William Krist's Blog, page 7

How the Circular Economy Can Revive the Sustainable Development Goals

The transformative potential of the ‘circular economy’ in addressing global environmental and social challenges is receiving increasing international attention, with recent interest driven in particular by recognition that the existing UN-led sustainable development agenda is faltering. Until now, the circular economy has been largely peripheral to that agenda, despite featuring extensively in government thinking and having a rising profile as a sustainable alternative to today’s wasteful and polluting economic models. However, with the multilateral policy community considering as a matter of urgency both how to revive stalled progress on the Sustainable Development Goals (SDGs) and what any framework that replaces or extends the SDGs after 2030 should contain, there is an opportunity to embed  circular economy principles more comprehensively and formally within the international system.

This research paper has been written with the express intention of contributing ideas to this emerging SDG reset, both at forthcoming events in the autumn of 2024 – most notably, the UN’s Summit of the Future – and in continuing discussions into 2025 and beyond. We make the case for accelerating and deepening the shift to circular economic models, taking into account the potential trade-offs and unintended consequences that disruptive innovations may bring. The paper underlines the vital role that expansion of the circular economy could play in supporting the SDGs and in shaping what comes after them. On the latter, specifically, we present a policy blueprint for development of the circular economy to 2050.

At the heart of our argument is the idea that the circular economy and the SDGs are naturally complementary. Prominence in the SDG framework could help the circular economy to reach a critical scale and breadth, which in turn would improve prospects for achieving many of the SDGs’ targets. Linking the two offers mutual benefits. The circular economy needs the imprimatur of the UN system and other multilateral institutions to establish itself globally. At the

same time, the circular economy offers the prospect of vastly more effective action on the triple planetary crisis of pollution, climate change and biodiversity loss – precisely the sort of catalyst the UN’s ailing 2030 Agenda for Sustainable Development could use.

A ‘circular economy’ can be thought of as a system designed to deliver social and economic prosperity without requiring unsustainable levels of raw material extraction, consumption or pollution. In simplified terms, a circular economy combines three design principles: eliminating waste and pollution; extending the lifetime of products and materials for as long as possible; and regenerating natural systems. It can entail many different types of activity – ecodesign of goods, ‘product-as-a-service’ alternatives to product ownership, regenerative and restorative farming, and the use of refurbished and second-hand goods are just a few examples. Achieving a circular economy is not simply about recycling more: it requires reorienting and redesigning the fundamental goals and structures of societal provisioning systems (food, transport, energy, shelter) in ways that dramatically reduce raw material and energy consumption.

The story of the circular economy so far has often been one of modest ambition, localized initiatives, and small-scale or experimental projects implemented incoherently.

A robust scientific literature underlines the advantages of circular economic models over today’s predominantly extractive, resource-intensive ones (often described as ‘linear’ by researchers). By some estimates, moving to a circular economy could unlock up to $1.5 trillion in value in just three sectors of the US economy alone. It could help achieve 45 per cent of the global greenhouse gas emissions reductions needed to mitigate climate change by transforming the way products and materials are made and used. It could also restore global biodiversity to its 2000 levels within little more than a decade. Yet without introduction of the circular economy at scale, in contrast, resource consumption could increase by 60 per cent from 2020 levels by 2060, while over half of the 169 targets within the 17 SDGs may be unachievable. Put another way, the circular economy is becoming too important for policymakers to ignore, all the more so amid mounting concerns about rising global temperatures, the lack of progress on the SDGs, and the world’s failure to meet many environmental targets.

Yet the story of the circular economy so far has often been one of modest ambition, localized initiatives, and small-scale or experimental projects implemented incoherently. As we argue in this paper, the circular economy needs to be both scaled up and globally coordinated. One of the most basic challenges is that not enough circular economy activity is going on: according to one estimate, the global economy is just 7.2 per cent ‘circular’, if measured by the percentage of secondary (i.e. cycled) materials it consumes. A second problem is the lack of dedicated institutional representation. Whereas the UN Framework Convention on Climate Change (UNFCCC) exists for global climate policy coordination, and the International Energy Agency (IEA) provides a coordinating structure for the energy sector, no equivalent exists for the circular economy. What is needed is a kind of IEA for the circular economy, so to speak: a multilateral body that can champion the circular economy with policymakers and in the UN system, and that can coordinate policy, regulation and standards.

A third problem, partly stemming from the above, is that action on the circular economy remains fragmented at a global level. All countries depend to varying degrees on foreign trade for the materials, goods and services associated with circular activities. Equally, ‘ecodesign’ standards requiring products to meet strict circularity criteria will affect global supply chains, with implications potentially beyond the jurisdictions where such standards are enacted. However, the basic interconnectedness of the circular economy is not fully reflected in policy. More than 75 national circular economy action plans, roadmaps and strategies have been launched to date (another 14 are in development). These documents have been drafted unilaterally by the countries in question, resulting in a kaleidoscope of around 3,000 rapidly evolving commitments spanning 135 policy areas and 17 sectors. While the amount of activity is a positive sign of rising interest in the circular economy, fragmentation of its operating and regulatory environments risks increasing barriers to trade (for example, when regulations on the export of industrial waste or recycled electronics are incompatible between one country and another).

A fourth concern is that current government practice on the circular economy risks encouraging counterproductive resource nationalism and zero-sum economic competition, hurting resource-poor developing countries in particular and undermining the SDGs. In some cases, the national action plans and roadmaps mentioned above have narrow domestic goals, such as boosting competitiveness against trade partners, supporting the (often politically motivated) reshoring of industry and jobs, and reducing dependence on imported critical materials. Trends towards deglobalization and nationalism increase the temptation for governments to treat the circular economy as an opportunity to assert, or contest, control over supplies of critical raw materials.

Summary of recommendations

To address these challenges, this paper proposes solutions and ideas in two parts. The first part covers the period to 2030, the UN’s currently envisioned deadline for achieving the SDGs. The second focuses on 2030–50, a period during which the SDGs may be extended (most likely in modified form) or replaced with new goals as part of a refreshed sustainable development agenda.

In terms of immediate action on salvaging the SDGs between now and 2030, we have identified five priority areas for international collaboration on the circular economy. These proposed actions draw on input from stakeholder workshops and consultations with participants from Africa, Asia, Europe and Latin America, and are intended for a varied audience of multilateral institutions, governments and businesses. With the 2030 SDG deadline approaching, work on implementing these recommendations would need to begin immediately.

The five priorities are as follows:

1. Embed principles of justice and inclusivity in circular economy development.

This is more than a moral imperative; it is a pragmatic necessity both for engagement with the UN system, where such values already underpin the SDGs, and for achieving political and popular support around the world for the economic reforms implied by the circular economy. Key tasks include rectifying environmental injustices such as illegal dumping of waste in low- and middle-income countries, providing decent work and meaningful employment, and consulting a wide range of countries and stakeholders on the design of circular economy policies. Other recommendations include establishing UN guidelines on social equity in the circular economy; setting up a platform under the UN’s Economic and Social Council (ECOSOC) to facilitate sharing of expertise and best practices of Indigenous communities; and launching a global information campaign on the benefits of the circular economy.

