiming to implement the circular economy in all activities.29
Regardless of the efforts put forward, our world is only 9% circular and the trend
is negative. 30
The Circularity Gap is not closing. In the 12 months since the first
Circularity Gap Report, the upward trend in resource extraction and greenhouse gas
emissions has continued.
1.2. The impact of circular economy on trade flows
Many countries are taking action to adopt circular economy policies by closing
material loops through the promotion of reuse, recycling and new business models,
extending material loops through eco-design, and narrowing loops through resource

efficiency initiatives. While these policies are largely considered at the domestic level,
they exist in the context of a global economy and international value chains, therefore
there is increasing awareness that a transition towards a more resource efficient and
circular economy has broad linkages with international trade. This for instance takes
place through the emergence of global value chains as well as trade in second-hand
goods, end-of-life products, secondary materials or non hazardous waste, as well as
trade in related services.31
Trade will be a powerful tool for fostering engagement from both the public and
private sectors in regional and global circular value chains. Trade-focused circular
economy discussions have the potential to open up new perspectives on opportunities
for mutual gain, and to shape a global and inclusive vision that goes
29
https://baotainguyenmoitruong.vn/xem-xet-dua-kinh-te-tuan-hoan-vao-luat-293374.html 30
The Circularity Gap Report 2019, https://bfc732f7-80e9-4ba1-b429-
7f76cf51627b.filesusr.com/ugd/ad6e59_ba1e4d16c64f44fa94fbd8708eae8e34.pdf
31
OECD (2018) International Trade and the Transition to a More Resource Efficient and Circular Economy: A
Concept Paper. Available at: https://www.oecd-ilibrary.org/docserver/847feb24-
en.pdf?expires=1581173188&id=id&accname=guest&checksum=90374A4E6DCDD65A119B56C29012E7 84
20
beyond the zero-sum world implied by some circular economy strategies today. This
will be critical to expanding the markets for circular goods and services, pooling
innovation knowledge bases, optimizing circular value chains, attracting cross-border
investment and providing entrepreneurs with access to data while delivering an
inclusive approach32
.
International trade flows may shift according to structural changes induced by a
circular economy (See Figure 7). Circular economy may lead to the decrease in import
demand for primary and secondary materials and also decrease in exports of wastes and
scrap.33
Potential opportunities and challenges imposed by the transition towards
circular economy are identified by OECD as presented in the following Table 1.
Table 1.1: Impact of circular economy on trade flows
Potential opportunities Potential challenges

Potential
impacts of
the CE
transition
on trade
flows
- New opportunities for
trade in services
- Additional trade
opportunities thanks to
circular procurement
- How resource dependent developing
countries may need to shift their
economies in terms of infrastructure
and labor force
- Some policies and activities are
difficult to foresee (e.g. new biz
models)
Specific
issues for
key
material
streams:
- Trade can help boost
global recycling rates by
shipping waste to
countries with
comparative advantage
- Definition and classification of waste
and secondary materials
- Regulating transboundary movement
of waste (e.g. Basel Convention,
proximity principle, import and
32
Laura Wellesley, Felix Preston, Joahanna Lehne (2019), An Inclusive Circular Economy: Priorities for
Developing Countries. Available at https://reader.chathamhouse.org/inclusive-circular-economy-priorities
developing-countries#
33
OECD, 2019
21
recycling –
waste and
secondary
materials
in sorting and
processing
- Role for trade as
primary & secondary
materials are
geographically
concentrated
- Trade in environmental
goods and services for
efficient waste
management
export restrictions)
- Waste flows to destinations with
insufficient waste management
capacity
- Illegal waste trade/informal sector -
Potential downcycling
- Fragmentation of eco-design, eco
labelling and recyclability standards
for material quality and phase out of
hazardous content

Specific
issues for
key
material
streams:
Reuse,
remanufact
u ring –
second
hand goods
- Promoting re-use of
products through
exports of second-hand
goods (e.g. used cards,
second-hand textiles)
- Trade can provide
opportunities for
refurbishment and
remanufacturing
- “leakage” from the official system (e.g.
EPR schemes)
- Second-hand good imports may hinder
the transition towards energy
efficient and low carbon economies
due to slower market transformation
or place additional pressures on the
management of end-of-life products
- Issues in recovering end-of-life
products across borders for
refurbishment and remanufacturing
as they are often legally classified as
waste
- No comprehensive data on second hand
goods and goods for refurbishment and
remanufacturing
Source: Extracted from OECD’s presentation at Word Circular Economy Forum 2019
22
For Goods
As argued by Felix P., Johanna L., and Laura W., (2019), domestic trade policies
potentially provide an important means through which national governments can
encourage and incentivize a transition to more circular approaches. The adoption of
circular economy policies and measures will likely encourage trade in secondary goods,
including materials and waste for recycling and energy recovery, secondary raw
materials, second-hand goods, and goods for refurbishment and remanufacturing34
.
Products that reach the end of their operational life can be exported to other countries
as secondary goods for further consumption, as secondary materials for production
feedstock, or as materials and waste for further processing.35

Energy-efficiency requirements for imported second-hand vehicles; minimum
percentage requirements for recyclable content in plastic waste; health and safety
standards for recycled or recyclable products and materials; and quality, health and
safety standards for remanufactured products36
– all could, depending on how they are
designed, either expand or restrict international trade in various categories of desirable
and undesirable secondary materials.
Import duties can have a substantial impact on access to affordable inputs for
circular economy activities in developing countries. The reduction or removal of import
duties on primary goods used for pollution management and resource management –
such as equipment used in recycling plants – or on secondary raw materials can lower
the capital costs of circular economy infrastructure and feedstock in import-dependent
countries and boost the competitiveness of downstream circular economy activities.
34
OECD (2018), International Trade and the Transition Towards a Circular Economy. 35
Chatham House
(2019), resourcetrade.earth database, https://resourcetrade.earth/ 36
OECD (2018), International Trade and
the Transition Towards a Circular Economy, Paris: OECD,
https://www.oecd.org/environment/waste/policy-highlights-international-trade-and-the-transition-to-a
circular-economy.pdf
23
For Services
Increased demand for services related to the sharing economy and provided by
so-called ‘collaborative sectors’ could bring new opportunities for trade in services37
.
Countries with a large, young and digitally workforce may look to export software
services, for example, while countries with abundant manual labor may see new market
opportunities in providing remanufacturing services for imported used goods. By the
same token, architects overseeing the construction of new building stock in developing
countries may, for example, elect to employ lighting services from overseas lighting
companies rather than take ownership of the lighting equipment itself and assume
responsibility for its maintenance and refurbishment38
. Trade opportunities and new
trade flows could also emerge in various environmental services related to recycling,
waste management and waste to-energy generation.
For developing countries, the removal of restrictions on trade in services relevant

to the circular economy across various modes of delivery (such as measures that restrict
domestic businesses’ access to operating licenses overseas, or to foreign services in IT
and communications) will be critical to promoting a more inclusive approach to the
circular economy. Developed countries could benefit from repair services, for
appliances and other goods, based in developing countries. Developing countries could
benefit from the expertise of specialized companies in the sorting and processing of e-
waste.
37
UNCTAD (2018), Circular Economy: The New Normal?, Policy Brief No. 61, May 2018, Geneva:
UNCTAD, https://unctad.org/en/ PublicationsLibrary/presspb2017d10_en.pdf
38
Yamaguchi, S. (2018), International Trade and the Transition to a More Resource Efficient and Circular
Economy–Concept Paper, Paris: OECD, https://www.oecd-ilibrary.org/docserver/847feb24-
en.pdf?expires=1581923338&id=id&accname=guest&checksum=7852923D4DACEEF7EA36AFAAE4EEB BC8;
and McCarthy, Dellink and Bibas (2018), The Macroeconomics of the Circular Economy Transition: A Critical
Review of Modelling Approaches, https://www.oecd-ilibrary.org/docserver/af983f9a
en.pdf?expires=1581923391&id=id&accname=guest&checksum=F53E9B17C16F42FC25BFBE51F3C0462 7
24
Figure 1.5: Opportunities for trade in waste and secondary materials
Source: Laura Wellesley, Felix Preston, Joahanna Lehne (2019)
25
CHAPTER 2: OVERVIEW OF GLOBAL CIRCULAR ECONOMY PRACTICES
AND TRADE
2.1. Overview of global circular economy practices
2.1.1. WTO rules, domestic trade policies and circular economy