2. Enhance global policy coordination on the circular economy.

A multilateral or intergovernmental policy coordination mechanism is needed to help governments develop and implement national circular economy roadmaps. One option would be to establish a cross-sectoral circular economy alliance between UN development agencies. Such an alliance could work with national governments, multilateral development banks (MDBs), the private sector and civil society to offer guidelines, best-practice examples and technical knowledge. The Global Alliance on Circular Economy and Resource Efficiency (GACERE) – which currently consists of just 16 countries plus the EU – could conceivably be repurposed and expanded for this role. Another option would be to set up an international resource agency, akin to the International Energy Agency (IEA) in some respects but with a mandate specific to material resources and the circular economy. Additionally, the G7 and G20 should be encouraged to increase their ambition on the circular economy and to align policy in areas such as product and producer standards. International coordination between environmental agendas could also be improved by applying circular economy principles to achieve the targets set in multilateral environmental agreements such as the Convention on Biological Diversity and the Paris Agreement on climate change.

3. Reform the global financial architecture.

Scaling up the circular economy will require significant investment. At present, the circular economy is poorly integrated into the global financial architecture, and thus largely off the radar of many investors or perceived as too risky. Creating a circular economy-specific framework for international financial institutions could facilitate development of investment taxonomies, financial benchmarks and technical criteria that would underpin the funding of projects, technologies and business models at scale. Multilateral development finance – though historically focused on ‘linear’ economic models – also has a role to play in de-risking circular economy investments. The ongoing reform of MDBs presents an opportunity to embed circularity principles in international public finance. Most fundamentally, MDBs will need to increase their lending capacity and adjust their mandates to allow the financing of global public goods. A Global Circular Economy Fund, financed through public sources and modelled on the Green Climate Fund, could also be set up to mobilize private capital, concentrating on low- and middle-income countries that might otherwise struggle to attract financing for their circular economy transitions.

4. Rewire the global trade system.

Changes in policy and regulation are needed to support circular economy-enabling trade while preventing problems such as the illegal dumping of waste and trade in goods that inhibit the circular economy. Reconfiguring global supply chains to be circular in nature will require policies and regulations to streamline trade in many kinds of goods and services, including: remanufacturing and recycling equipment; second-hand goods; secondary raw materials; non-hazardous scrap and industrial residues; and design, rental and repair services. ‘Trusted circular trader’ schemes could be established to reduce red tape, pre-certifying circular economy-compliant exporters. ‘Resource recovery lanes’ similar to customs green lanes could expedite documentation for shipments of secondary raw materials. Technical cooperation to make circular trade compatible with the World Customs Organization’s Harmonized System (HS) codes is also needed. Finally, the informal circular economy working group hosted by the WTO’s Trade and Environmental Sustainability Structured Discussions (TESSD) would benefit from more formal status.

5. Develop shared standards and metrics.

Common standards and metrics will be crucial to expanding the circular economy worldwide, and to reducing policy and regulatory fragmentation. In addition to supporting disclosures by businesses and organizations, new metrics will be needed for monitoring and reporting the circular economy’s aggregate impact on other multilateral environmental agreements, such as the Paris Agreement on climate change and the upcoming binding instrument to end plastic pollution by 2040. A circular economy-specific taxonomy of standards will need to cover many different areas, including product design, procurement, cleaner production, supply-chain transparency and traceability, and financial performance. The recent publication of the first tranche of ISO 59000 standards on the circular economy is a step forward, but micro, small and medium-sized enterprises (MSMEs) in particular may need support on compliance costs. The new voluntary Global Circularity Protocol (GCP), launched in 2023, could drive the development of universal metrics for assessing circularity.

After the SDGs – 2030 to 2050

Most of the SDGs will not be achieved by 2030. Only 17 per cent of the SDG targets are on track to be met globally by 2030. Some prominent voices propose that, instead of abandoning or replacing the SDGs, the UN should revise the current set of targets and extend the SDG framework to 2050. To provide ideas in this area, Chapter 4 presents an indicative, longer-term policy blueprint to be considered in the context of a possible extended or revised SDG framework post-2030.

Specifically, we propose a set of circularity targets in 17 categories for 2050, and corresponding levers and actions for achieving them. Each category of target is mapped to one of the 17 SDGs. For example, for SDG 1 (‘No poverty’), our proposed targets envisage the circular economy providing affordable basic services to the poor, and sustaining local businesses that can help make communities resilient to economic shocks and environmental disasters. For SDG 7 (‘Affordable and clean energy’), we propose actions that would enable societies to achieve full, affordable access to renewable and circular energy systems. Under this target, most critical materials would be supplied through secondary sources or substituted with alternative materials – highlighting the importance of circularity in ensuring that the resource demands of the energy transition are reduced as much as possible.

To enshrine circular economy principles more prominently in the next set of goals post-2030, we recommend several steps:

1. Introduce a specific high-level objective, within the extended post-2030 SDG framework, that recognizes the transformative potential of the circular economy for global development and for addressing the triple planetary crisis.

2. Explicitly outline ambitious but achievable global targets related to reducing unsustainable resource use, reducing global waste generation, and enhancing circularity rates for key resources and materials.

3. Ensure that circular economy targets are integrated across all SDGs, emphasizing the interconnectedness of sustainable resource management with economic, social and environmental objectives.

4. Align the post-2030 framework and circular economy targets with the ‘Beyond GDP’ initiative that forms part of the UN secretary-general’s ‘Our Common Agenda’ vision.

5. Develop clear, measurable indicators for inclusive circular economy practices with specific relevant targets for 2050.

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To read the Research paper as it was published on the Chatham webpage, click here.

To read the full Research paper, click here.

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From Rhetoric to Reality: Nearshoring in the Americas

Executive summary

Over the past five years, global shifts have reshaped the world. China’s rise, US-China tensions, COVID-19, and Russia’s 2022 invasion of Ukraine exposed supply chain vulnerabilities, pushing resilience to the top of the agenda. Latin America and the Caribbean (LAC) can seize the opportunity to provide solutions for US companies through nearshoring. With the most US bilateral free trade agreements, geographic proximity, and abundant critical minerals and forms of renewable energy, LAC is perfectly positioned to support the “China+1” strategy while also meeting environmental, social, and governance (ESG) standards. Estimates suggest nearshoring could add an annual US$78 billion in additional exports of goods and services in Latin America and the Caribbean in the near and medium term. Similarly, nearshoring could allow the US government and US companies to diversify supply sources and build resilient supply chains, while boosting inclusive economic growth in the region.How can nearshoring be transformed from rhetoric to action?

How can the United States and regional governments work together to materialize nearshoring opportunities? How can the private sector be included in this endeavor? To answer these questions, the Atlantic Council created the Nearshoring Working Group, a multisectoral group of practitioners and experts from the United States and the region to help advance actionable policies to accelerate economic engagement across the hemisphere. Through numerous consultations with Nearshoring Working Group members and conversations with officials in the United States and across the region, this report identifies three overarching conditions that need to be met to materialize nearshoring, and suggests ten opportunities to achieve the three conditions.

Improving domestic “pull” factors

Modernizing port and telecommunications infrastructure: Pursue modernization of port infrastructure to reduce transportation costs associated with nearshoring, and expand internet access.
Improving “soft” infrastructure at border crossings: Leverage regulatory modernization and harmonization of customs processes to improve intraregional trade and coproduction.
Offering reliable, clean energy sources: Create regulatory frameworks for renewable energies to reduce share of fossil fuel dependency, and update transmission lines to achieve reliable electricity.
Providing legal certainty and fostering strong institutions: Offer predictable “rules of the game” for investors by strengthening independent regulatory agencies and pursuing digitalization of public services.