The World Trade Organization (WTO) provides a useful platform where
members can discuss and explore issues at the interface of trade and environment,
including through the Committee on Trade and Environment (CTE). Circular economy
is one of the works of focus of the CTE and other WTO committees, such as the Rules
Committee, TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary)
committees, Committee on Agriculture and Committee on Development etc.39
To
promote circular economy at global level, it is a must to consider relevant WTO-related
issues below:
2.1.1.1. Trade measures
With production and sales today being largely international, free trade is a
precondition for a successful transition towards circular economy. However, as waste
regulations are mostly still national, the free movement of material and resources is
hindered at every border. Lack of harmonization and standardization, misdirected
subsidies and lack of communication between actors and sectors are all hindering
businesses from shifting towards circularity.
The WTO’s Environmental Database shows that a broad range of trade measures
affect the key activities that underpin a circular economy, from reuse and repair, to
remanufacturing, recycling and eco-design. Of the 470 or so trade measures related to
these activities contained in the database, 44% consist of government support
measures, 28% of technical regulations and conformity assessment procedures, and
22% of bans and licensing requirements, with other measures making up the rest. As
addressed by Deputy Director of the WTO –
39
European Commission (2020), COMMISSION STAFF WORKING DOCUMENT: Leading the way to a
global circular economy: state of play and outlook
26
General Alan Wolff, many of these measures actively support the circular economy —
for example by establishing eco-design or recycling standards, or by requiring
governments to purchase goods that meet environmental standards. But others may
inadvertently work against circular trade, reflecting the fact that trade policies have
traditionally been conceived with a linear, rather than a circular, economy in mind. This
can result in a mismatch between trade policies on the one hand, and circular economy
strategies on the other.40

2.1.1.2. MFN & NT for “Like products” and exceptions
As Preston F. et. al (2019) has also pointed out, the non-discrimination principle
enshrined in the World Trade Organization (WTO) agreements, centered around the
General Agreement on Tariffs and Trade (GATT), prohibits the use of protectionist
trade measures by member countries. Regulations or taxes must not discriminate
between imported and domestically produced ‘like products’, or between imports from
different WTO members. But certain exceptions to these rules permit governments to
impose unilateral trade restrictions in specified circumstances, for example when
‘necessary to protect human, animal or plant life or health’ (GATT Article XX(b)); or
‘relating to the conservation of exhaustible natural resources if such measures are
made effective in conjunction with restrictions on domestic production or consumption’
(GATT Article XX(g)). The WTO’s Agreement on Technical Barriers to Trade (TBT
Agreement) also employs the same concept of ‘likeness’ to ensure that domestically
produced goods are not treated more favorably than their imported equivalents. Under
the TBT Agreement, technical regulations must not be ‘prepared, adopted or applied
with a view to, or with the effect of, creating unnecessary obstacles to international
trade’ and ‘shall not be more trade-restrictive than necessary to fulfil a legitimate
objective” of protecting human health or safety and/or the health of animals, plants and
the environment. Therefore, products manufactured using circular economy practices
could, in theory, be afforded preferential treatment if their positive environmental
40 https://www.wto.org/english/news_e/news19_e/ddgaw_25nov19_e.htm
27
impact is easily demonstrable, and if the trade measures in question are clearly not
protectionist in effect.
However, the definition of ‘like products’ in the context of circular economy
policies, and the WTO treatment of trade measures based on them, is a largely untested
topic. The application of trade measures based on processes and production methods
rather than on product criteria is a controversial and contested topic. Developing
countries in particular often see such measures as a potential form of protectionism,
through which developed countries impose their environmental standards (which are
assumed to be higher and costlier) on poorer countries’ exports.
2.1.1.3. Subsidies/Preferential treatment

Subsidies could be used to support specific sectors of the economy. Given the
circular economy trend, countries may want to develop circular economy -based
industries such as product refurbishment and remanufacturing. However, the provision
of subsidies conditional on exports or the use of domestic goods (i.e. via ‘local content’
requirements) is automatically prohibited under the WTO’s Agreement on Subsidies
and Countervailing Measures (SCM Agreement). Such measures are actionable under
WTO law if proven to cause ‘adverse trade impacts’ and injury to trading partners.
2.1.1.4. Product classification (HS system)
Currently, the definition and classification of waste, scrap and secondary
materials differ from country to country; the distinction between end-of-life products,
non-hazardous waste and secondary raw materials is often not the same across different
jurisdictions. HS product descriptions are to a large extent based on physical product
attributes that are easily verifiable by customs officials, while environmental regulatory
frameworks and environmental inspectors focus on the ‘intention to discard’ in order to
identify waste. This makes it difficult to distinguish primary products from secondary
products, to assign separate HS codes
28
on the basis of how products have been manufactured (e.g. using recycled aluminum),
or to determine that certain products are remanufactured.
Amendments proposed by the Basel Convention Secretariat to the WCO also
raise a number of issues, such as the difficulties in distinguishing and separating
hazardous waste from non-hazardous waste, or waste from second-hand goods. But in
the absence of any measure for differentiating between e-waste and functional used
electrical and electronics equipment under the Basel framework, there are limits to
implementing genuine CE-related trade for waste recovery and recycling while
ensuring that adequate standards, regulations, technology and management practices
are met.
This will require adopting harmonized approaches to data gathering at the
national level, as well as international efforts through the World Customs Organization
(WCO) to agree on Harmonized System (HS) customs codes classifications that more
accurately capture secondary goods (such as recycled material) and identify waste
types.

2.1.2. Restrictive trade measures and circular economy
Restrictive trade measures affect international trade system of complex web of
value chains of products and services crossing borders multiple times. Domestic trade
policies, if improperly designed or enforced, can have unintended and negative
consequences. For example, Rwandan government to raise import duties on used
clothing as a means of safeguarding the domestic textile industry. The move has been
criticized for having adverse impacts on Rwandans working in the used-clothing sector,
who have been unable to access an affordable supply to match demand. Moreover,
given limited domestic production capacity, the rise in duties has simply prompted
growth in imports of new but cheaper Chinese clothing.41
Members of the WTO may
apply environmental protection measures, even trade
41 Preston F., et al. (2019)
29
restrictive ones. But those measures must fulfil certain conditions to ensure that they
are fit for purpose rather than being adopted for protectionist reasons.42
The most common restrictive measure is import bans. Import bans reduce the
availability of recyclable or recycled material in a country, forcing recyclers or
manufacturers to find alternative materials. This may lead to price increases or
volatility of prices. It may also mean that the volume of recyclable material available in
a country does not allow economically viable recycling operations. This happens
particularly in small countries where the volumes of solid wastes generated within the
country, e.g. metals, inorganics and organics, are not high enough to sustain a domestic
recycling industry.
Trade restrictive measures could be a consequence of trade dispute which could
dampen trade in circular goods and services between countries. The trade dispute
between China and the US is an example. The two countries have enjoyed a healthy
symbiotic relationship through the trading of goods until now, particularly the trade in
secondary raw materials and waste products for re-processing and recycling. However,
the Trump administration’s newly planned tariffs on Chinese goods and China’s
retaliatory tariffs which cover multiple categories of scrap metals, copper waste and

other secondary materials including recovered fiber and paper pulp from recycled paper
and cardboard in the US – all relevant resources for the circular economy, could risk
undermining China’s efforts to support the growth of a domestic circular economy.
Initially, the loss of China as the principal export market for American recycled paper
has left many municipal recycling programs in crisis, facing increasing costs and
reduced revenues. In China, recycling operators and urban mining pilot projects, which
were already facing a shortfall of secondary raw materials after China placed
restrictions on foreign plastic waste imports at the start of 2018, are now suffering from
the new import tariffs.43
42 https://www.wto.org/english/news_e/news19_e/ddgaw_25nov19_e.htm
43
Schroder P., (2019), The US-China Trade Dispute: What impact on the circular economy? Available at:
https://www.chathamhouse.org/expert/comment/us-china-trade-dispute-what-impact-circular-economy
30
2.1.3. Circular economy initiatives in some countries
CE may offer opportunities for bilateral investments and partnerships which
simultaneously contribute to the CE at home and overseas. The EU, China and Japan
have been proactive in seeking out cross-border opportunities for partnership on the
CE. The EU has dispatched CE missions to Japan, Indonesia and India (2018),
Columbia (2017), Chile, China (2016). The focus of these missions is to communicate
the opportunities from transitioning to a CE, as well as to support European businesses
in expanding their activities in these countries. In June 2018, the EU and India signed a
joint declaration of intent to foster resource-efficient practices in India and support
recommendations made in the Strategy on Resource Efficiency. A number of joint
initiatives will be undertaken, including support for an eco-labelling scheme for
secondary products; assistance in developing recycling standards for e-waste, plastics,
and construction and demolition waste; promotion of R&D in resource efficiency; and
development of a ‘Waste Exchange Platform’, a marketplace for by-products and
industrial waste.
In China, President Xi Jinping has stipulated that the Belt and Road Initiative –
centered on infrastructure building to connect China’s less developed border regions
with Southeast Asia, Central Asia and Europe – should promote a ‘green, low-carbon,
circular and sustainable’ form of development. One example is the planned
construction of a China-African Circular Economy Industrial Park in South Africa.