Unlocking US “push” factors

Leveraging existing US trade policy toward the region: Work with partner countries to ensure provisions of current free trade agreements (FTAs) are best utilized in promoting nearshoring and supply chain resilience and sustainability.
Tailoring development and investment policies to US strategic goals: Investment development policy must be tailored to US strategic goals, by lifting institutional constraints to International Development Finance Corporation (DFC) lending to LAC.
Leveraging the existing toolbox across the US government: Include the breadth of US government programs and agencies as a tool of intragovernmental, bilateral engagements to catalyze nearshoring.

Enhancing public-private sector collaboration

Strengthening workforce development: Closer collaboration between the public and private sectors is essential to close the skills gap between jobseekers and employers and improve the region’s human capital.
Enhancing trade and investment promotion through multisectoral collaboration: Incorporate private-sector input in the decision-making process of investment promotion schemes such as investment promotion agencies (IPAs) and free trade zones (FTZs) to render both tools more effective.
Supporting industries by following winners: Governments should provide incentives for winning industries to further grow, avoiding the draining of fiscal resources for industries that have yet to prove their yield.

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To read the report as it was published on the Atlantic Council webpage, click here.

To read the full report, click here.

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World Trade Report 2024 — Trade and Inclusiveness: How to Make Trade Work for All

Over the past 30 years, the world has witnessed a period of income convergence, as the gap in income levels between economies has narrowed. Economic growth has improved living conditions for many people around the world but not all individuals and economies have benefited equally from the changes brought about by more open trade. This year’s Report explores the interlinkages of trade and inclusiveness across and within economies, discussing how trade policies need to be complemented by domestic policies to make the benefits of trade more inclusive.

The Report underlines that diversifying global value chains, reducing trade costs through digitalization, and transitioning to a low-carbon economy can create new opportunities for low- and middle-income economies. Furthermore, when trade policies are complemented by domestic measures, such as labour, education and competition policies, the gains from trade can more easily flow to workers and consumers. Enhanced WTO cooperation with other international organizations can magnify their combined action to increase inclusiveness across and within economies.

WTO 2024 World Trade Report

To read the report as it was published on the World Trade Organization webpage, click here.

To read the full report, click here.

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Ten Quick Wins for: Re-globalization and Resilience in Trade

Foreword

The year 2024 marks a global election cycle with over 80 countries, representing more than half of the world’s population casting their votes. In these uncertain times, the world finds itself confronted by a state of “polycrisis”—a complex web of interconnected global challenges that transcends borders. Geopolitics and international trade have a critical role to play in driving solutions to these crises. 

As many countries continue to navigate the aftermath of the COVID-19 pandemic, the world contends with other pressing issues such as the increasing urgency of tackling climate change and addressing the fragmentation of traditional geopolitical alliances. As nations confront various stressors, including ongoing conflicts in several regions around the world, these interconnected issues have heightened uncertainties and undermined the previously robust support for open trade.

Ten Quick Wins for: Re-globalization and Resilience in Trade

Quick Win No. 1

In the past three decades, the world has enjoyed numerous benefits of trade liberalization. For example, in the first 25 years since the establishment of the WTO average tariffs dropped from 10.5% to 6.4%, and the value of global trade nearly quadrupled. The emergence of a global supply chain seamlessly weaved goods and services from various corners of the world into products ready for consumers’ hands. However, disruptions in recent years, such as the COVID-19 pandemic, climate-change-related natural disasters, and geopolitical events, have exposed significant risks in the global supply chain model. These disruptions have propelled businesses to diversify their supply chains in order to mitigate disruption risks. This means increasing sourcing opportunities from a diverse geographical footprint.

Quick Win No. 2

Trade policy can significantly leverage re-globalization to achieve a net-zero world, but it is crucial to ensure these measures include developing countries, particularly the most vulnerable and marginalized. Climate science advocates for enhanced efforts to reduce greenhouse gas (GHG) emissions and move towards a sustainable energy future, as underscored by the 2023 Intergovernmental Panel on Climate Change (IPCC) Synthesis Report. Agreements like the 2015 Paris Agreement and the 2021 Glasgow Climate Pact have set ambitious targets for net-zero carbon dioxide emissions by mid-century. However, developing countries often lack the financial resources, technological advancements, and institutional capacity to meet these targets. This risks their exclusion from the benefits of global climate initiatives such as carbon markets and clean energy transitions.

Quick Win No. 3

Workers are the backbone of international trade. They provide global services, the labor for tradable goods, and the means to ship exports and imports. Despite their unique importance to trade, not all workers are treated equally, and many groups are excluded from the design, implementation, and enforcement of trade policies. Countries should offer a seat at the trade policy table not only to advantaged trade union representatives but also to vulnerable workers who lack union representation.

Quick Win No. 4

The world is on the cusp of a transformative shift as the growth of clean energy and digital technologies propel humanity toward a minerals-based economy. This transformation holds the promise of a more sustainable and interconnected future, but it will also be highly material intensive. Meeting the burgeoning demand for these materials will necessitate an unprecedented expansion of mining activities. Experts estimate that the demand for lithium-ion batteries alone could require more than 300 new mines by 2035. Emerging green technologies will further accelerate demand for critical minerals needed for the generation and transmission of more renewable energy.

Quick Win No. 5

Cross-border data flows are crucial for trade and digital economy innovation. The rapid advancement and adoption of artificial intelligence (AI) further highlights the need to ensure that data flows freely, safely, and securely across borders. However, diverse and sometimes irreconcilable policy interests of WTO members have fueled the lack of agreement on vital issues, such as data governance, and slimmed down the negotiation agenda within the WTO’s Joint Statement Initiative on Electronic Commerce (E-Commerce JSI). These developments reflect ongoing concerns about shrinking policy space, privacy, national security, and data sovereignty, which can lead to regulatory fragmentation and restrictions on data flows. While AI is not currently included in the E-Commerce JSI, rapid developments in AI governance outside the WTO indicate the potential for further fragmentation. We propose a pragmatic approach focused on inclusivity through regulatory interoperability and technical harmonization, where certification frameworks and technical standards play a key role.

Quick Win No. 6

The WTO dispute settlement system is vital for enforcing WTO rules and providing security and predictability to the multilateral trading system. While the system has been by and large effective over the past 30 years, its practical application over time has made clear that some aspects need improvement or clarification. Accumulated dissatisfaction of some WTO members over certain features of the system, especially related to appellate review, led to a deadlock in the appointment of Appellate Body members to replace those whose terms of office had expired. This situation came to a head in December 2019, when the Appellate Body became non-functional due to a lack of quorum.

Quick Win No. 7

Responding to the perception that aspects of international trade create economic security risks, some WTO members have implemented unilateral, trade-inhibiting measures that lack clear endpoints. Members may justify violations of trade rules by invoking the WTO security exceptions, provided all requirements are met. However, security exceptions are not a long-term solution for persistent, unpredictable challenges and may even preclude multilateral approaches to anticipate and mitigate economic security risks. It is time to view security as more than an exception to WTO rules and principles. Members should build a new mechanism for economic security issues using the WTO’s safeguards procedures as a model.

Quick Win No. 8

Redirecting investment flows to developing and least-developed economies is one of the key challenges to overcome when thinking about a new paradigm for globalization and building resilience in trade. The Joint Initiative on Investment Facilitation for Development, launched by some WTO members in December 2017, aimed to address trade barriers that impede and restrict investment processes between countries. Although the conclusion of the negotiations on the Investment Facilitation for Development (IFD) Agreement was announced in February 2024, the Agreement was not incorporated into Annex 4 of the Marrakesh Agreement during the 13th WTO Ministerial Conference (MC13). Establishing these rules at the multilateral level is crucial to creating a cohesive and inclusive global investment environment, which will enhance the participation of developing and least-developed WTO members in global investment.