Japan, meanwhile, has demonstrated regional leadership in the CE through its
inauguration of the Regional 3R Forum in Asia and the Pacific. This cooperative
platform enables governments from 39 countries in the region to promote the piloting
of CE projects. As G20 chair in 2019, Japan has an opportunity to take its domestic and
regional experience on to the international stage, building on the work started by
Germany two years ago, and to promote policy alignment and knowledge exchange on
resource efficiency and the CE among G20 countries and developing
country partners.
31
Several other donors are discussing the CE as a potential new focus area for
development assistance. Few detailed strategies have yet emerged, but early examples
include Denmark’s strategic sector cooperation agreement with Indonesia on ‘circular
economy and waste management’; a similar agreement with Kenya on ‘circular
economy, cleaner manufacturing, regulation and enforcement’; and the Norwegian
international development minister’s highlighting in April 2018 of the CE as a priority
in Norway’s international development policy, with a focus on cooperation with
developing countries to establish profitable value chains for waste.
Commitments to supporting CE initiatives in the developing world have also
emerged in other countries, in response to a surge in public awareness of the global
waste challenge. The Memorandum of Understanding on Circular Economy
Cooperation between the EU and China, signed in July 2018, could provide a vehicle
through which to broaden CE cooperation and leadership. Under the MoU, the EU and
China agree to cooperate on ‘dialogue on the design, planning and implementation of
strategies, legislation, policies, and research’, ‘strategic exchanges on management
systems and policy tools such as eco-design, eco labelling, extended producer
responsibility and green supply chains’, ‘strategic exchanges on best practices of
circular economy’, and ‘exchanges on investments in and financing of circular
economy’. Such modes of cooperation could, in theory, be extended to third countries,
including in sub-Saharan Africa where both the EU and China have significant
investment interests and existing donor programs.
32
Table 2.1: Resource Efficiency & Circular Economy National Policy/Strategy
Country National policy/strategy Year

Resourc
e
Efficien
cy
The EU Resource Efficiency Europe 2012
Austria The Resource Efficiency Action Plan 2012
Germany The Resource Efficiency Programme (Progress) 2012, 2016
Finland National Material efficiency programme –
sustainable growth through material efficiency
2014
Circular
Economy
Japan Fundamental Plan for establishing a sound
material-cycle society
2003, 2008,
2013, 2018
China Circular development leading plan
National circular economy promotion Act
2016
2008
Sweden From waste management to resource efficiency
Sweden’s Waste Plan 2012 – 2017
2012
Netherlands Waste to Resource Programme
A Circular Economy in the Netherlands by
2050 – Government-wide Program for a
Circular Economy
2014
2016
The EU Closing the loop – An EU Action Plan for the
Circular Economy
2015
France Circular Economy (Energy Transition for Green
Growth Act)
Let’s go into the loop: a roadmap for the 100%
circular economy
2015
2018
U.S Sustainable Material Management 2019, 2015
Finland Leading the cycle- Finish Road Map to a
Circular Economy 2016 – 2025
2016
Italy Towards a Circular Economy in Italy 2017

The U.K Increasing resource efficiency and reducing
pollution and waste (Green Future: Our 25-year
Plan to Improve the Environment)
2018
33
Cooperation between donors and multilateral agencies can provide a further
avenue through which to advance CE activities and strategies. The UK’s Department
for International Development, for example, has partnered with the UN Conference on
Trade and Development (UNCTAD) to develop the Sustainable Manufacturing and
Environmental Pollution programme.
For international financial institutions seeking to support the implementation of
the SDGs and the Paris Agreement, investments in CE innovations or value chains
could be used to reinforce and accelerate existing programmes of sustainable
development. Many multilateral development banks are scaling up their activities in the
CE space and are also setting aside specific funding pots for CE approaches. Some
examples of MDB activity include the following: European Investment Bank (EIB);
European Bank for Reconstruction and Development (EBRD); World Bank: The bank’s
technical assistance programme ‘China: Promoting a Circular Economy’ supported the
development of national legislation on the CE in China in 2009; African Development
Bank (AfDB).
Among the countries that have formulated their circular economy national
policies and strategies, the EU and China are the most typical examples of
comprehensive circular economy packages. Being the frontrunners in the transition
towards circular economy, the EU’s and China’s experiences in both policy making
and actual implementation could become a benchmark for other countries. Besides,
from a trade perspective, the intra-EU trade in circular goods and services itself could
be valuable lessons for Vietnam in formulating its trade policies. Therefore, in the
following sections, the research will focus on circular economy practices in China and
the EU.
2.2. Circular economy practices in China
China’s rapid economic growth demands major supplies of all basic industrial