Quick Win No. 9

Across the globe, governments are increasingly confronting the urgent challenge of combating climate change. The green transition is essential to tackle this challenge and necessitates wide scale innovation and dissemination of advanced clean technologies. While the clean tech boom is underway, many developing countries are struggling to keep pace. The WTO is uniquely positioned to facilitate technology transfer by leveraging its existing frameworks and enhancing international cooperation with existing initiatives, such as those of the UNFCCC.

Quick Win No. 10

For decades, development finance has played a critical role in supporting financial resilience in developing countries. However, even countries that are striving to increase their economic strength remain vulnerable to external macroeconomic shocks and geopolitical uncertainties. One way development finance can help shield developing economies from shocks and drive inclusive growth is by championing the adoption of digital payments—including open and competitive payments markets and public-private partnerships.

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To read the report as it was published on the TradeExperettes webpage, click here.
 
To read the full report, click here.

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Antimony: The Hidden Metal Fuelling Global Competition

Great power competition between the United States and China centres on technological supremacy. This extends beyond future-defining technologies such as high-end chip manufacturing, advanced AI, and quantum computing to include the supply chains underpinning these technologies, particularly critical minerals.

As the clean energy transition accelerates, critical minerals such as cobalt, lithium, and rare earth elements have become buzzwords in business, international relations, and sustainability.

Yet amid the scramble for these well-known resources, another metal – antimony – has quietly emerged as another keenly contested resource. With China’s recent announcement of export restrictions on this metal, the challenges of balancing supply and demand are intensifying, raising concerns over supply chain vulnerabilities and fuelling a new form of competition among great powers.

Antimony, a lustrous silvery-grey metalloid, is scarce in nature and unevenly distributed globally. It is, however, critical for producing high-tech and defence products, including flame-retardant materials, certain semiconductors, and superhard materials. As with many critical minerals, China dominates the global antimony supply chain. The country holds the world’s largest deposit, accounting for approximately 32% of global antimony resources, yet it produces more than 48% of global output.

China’s move to restrict the export of antimony, ostensibly to safeguard “national security and interests”, is set to take effect on 15 September. While these restrictions are not explicitly targeted at any specific country, the geopolitical implications are significant. China has gradually reduced its antimony production over the past few years to limit strategic stockpiling. As a result, the announcement has driven up prices, potentially disrupting global supply chains. The impact is particularly acute for the United States, which sourced 63% of its antimony imports from China.

China’s export control of this critical metal might appear a calculated move within the broader framework of resource nationalism. Beyond safeguarding strategic resources and preventing over-exploitation, these controls reinforce China’s leadership in the global antimony industry, enhancing its influence over the international allocation of this critical mineral. This move, thus, is not just about acquiring and protecting resources; it is also about denying rivals a strategic advantage.

Antimony is one of the few elements classified as a “critical” or “strategic” mineral by countries including the United States, China, Australia, and Russia, as well as the European Union, underscoring its special geopolitical value. Following similar restrictions on germanium, gallium, graphite, and rare earths, China’s export control of antimony marks another move to leverage its dominance in global supply chains. This action serves as a response to US efforts to limit the availability to China of critical technologies such as high-end chips .

China’s anitimony announcement has not gone unnoticed by markets. In Australia, the response has been notably positive. Larvotto Resources, a leading exploration and pre-development company focused on high-demand commodities including antimony, saw its share price surge as it possesses the rights to operate the Hillgrove Gold-Antimony Project, the eighth-largest in the world. The assumption is that Australia will fill the market gap left by China. In an effort to counter China’s dominance in critical mineral supply chains, the United States had forged partnerships with resource-rich countries including Australia.

However, China’s export restrictions target antimony oxides with a purity of 99.99% or higher, as well as other high-purity antimony compounds (99.999%). Producing such high-purity chemical compounds requires advanced processing technologies, and export controls with this high-purity threshold are likely aimed at restricting the export of high value-added antimony products and advanced processing technologies. These ultra-pure products are used in specialised industries, including high-end electronics, optics, and defence applications.

Australia’s ability to mitigate the risks associated with China’s dominance remains limited. China is a net importer of antimony metal. Currently, 86% of Australia’s antimony exports are sent to China for processing. Investing in processing capacity and infrastructure for lower-grade antimony products may offer limited strategic value for the United States, as these products will still be available under China’s restrictions. Conversely, developing high value-added processing technologies to produce high-purity antimony products carries significant risks, particularly if China decides to retaliate in trade or lift these restrictions. In the latter case, even if alternative processing technologies become available in Australia, the market – including the United States – may still turn to China for more cost-efficient products, potentially rendering Australia’s investments obsolete.

Navigating these dynamic complexities and maintaining an independent policy in the face of great power competition will be a true test of political acumen for Australian policymakers.

The competition over antimony is merely the latest manifestation in the great power rivalry that centres on technological supremacy. Each side is manoeuvring to secure critical materials and technologies, define future systems, and outpace the other in innovation.

The underlying issue is a deepening lack of trust between these global powers. This mistrust fuels the tug-of-war over resources, with nations viewing control over materials as crucial for maintaining technological dominance.

However, this relentless pursuit of supremacy comes with significant downsides: fragmented global supply chains, rising resource nationalism, and intensified trade restrictions. Cooperation gives way to competition, and technological progress risks becoming a zero-sum game.

To read the article as it was published on the The Interpreter webpage, click here.

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The EU’s Critical Raw Materials Strategy: Engaging with the World to Achieve Self-Sufficiency

The tussle over critical raw materials

Critical raw materials (CRMs) are the bedrock of the world’s renewable energy systems. As economies around the world are committing to decarbonization, demand for critical minerals—the key components of clean technologies powering the green transition—is swiftly outpacing supply: the International Energy Agency (IEA) forecasts that the global energy sector’s requirements for energy transition minerals could quadruple by 2040. Confronted with growing competition for control over critical mineral supply chains, governments worldwide have implemented new policies, marshaled funding, and forged alliances to protect their access to these essential materials.

Although concerns over CRM supplies were raised as early as 2008, supply chain insecurities exposed during the Covid-19 pandemic and the challenges of reducing the EU’s energy dependencies in the aftermath of Russia’s invasion of Ukraine catapulted the issue of reliable access to energy transition minerals to the top of the EU’s political agenda.

The need to reduce dependencies on the EU’s access to CRMs figured prominently in Ursula von der Leyens political guidelines which were presented to the European Parliament on July 18th. She underscored the need to create a secondary market for CRMs, but also underlined that the EU need to diversify its supply and aggregate its demand as well as a need to boost European investment in the sector.

While we are still awaiting Mario Draghi’s report on the EU’s competitiveness, access to CRMs are also expected to be a central theme here. Speaking on April 16, 2024, Mario Draghi, the former president of the European Central Bank, thematized the urgency of securing Europe’s strategic autonomy in critical raw materials value chains. In a world where global superpowers such as the United States and China are turning to protectionist policies to shore up their CRM supply, the EU, Draghi underlined, needs “a comprehensive strategy covering all stages of the critical mineral supply chain.” 

The Critical Raw Materials Act (CRMA), which entered into force on May 23 of this year, is the EU’s initial attempt to build such a strategic approach. The regulation focuses on measures the EU can implement domestically to increase its raw materials resilience: ramping up extraction at home, increasing circularity and recycling efforts, and fostering innovation in alternative technologies. By 2030, 10% of all the EU’s annual consumption of strategic raw materials is to be extracted domestically and 40% is to be processed within the EU. At least 15% of the EU’s annual consumption is to come from recycled sources. According to observers, these targets set by the EU are widely ambitious and will most likely not be achieved by 2030.

The EU, however, will never be entirely self-sufficient in supplying the critical raw materials it requires and will always rely on CRM imports. Even in the best-case scenario where the CRMA’s goals are reached, 90% of the extraction and 60% of the processing of the EU’s yearly requirements will still occur overseas. Currently, geospatial concentration of supply chains leaves Europe’s critical raw material supply—and with it, Europe’s climate ambitions—vulnerable to supply disruptions, external shocks, and the tactics of trade wars.

For a handful of CRMs, the EU is almost solely dependent on a small number of third countries. For example, 98% of the EU’s supply of borate comes from Turkey and 63% of the world’s cobalt is extracted in the Democratic Republic of Congo (DRC). China’s stranglehold over global CRM extraction and, especially, refinement is a serious concern. For example, 100% of the rare earth elements used in permanent magnets are refined there. As the EU and US attempt to loosen China’s grip on CRM value chains, China is becoming more and more assertive in using its dominant position to defend its control of the market. In 2020, China ranked as the country with the most export restrictions on minerals, and, in 2023, introduced additional restrictions for graphite and for rare-earth mineral processing technology. Even the EU’s recently announced plans to impose tariffs on electric vehicles produced in China—an attempt to curb Chinese dominance at the downstream end of the critical mineral value chain—provoked Chinese authorities to open anti-dumping probes into European pork and French spirits in what was widely seen as a retaliatory response.

To secure a reliable CRM supply, the EU must reduce these dependencies. Thus, the CRMA establishes that, by 2030, not more than 65% of the EU’s annual consumption of each strategic raw material at any stage of the value chain is to be sourced from a single third country. This brief, which builds on Tænketanken EUROPA’s previous works, seeks to unpack the strategies deployed by the EU in pursuit of this diversification target. 

Why trade is not enough

There is an ongoing political discussion both within the Commission, but also among Member States, as to whether the EU can secure its critical mineral supply chains through mere import diversification or whether the EU also needs to build up industrial capacity in third countries. So far, the EU has been pursuing strategies along both these vectors, completing trade and investment agreements to increase its network of preferred trading partners and signing strategic partnerships to create investment opportunities overseas.

Industry forecaster, Benchmark Minerals, estimates that at least 384 new graphite, lithium, nickel, and cobalt mines will have to be opened by 2035 to meet global demand for electric vehicle battery materials alone. To secure true stability of supply, the EU thus cannot rely solely on increasing its number of trading partners but must be proactive in ensuring European engagement in supply chains on competitive terms.

Since mining and processing are capital intensive processes, accompanied by a slew of associated environmental and business risks, attracting investment in mineral projects poses a challenge the EU must overcome. The EU must think beyond its current strategies, which though feasible are not sufficiently innovative, to develop tools that will both incentivize and protect European stakeholder involvement.

Reducing dependencies through development: The EU’s Strategic Partnerships

The EU’s raw materials strategy has emphasized the creation of Strategic Partnerships on Raw Materials Value Chains, which are formalized in memoranda of understanding (MoUs) and pledge to facilitate investment in CRM value chains abroad. The EU has forged 13 such agreements with mineral-rich countries outside of the Union since 2017, with more agreements in the pipeline.

The partnerships aim to promote economic development in cooperating countries in mineral extraction, processing, and related infrastructure, scaling up global CRM output. Being non-legally binding, the MoUs are practical: they are easy to set up, quick to push through the internal machinery of the EU, and they satisfy a political appetite for official statements of cooperation. They are followed by more concrete, though still not legally binding, roadmaps identifying projects and laying out a step-by-step approach to achieving the goals of the partnership, which the EU and its partners agree to design within six months of the Strategic Partnership’s signing.

By opening up opportunities for EU investors to establish a foothold in third countries, the strategic partnerships constitute a means of establishing a European presence in global CRM supply chains. In the MoUs, the EU promises prioritized funding for projects through the EU Global Gateway, the EU’s foreign investment policy initiated in 2021. Global Gateway has earmarked a total of €300 billion to clean energy and infrastructure projects worldwide. Deploying Global Gateway funds and a Team Europe approach, under which the EU pools resources from the EU, Member States, and other actors such as development finance institutions and the European Investment Bank, the EU hopes to stimulate private sector investment in partnering countries. However, investors will need more concrete incentives than the Partnerships alone, not least because the Strategic Partnerships, as non-binding compacts, do not create the clear and enforceable legal guarantees necessary to support investments.

Reducing dependencies through trade policy: Understanding the EU’s exclusive competence FTAs

In addition to forming Strategic Partnerships, the EU has doubled down on efforts to bring pending trade agreements with resource-rich countries across the finish line, in a move to diversify its critical mineral supply by increasing trade privileges in CRM markets worldwide. While FTAs are broad arrangements that cover relations across a range of economic sectors, critical raw materials can be a driving force behind these agreements. All new EU trade agreements since 2015 have contained a dedicated chapter on Energy and Raw Materials.

Trade agreements have limited power to stimulate imports of critical raw materials into the EU because there is little scope for country-specific tariff reductions on CRMs. 92% of EU CRM imports do not pay import duties, whether because of tariffs set at zero or trade agreements already in force. The remaining CRM imports are covered by a tariff ranging from 2-7% for unprocessed and 3-9% for processed goods. As such, there is little scope for significant further reduction. However, the EU’s FTAs can be understood as reflecting a shift away from traditional trade liberalization methods and towards increasing opportunities for EU companies in sourcing SRMs overseas, much like the Strategic Partnerships, although FTAs are legally binding accords.

However, trade agreements might help restrict protectionist CRM policies implemented by mineral exporting countries. Such measures pose a worrying barrier to trade in critical minerals. In newly developed FTA provisions, the EU has included additional rules which aim to address defensive CRM trade strategies adopted by resource-rich countries and to close gaps in existing WTO regulations. Recent FTAs have also sought to open foreign markets to EU investors in the extractive industries of FTA partners, for example by securing preferential access for EU investors to trading opportunities and ensuring non-discriminatory procedures in the authorization of exploration and production licenses. 

Since 2017, the EU has crafted more agile FTAs—slimmed down agreements designed to fall under exclusive EU competence which can enter into force with only the consent of the EU Council and European Parliament. In this way, the EU has managed to accelerate the exhaustive ratification procedure associated with traditional trade agreements. However, the EU’s newest trade agreements, including the deals with mineral-rich Chile, New Zealand, and Vietnam, are unable to secure full protection and security for EU investors once they are operating in foreign markets: because investment protection counts as an area of shared competence, these FTAs must leave out provisions protecting EU investors against the expropriation of their investments.

Though offering a promising way of expediting FTA ratification, the inability of exclusive competence FTAs to secure investment protection makes these agreements weak supports for the Strategic Partnerships’ investment push. The EU’s current Strategic Partners are predominantly countries where no trade agreement with investor protection articles is in force, whether because negotiations have been on hold, as is the case in the DRC and Zambia, or because ratification is embattled, as is the case with the MERCOSUR country, Argentina.