commodities. The country’s rapid industrialization in the last decades has engendered
serious problems of depletion of natural resources, degradation
34
of major ecosystems, and pollution extending far beyond its borders. China, then, puts
efforts to harmonise economic development and environmental protection. For more
than 15 years, China’s government has been a frontrunner on circular economy
policies, with a focus on addressing pollution, promoting resource efficiency, and
industrial ecology.44
If China can achieve its goal of increasing efficiency of resource
utilization, this will have global impact. For Vietnam, China is the country’s neighbor
and also among the biggest trading partners. The two countries share many similarities
in terms of economy, culture, society, politics, etc. Given the above analysis, it will be
useful for Vietnam to study the example of China’s circular economy practices.
Since the 1980s, China has successively issued a series of laws and regulations,
comprehensive policies, industrial policies, economic policies, and related
environmental policies on circular economy.45
These include the Cleaner Production
Promotion Law, the Energy Conservation Law, the Circular Economy Promotion Law,
etc. (Figure 2.1).
44
Ellen MacArthur Foundation (2018), “The Circular Economy Opportunity for Urban & Industrial
Innovation in China.”
45
Li, W. and W. Lin (2016), ‘Circular Economy Policies in China’, in Anbumozhi, V. and J. Kim (eds.), Towards
a Circular Economy: Corporate Management and Policy Pathways. ERIA Research Project Report 2014-44,
Jakarta: ERIA, pp.95-111.

35
Figure 2.1.The evolution of circular economy policy in China
Source: Ellen MacArthur Foundation, 2020
The Circular Economy Promotion Law of the People’s Republic of China, which
was adopted at the 4th session of the Standing Committee of the 11th National People’s
Congress of the People’s Republic of China on August 29, 2008, came into force on
January 1, 2009. The Law has 7 chapters including: Chapter I –
General Principles, Chapter II – Basic Management Rules, Chapter III – Reduction,
Chapter IV – Reusing and Recycling, Chapter V – Incentive Measures, Chapter VI –
Legal Liabilities and Chapter VII – Supplementary Provisions. It focuses on
development plans, extended producer responsibilities, supervision management
systems for key enterprises with high energy and water consumptions, circular
economy indices, statistics, and other management systems. In the Law, the
requirements for circular economy development are proposed, covering production
techniques, equipment, resource exploitation, recycling of waste materials,
comprehensive resource utilisation, reduction, and other aspects. As proposed in
Chapter V - Incentive Measures of the law, the government shall encourage circular
economy through special funds, technical support, tax incentives, investment,
finance, price, government procurement, and other aspects.
36
While laws and regulations are legal protection and play supporting role in the
development of circular economy, comprehensive policies play the general guiding role

and include action plans, programmes, and opinions. Developing circular economy,
China adopts both environmental, industrial and economic policies46
. One example of
environmental policy is that China’s Environmental Protection Ministry develops
pollutant emission standards for different industries so that enterprises must develop
strategies for low material consumption and low emissions. Economic policies could
include tax, fiscal, monetary and price policies to develop circular economy47
.
Preferential tax and financial incentives are also adopted to stimulate the development
of cleaner production in enterprises. Preferential tax rating is implemented in
enterprises dedicated to waste material recycling and comprehensive resource
utilisation. Price measures are adopted to regulate industries with high-energy
consumption for utilisation of resources and energy.
In a research by Ogunmakinde (2019), his finding is that China’s circular
economy practices are primarily implemented at the design, production, consumption
and waste management stages and at the enterprise, regional, and social levels. As
illustrated in Figure 2.2. below, eco design and environmentally friendly designs are
introduced at the design stage to protect the quality of the environment. Cleaner
production, eco industrial park, and low-carbon cities are implemented to improve the
circularity of products at the manufacturing/production stage. For consumers play a
vital role in ensuring that materials are continually circulated at the end of their useful
lives, minimizing pollution, Chinese consumers are encouraged to live a love-carbon
lifestyle through green purchase, sharing, and renting services. With regards to waste
management, China adopts reuse, recycling, waste trade markets, and industrial urban
symbiosis to allows waste products to remain in circulation.
46
Ibid.
47
Ibid., p.101.
37
Figure 2.2 Circular Economy development in China