Investment protection: The missing piece in the EU’s strategy

Neither exclusive EU competence FTAs nor Strategic Partnerships include robust, legal-binding, investment safeguarding measures, which, though controversial, can be crucial prerequisites for investor engagement. It is only with fully-fledged, shared competence trade and investment agreements that the EU has the ability to ensure legally binding investment protection mechanisms, including the shielding of EU investments against discriminatory judicial and administrative procedures and the safeguarding of investors against expropriation or nationalization of their investments. These rules have bite: Investor State Dispute Settlement (ISDS) provisions grant EU investors standing to sue the EU’s trading partners directly. Remedies include financial compensation or restitution of expropriated property. Due to investment risks in many of the EU’s partnering countries, investment protection provides the stability essential for the kind of investment in raw materials value chains that the EU hopes to foster. ISDS procedures, however, are increasingly coming under fire for enabling private companies to sue governments when climate policies or local opposition affects their profits. Should the EU’s trading partners grant EU investors the right to ISDS procedures, they would expose themselves to substantial risk of lawsuits and weaken their leverage to take further measures to protect the environment, as well as protected and indigenous land. As EU-level investor protection measures will not materialize soon, mechanisms for de-risking investment will have to be installed on a project level basis, including guarantees from the Multilateral Investment Guarantee Agency (MIGA) of the World Bank, from national export credit agencies, or the private political risk insurance market. 

Recommended flanking measures

Import diversification alone is not enough to ensure stable and resilient supply of critical raw materials, foreign—and especially Chinese industry—is already far too involved for diversification to be a potent strategy. Chinese mining companies have already made conspicuous acquisitions in mining infrastructure abroad, spending $10 billion in the first half of 2023 alone. Chinese enterprise has established significant control over cobalt and copper mining in the DRC and nickel mining in Indonesia and has its sights set on South America’s lithium triangle.

European mining industry must therefore insert itself in third countries in order to bolster a resilient supply of CRMs. Strategic Partnerships and the EU’s excusive competence trade agreements are feasible tools, albeit weak in that they lack investor protection and dispute settlement measures. As such, the EU must pursue a broad range of flanking measures toinsert European stakeholders in global CRM production, offering secure measures that can counterbalance the lack of investment protection treaties. Relying, as it does, on private investments to achieve the CRMA’s diversification goals, the EU must develop strong incentives for European investors to move to risky markets and build a European mining industry there.

Firstly, the EU should look to motivate Member States to direct national funding towards projects in the Strategic Partnership countries and coordinate the diplomatic efforts of individual Member States. France has signed bilateral agreements on raw materials with Canada and Australia. Germany has been conducting diplomatic visits to strengthen its relationships with mineral-rich countries around the world and has formed partnerships with Mongolia, Kazakhstan, and Peru, among others. Germany, Italy, and France have all announced national Raw Materials Funds amounting to €2.5 in total of public funds, which will focus on financing domestic mining operations.

In addition to nudging national investments towards Strategic Partnership countries, the EU can stimulate European companies to initiate CRM production through purchasing agreements, which are long-term contracts that establish foresight on the offtake of products. The EU has already made use of purchasing agreements to supply vaccines (APAs) and in the power sector (PPAs) and is considering their application to the defense sector. 

The EU can also ensure foresight through contracts for difference (CfDs), which fix a floor price for a set number of years and a set quantity. Such measure could be used to set a European floor price for CRMs and thus guard against price dumping. However, the EU would need both to use its budget as a guarantee and to establish a fund dedicated to subsidizing producers. There is a risk related to such tools, as technological innovation might make certain CRMs redundant more rapidly than currently expected.

Nudging investment towards projects that are not yet bankable remains a key challenge. In July 2023, the EU made all stages of the CRM value chain eligible for European Investment Bank financing. The EU could further explore the expansion of existing EU programs, for example the Just Transition Fund, Horizon Europe, or the Connecting Europe Facility program, to co-finance projects either aimed at developing the European mining industry, or to co-finance projects in resource rich countries with which the EU has strategic partnerships. The EU should also consider lowering the eligibility threshold for CRM extraction projects to support their early-stage development and encourage financial aid from Member States for these initial stages.

Currently, the EU’s development finance institutions and Global Gateway program have no means for excluding investment from the EU’s geopolitical competitors in countries where the EU has a Strategic Partnership in place. There is an on-going discussion within the Commission—also beyond the fields of CRMs—as to whether the EU’s public procurement procedures can be adapted to shield against non-EU investment, for example by including resilience criteria in the evaluation of bidders, or by making EU support for European firms reliant on them investing in supply chain resilience.

A culture shift is needed to conceptualize EU-level development aid, with conditions that receiving countries should privilege European interests in developing their CRM sectors. Work must continue in the Commission to determine how existing competition rules (including public procurement) which are currently focused on the internal market can be used or adapted to ensure that the European mining industry’s growth overseas and the EU’s development aid objectives are not hobbled by competition from non-EU investors.

The EU can also apply taxonomy certification to CRMs to incentivize “green” investments. In January, German group TÜV NORD launched its “CERA 4in1” four step ESG-compliance certification standard for minerals along the entire value chain, from raw material to manufactured product. This EU-funded project is an example of a certification scheme that could be beneficial to the EU in designing its own taxonomy. Building on a taxonomy certification the EU could consider establishing a “green” content requirement in the up-stream value chain including finished manufactured product using CRMs. 

Going further, the EU could establish a European content requirement for the CRM value chain. Although a tantalizing means for loosening the control of Europe’s geopolitical competitors, this measure cannot be deployed before the EU has built up a sufficient European CRM supply.

Presently, there is limited CRM export from Europe, but in the future the EU could impose export restrictions, such as export taxes, on the export of CRMs processed or extracted in the EU. These measures would incentivize European processing and distribution but would not increase the EU’s access to raw material supply chains in third countries. The EU could also build its domestic processing capacity through FDI screening.

Both export control and FDI screening are national competences, although attempts have been made to harmonize the EU Member States’ approach. Current EU FDI regulation already flags critical infrastructure, critical technologies, and the supply of critical inputs, such as energy or raw materials as factors that are likely to affect security or public order. Future revisions of the EU’s FDI Screening Regulation could opt to include firmer obligations for EU Member States in screening for ESG standards in these critical areas. However, these measures do not apply to guarding against foreign direct investment threats in foreign countries, with which the EU has strategic partnerships and its own investment interests. 

Currently, there exist differences between Member State investment insurance products, including discrepancies in pricing, in coverage percentage, and in the extent of diplomatic leverage attached to the guarantees. The EU must continue working towards a comprehensive EU export credit strategy and convene the European credit agencies, which are currently governed under national laws, and the relevant development finance institutions to create a more harmonized approach, collaborate on larger packages, and condition their investments to promote EU enterprise. 

To reach stable and resilient supplies of CRMs, the EU must also increase its attractiveness as a partner for resource-rich countries and work to fend off increased competition in overseas markets. The EU can increase its bargaining power by strengthening its leverage to purchase unrefined or processed CRMs through joint procurement mechanisms. Under joint procurement processes, EU Member States sign up on a voluntary basis to combine purchasing power. The EU’s joint procurement mechanism proved its effectiveness during the Covid-19 pandemic in securing affordable medical supplies. In May, the Commission announced that it was beginning to outline plans for joint purchases of approximately 30 materials, using as a blueprint the scheme of joint gas purchases launched in 2022.