Source: Olabode Emmanuel Ogunmakinde (2019), A Review of Circular Economy
Development Models in China, Germany and Japan, MDPI.
China has also launched circular economy pilot projects in provinces and cities,
industries, fields, and industrial parks, which is considered one of the most important
practices of circular economy in China for policy makers to recognize the characters of
circular economy.48
2.3. Circular economy practices in the EU
The EU is another important trade partner of Vietnam (Details of the EU – Vietnam
trade relation to be presented the next session). With a Circular Action Plan in place
since 2015 and many other relevant regulatory & policy documents, the EU’s practice
of Circular Economy implementation is a good reference for other countries to look at
circular economy from the perspective of a developed block.
48
Ibid., p.110.
38
2.3.1. Circular economy policy
Promoting the transition towards a circular economy and protecting the
environment and human health in Europe have emerged as pillars of the EU policy for

sustainable development49
. Europe has adopted a comprehensive circular economy
package for that purpose in 2015 and becomes a frontrunner with its circular economy
approach. The CE package is expected to help European businesses and consumers to
make the transition to a stronger and more circular economy where resources are used
in a more sustainable way. The package included 04 legislative proposals on waste,
revising the following legal acts:
Table 2.2. Circular Economy Package 2015: Proposed amendments to four
waste management legal acts of the EU
Legal acts Proposed changes
The Waste
Framework
Directive
• Set targets regarding the share of municipal waste prepared
for reuse and recycling to be met by 2025 and 2030 • Defines
general requirements for EPR schemes • Requires MSs to use
economic instruments to implement the waste hierarchy, to
take measures to prevent waste generation and to ensure the
separate collection of bio waste where appropriate
The Landfill Directive • Introduces a landfilling ban for separately collected wasted
and limits the share of municipal waste landfilled to 10%
by 2030
The Packaging Directive • Set targets for the share of packaging waste prepared for
reuse and recycling to be met by 2025 and 2030, with
specific targets for various packaging materials (details
below)
Packaging material 2030 recycling target (%)
49
39
Plastic 55

Glass 75
Paper & cardboard 85
Ferrous metals 80
Aluminium 60
Wood 30
The Directives on end-
of life vehicles
(ELVs), batteries and
accumulators, and
waste electrical and
electronic equipment
(WEEE)
• Review targets for the management of ELVs, batteries and
accumulators and minimum rate for separate collection,
recovery and recycling/preparing for reuse.
Source: European Commission, 2015
The Circular Economy Package also introduced a Circular Economy Action
Plan50
, a set of 54 actions to “close the loop” and support the achievement of the UN
Sustainable Development Goals, in particular SDG12 on sustainable production and
consumption. The list of actions is divided according to each stage of products’ life
cycle – production, consumption, waste management, market for secondary raw
materials – and to five priority areas – plastics, food waste, critical raw materials,
construction and demolition, biomass and bio-based products. Other measures relate to
innovation, investment and monitoring processes (See details of the actions in Annex
04).
Among the actions delivered through the action plan, it is worth noting the
introduction of a EU Strategy on Plastics51
as well as a Directive on Single-Use

50
European Commission (2015), COM(2015) 614 final. Closing the loop – An EU action plan for the
Circular Economy.
51
European Commission (2018), COM(2018)28 final. A European Strategy for Plastics in a Circular
Economy.
40
plastics52
, a Communication on the interface between waste, chemicals and
product legislation53
, a new Regulation on fertilising products54
– introducing
harmonised requirements for organic fertilisers manufactured from SRMs - and a
Monitoring Framework for the Circular Economy55
.
In 2019, the European Commission published a report on the implementation of
the action plan, stating that all 54 actions had been put in place at the EU level. Actions
to support the transition to a circular economy have been gaining increasing political
support also at the Member State level. Several member States have introduced
National Circular Economy Action Plans or Roadmaps.
With regards to the latest developments in the implementation of the EU Circular
Economy Action Plan, in January 2018 the European Commission adopted a Europe-
wide EU Strategy for Plastics in the Circular Economy. Accordingly, by 2030, all
plastic packaging should be reusable or recyclable in a cost-effective manner. Signed
by over 250 businesses, governments and other organizations, it commits signatories to
eliminate unnecessary plastic items; innovate to ensure plastics can be composted,
recycled or reused; and circulate plastic items to prevent their damaging the
environment. The EU’s latest circular economy movement is the Commission’s
adoption of the New Circular Economy Action Plan – one of the building block of the
EU Green Deal – on March 11, 2020.
2.3.2. The EU’s trade policies in relation to circular economy
In today’s globalised world, raw materials, technologies, products, components,
waste, and services are produced, traded and consumed cross-border. The circular
economy transition of the EU therefore has the potential impact beyond its
geographical border.
52
European Commission (2019), DIRECTIVE(EU) 2019/904 on the reduction of certain plastic products on the
environment.
53
European Commission (2018), COM (2018) 32 final. Communication on the interface between waste,
chemicals and product legislation
54
European Commission (2019) Regulation of the European Parliament and of the Council laying down rules on

the making available on the market of EU fertilizing products.
55
Eurostat (2018) Monitoring Framework for the circular economy
41
2.3.2.1. The EU’s trade in recyclables
The EU is the world's largest exporter and a major importer of non-hazardous
waste destined for recovery (recycling). The value of the recyclable raw materials
imported from non-EU countries stood at €9.2 billion in 2018. On the other hand,
exports of recyclable raw materials from the EU to non-EU countries were worth €14.0
billion in 2018. Turkey and China were the main destinations for the EU’s exports of
recyclable raw materials. The largest tonnage of recyclable raw materials were
imported from China, Norway, and the United States, Russia in 2018.56
When considering prices and quantities traded in the three major secondary
materials markets in the European Union alone, volumes are already very substantial.
Between 2002 and 2012, the combined markets for waste glass (€2.6bn), paper
(€56.2bn) and plastics (€26.4bn) in the EU alone amounted to €85.2 billion in current
prices, with much potential still untapped. Electronic goods also have a large untapped
circularity potential. A study from the United Nations University and UNCTAD
assessed a potential of €48 billion of savings in metals and plastics present in e-waste
alone.57
Plastic and plastic waste are traded worldwide and a significant proportion of
plastic waste is traded, both inside the EU and between the EU and other parts of the
world. Exporting plastic waste from the EU to Asia is a means of dealing with
insufficient recycling capacities in the EU, plus profit can be made from export
activities. EU exports of plastic waste to countries outside the EU amounted to around
150 000 tonnes per month at the start of 2019.58
Many of the countries to which the EU
exports its plastic waste are still in their infancies with respect to developing waste
management. For example, plastic products manufacturing and
56 Eurostat (2019), trade in recyclable raw materials. Available at
https://ec.europa.eu/eurostat/en/web/products-eurostat-news/-/DDN-20190304-2
57
UNTAD, 2016
https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1400&Sitemap_x0020_Taxonomy=UNCT
AD%20Blogs
58 European Environment Agency (2019), the plastic waste trade in the circular economy. Published on 28 Oct,
2019.

42
reprocessing plants in China have no standard operating procedures, no quality
standards and no inspections to investments in large manufacturing plants. Imported
waste is often not processed in accordance with European standards and might even be
dumped or burned in unregulated ways.59
Recent restrictions on imports of plastic waste in China, combined with some
types of plastic being added to the United Nations Basel Convention, the export of
plastic waste to other countries is becoming more difficult. The EU must find circular
and climate-friendly ways of managing its plastic waste e.g. by increasing reuse and
recycling. The same applies for other wastes in order to reach a comprehensive circular
economy.
2.3.2.2. Waste shipment legal framework
The EU’s waste trade is regulated under three legislations including the Basel
Convention, OECD Decision and the Waste Shipment Regulation (WSR).
The Waste Shipment Regulation prohibits exports of waste for disposal to third
countries, except EFTA countries parties to Basel Convention; prohibits exports for
recovery of hazardous waste and “other waste” under Annex II of the Basel Convention
to third countries, except those directed to countries specified in OECD decision; and
prohibits imports of waste for disposal or recovery from third countries not a Party to
the Basel Convention and not an OECD member and have no bilateral agreement with
the EU or MSs.
At the time of the adoption of the current Waste Shipments Regulations, the EU
legislators did not consider that it should pursue the objective of facilitating the
transition of the waste sector to a circular economy.60
Regardless of that fact, the EU
Commission’s evaluation of the Regulation on shipments of waste has pointed out that
a number of links with Circular Economy objectives such as administrative procedures
that hinder progress in innovation and do not support a well-functioning market for
secondary raw materials – a key component of circular economy; or the
59 Ibid.
60
43
inconsistency in waste definition between countries (shipment leaves on country as a

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