The protectionist instincts of many of these measures represent a radical shift in the EU’s modus operandi as they run counter to the logic of rule-bound free trade. For example,the imposition of export controls would require the EU to back-track significantly on its previous stance, since the EU has historically used FTAs and WTO accession agreements to prevent exactly such strategies. If the EU is serious about securing its CRM supply, however, it will need to reconsider its long-held stance on economic protectionism.

Conclusion

The EU’s ambitions regarding its overseas supply of Critical Raw Materials will be slow in coming to fruition. The EU’s strategic partnerships are an initial step in a long-term engagement spanning years, as mines can take decades from the first exploration to active production and investments in facilities overseas can take years to make returns. Those politicians who put critical raw materials on the ticket will not necessarily able to show concrete successes within one political cycle. 

Nevertheless, critical raw materials and the EU’s strategic dependencies have rightly risen on the EU’s agenda since negotiations for the current long-term budget (MFF) for 2021-2027 began in 2018. The proposal for the next MFF is expected to be tabled during the Danish EU presidency in the second half of 2025. Denmark should push for an overarching critical raw materials framework with a coherent, strong, and pragmatic stance on financing development in the critical raw materials sector, at home and overseas. This framework should include both dedicated EU funding for exploration, extraction, and processing within and outside of the Union as well as ambitious tools aimed at shielding European endeavors and ensuring foresight on CRM prices and offtake.

The EU’s Critical Raw Materials Strategy_ Engaging with the World to Achieve Self-Sufficiency

To read the analysis as it was published on the Tænketanken Europa webpage, click here.

To read the full analysis PDF, click here.

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How Trade Agreements Have Enhanced the Freedom and Prosperity of Americans

An essential part of America’s turning away from protectionism since the Great Depression has been the signing of free trade agreements (FTAs) with other nations. Those agreements, while imperfect, have led to lower tariffs and other barriers to trade, in the United States and abroad. They also have provided incentives for compliance through dispute settlement while discouraging mutually damaging trade wars. Although the impact of trade agreements has often been exaggerated by both their advocates and opponents, decades of experience and economic analysis confirm that the benefits for most Americans have been positive. The United States today is a richer and freer nation, and the world is a more hospitable place for economic activity because of those trade agreements.

The most straightforward and preferable path to trade liberalization for any country is the unilateral reduction of trade barriers without regard for other countries’ trade policies. Unilateral liberalization allows a country to realize the gains from openness—mainly lower prices for consumers, lower-cost inputs for businesses, and a more favorable exchange rate for exporters—without the need for complicated negotiations with other countries. Many nations have followed this route with success, from Great Britain in the mid–19th century to China and India and other emerging economies since the 1980s. As discussed in a separate Defending Globalization essay, however, unilateral liberalization is politically difficult, so governments have turned to reciprocal trade agreements, which offer reduced trade barriers at home in exchange for similar liberalization among participating governments abroad. The best approach to trade agreement liberalization is multilateral—the lowering of barriers to goods, services, and investment in a nondiscriminatory way by almost all countries through such forums as the World Trade Organization (WTO). A next-best option is bilateral and regional FTAs among two or several governments, respectively.

The United States is a partner in bilateral and regional FTAs with 20 other nations, including such major trading partners as Canada, Mexico, South Korea, Singapore, and Australia. The United States was a founding member of the General Agreement on Tariffs and Trade after World War II and is a member of its successor institution, the WTO, a multilateral agreement with 165 other countries that covers 98 percent of world trade. The United States is also party to narrower bilateral investment treaties with about 40 other nations that protect American investment assets abroad.

The 20 bilateral and regional FTAs that the United States has signed have virtually eliminated tariffs on US exports to those countries. Those FTAs have achieved what even trade populists claim as a goal: reciprocal tariff rate reductions. By definition, FTAs set virtually all tariffs between the signatory nations at zero. The reductions, as well as liberalizing components (restrictions on nontariff barriers, services, and investment disciplines, for example), can be phased in over time, and a few politically sensitive sectors can be excluded, but substantially all trade under the 20 FTAs that the United States has signed occurs duty-free.

A Brief History of US Trade Agreements

To better understand why trade agreements have become so important to US trade policy, we need to step back to the early 1930s, to the passage of the Smoot–Hawley Tariff Act and the beginning of the Great Depression.

In response to low prices in the farm sector, Congress began drafting the Trade Act of 1930, better known as the Smoot–Hawley tariffs after its sponsors Rep. Willis C. Hawley and Sen. Reed Smoot. The bill quickly morphed from raising agricultural tariffs to hiking tariffs on thousands of other products—some of which were not even produced in the United States—as it moved through Congress. The result of this congressional logrolling was the largest tariff increase in US history, signed by President Herbert Hoover in June 1930.

The consequences of the unilateral tariff hike were a disaster. Instead of saving jobs and promoting industry, the tariffs accelerated the US economy’s slide into depression. Major US trading partners retaliated with tariffs of their own aimed at US exports. Global trade dropped dramatically. By 1933, real US gross domestic product had dropped by a third, and the unemployment rate hit 25 percent. Republicans lost the White House and control of Congress in 1932 as Franklin Roosevelt swept into office in a landslide.

Reciprocal Trade Agreements Act of 1934

America’s historic turn away from protectionism began with the passage of the Reciprocal Trade Agreements Act (RTAA) in 1934. The bill gave the administration authority to negotiate agreements with other nations to reduce tariffs by up to 50 percent. Tariff reductions negotiated with one country were automatically applied to imports from all other countries that treated US trade on a nondiscriminatory, or “most-favored nation,” basis. By 1940, the United States had effectively reversed the Smoot–Hawley tariffs through agreements done pursuant to the RTAA.

The General Agreement on Tariffs and Trade

At the end of World War II, the United States joined with noncommunist, “free world” trading partners to establish the General Agreement on Tariffs and Trade (GATT). Beginning in 1947 and under successive rounds, the US president under RTAA authority negotiated multilateral agreements with an expanding club of countries that significantly reduced tariffs in the United States and around the world. Global trade expanded sharply, as did the post-war economic expansion. The initial Geneva Round in the GATT committed its members to reciprocity, unconditional most-favored nation treatment, and opposition to quantitative restrictions on trade. The GATT also served a vital foreign-policy role by assisting Western Europe’s recovery after the devastation of World War II. It also knit NATO allies closer together economically during the Cold War in the face of the military threat from the Soviet Union.

The Carter administration negotiated the Tokyo Round Agreement in 1979, which resulted in average tariff reductions of 34 percent by the United States, the European Economic Community, and Japan. For the first time in the GATT, the round curbed the use (and abuse) of nontariff barriers in government procurement, technical barriers to trade, subsidies and countervailing duties, customs valuation, import licensing procedures, and anti-dumping.

The Uruguay Round and the WTO

The GATT process culminated in the Uruguay Round Agreement of 1994, which further reduced global tariffs and established the WTO to administer the agreement and resolve disputes. Like the Tokyo Round, the Uruguay Round reduced global tariffs by an average of one-third. It phased out the Multi-Fiber Arrangement, a system of rich-country quotas on imports of clothing and textiles dating back to 1974. “Voluntary” export-restraint agreements were banned, requiring nations to rely on existing anti-dumping and safeguard laws to address politically sensitive imports. Farm subsidies were reduced and constrained. For the first time, the round established rules governing the treatment of foreign investment, intellectual property, trade in services, and technical issues in trade (such as abusing sanitary and phytosanitary measures to restrict imports). The agreement also established a more robust dispute settlement mechanism to encourage better compliance, a key goal of US negotiators.

The Uruguay Round Agreement achieved major US objectives. It reduced global barriers to US exports of goods and services and established the “rule of law” in global trade and commerce. For the export-oriented sector of US agriculture, the agreement created a more open and market-friendly global market. For American consumers, the Multi-Fiber Arrangement’s abolition allowed for more trade in clothing, delivering lower prices to millions of American households, especially lower-income families, while helping to reduce poverty domestically as well as abroad.

NAFTA and Other Regional and Bilateral Agreements

Beginning in the 1980s, the US government signed a series of regional and bilateral trade agreements with specific trading partners. As noted, those agreements have eliminated virtually all tariffs on trade between these partners, liberalized trade in services, and created rules for intellectual property and direct investment that are more stringent than those in the WTO agreements. The agreements have been a bipartisan project, negotiated by Republican and Democratic presidents alike and approved with bipartisan majorities by Congress.

The most important and controversial of those FTAs has been the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico. The agreement first went into effect in 1994 and was renegotiated by the Trump administration and renamed the United States-Mexico-Canada Agreement (USMCA) in 2019. Although USMCA tightened the automotive rules of origin and beefed up the labor-enforcement provisions, it did preserve the core NAFTA benefit of zero tariffs on virtually all goods trade between the three North American neighbors. Since NAFTA, the United States has signed and implemented 12 agreements with 17 countries, using the basic NAFTA framework that subsequent administrations have updated and expanded 

Beyond its economic impact, NAFTA proved to be a valuable foreign-policy initiative. It helped to institutionalize Mexico’s move away from a protected economy under one-party rule, thus improving US relations with its southern neighbor. As trade historian Douglas Irwin concluded, “NAFTA’s biggest impact may have been political: It contributed to the modernization drive that helped diminish the power of the Institutional Revolutionary Party (PRI) that had ruled the country for decades, and move the country towards multi-party democracy.”

In addition to FTAs approved by the United States, it’s also worth noting a major opportunity missed. Under President Barack Obama, US negotiators helped reach an agreement known as the Trans-Pacific Partnership (TPP) that would have expanded those reciprocal zero-tariff benefits to an even wider circle of nations. President Donald Trump, however, withdrew the United States from the TPP shortly after taking office in 2017. The remaining members went ahead and ratified the agreement without the United States. Now dubbed the Comprehensive and Progressive Trans-Pacific Partnership, the agreement includes six current US FTA partners—Canada, Mexico, Peru, Chile, Australia, and Singapore—plus Japan, Malaysia, Vietnam, Brunei, and New Zealand. The United Kingdom also negotiated entry into the agreement and will soon join as its 12th member. South Korea, China, and Taiwan have also applied to join CPTPP. Failure to join the agreement has placed US exporters at a competitive disadvantage and means an added burden for US businesses and consumers importing goods from CPTPP members with whom the United States does not have FTAs.

Why Does the United States Sign FTAs?

Supporters of free trade can raise the objection that trade agreements only complicate the goal of trade liberalization. Why engage in the protracted and sometimes arduous process of negotiating agreements with other countries when the United States could simply pursue free trade on its own by unilaterally liberalizing its own tariffs?

But there are practical as well as historical reasons why trade agreements have played a leading role in American trade policy for much of the past century. As Simon Lester explains, trade agreements make trade liberalization more attractive politically by enlisting US exporters on the side of liberalization. This allows trade liberalization to overcome the opposition of protected industries that would resist any decrease in US tariffs. And trade agreements magnify the benefits of domestic trade liberalization by combining it with trade liberalization abroad. Americans are better off when their government imposes fewer barriers on the freedom to trade—and they are even better off when other governments do the same.

The US International Trade Administration notes that US FTAs address a wide variety of foreign government actions that can affect US businesses, large and small. Besides reducing tariff rates on US exports, FTAs

enhance the ability of US exporters to participate in the development of product standards in the FTA partner country;
expand the ability of US companies to bid on certain government procurements in the FTA partner country;
open opportunities for US service suppliers to sell their services in the FTA partner country; and
guarantee that US investors are treated the same as the FTA partner country treats its own investors or those of any third country.

One of the most important advantages of trade agreements is that they lock in trade liberalization gains and prevent backsliding during times of economic stress and political tensions, whether abroad or here at home. In other words, agreements protect us against ourselves and against destructive trade wars that often result when trade barriers are raised unilaterally. During the Great Recession of 2008–2009, a web of trade agreements among advanced economies prevented governments from seeking the politically tempting but economically foolish option of raising trade barriers to “protect” domestic employment. Instead, barriers remained relatively low while governments sought to address the root causes of the downturn.

The Benefits and Downsides of FTAs

Negotiating, approving, and implementing FTAs have both costs and benefits for the United States—and all countries. The impact of these trade agreements on the US economy and employment has been positive, but that impact has also tended to be exaggerated by both sides in the trade debate.

Economic Benefits

Trade agreements’ fundamental purpose is to encourage people to engage in cross-border trade by lowering government barriers thereto, and this liberalization generates significant economic benefits. For example, American families and import-using producers can access a wider variety of imports at lower cost, while American exporters enjoy easier access to markets abroad. Because US trade barriers tend to be lower than most (but far from all!) other nations, the cumulative effect of the trade agreements that the United States has signed has been to lower foreign trade barriers more steeply than US barriers.

As a result, by 2023, 47 percent of US goods exports were bound for countries committed to accepting all exports from the United States duty-free. In return, 38 percent of goods imports to the United States in 2023 came from countries where the US government has committed to accepting their exports duty-free. This marks an important expansion of free trade, and even by the populists’ own logic, this should be the essence of “fair trade.” Almost all US exports to FTA countries are subject to exactly the same tariff rate—0 percent—as the imports we buy from those same countries. What could be more “fair” than that?

Historical experience also helps make the case for FTAs. Presidential candidate H. Ross Perot famously warned in the early 1990s that passage of NAFTA would unleash “a giant sucking sound” of jobs and investment flowing south to lower-wage Mexico. Nothing of the kind happened. In fact, in the five years immediately after the agreement went into effect (1994 through 1998), the US economy grew robustly, the unemployment rate fell to below 4 percent, and a net half a million new manufacturing jobs were created.

Studies by the US International Trade Commission (USITC) and the Peterson Institute for International Economics have found that the overall impact of NAFTA, like other trade agreements, has been modestly positive. While some proponents of the agreement may have overstated its positive impact on jobs, opponents such as Perot and the AFL-CIO were even guiltier of misstating feared negative impacts. According to the USITC, annual outflows of manufacturing foreign direct investment to Mexico during the period examined grew only slightly faster (11.7 percent) than outflows to the rest of the world (9.6 percent). In recent years, annual outflows of manufacturing foreign direct investment to Mexico have averaged less than 2 percent of total annual domestic investment in US manufacturing, and the United States has consistently been the top destination for foreign investment.

Unfortunately, proponents of FTAs have at times oversold their impact with unreasonably precise and optimistic projections of net job creation, export growth, and changes in bilateral trade balances. For example, export growth was disappointing after the signing of FTAs with Mexico and South Korea because of unrelated macroeconomic factors in the partner countries, such as recession. Proponents can also overstate the nontrade impact of agreements on the other country’s domestic political and economic reform. And they can ignore disruptions—lost jobs, for example—that inevitably arise from new foreign competition. It’s a simple fact that politicians are more inclined than professional economists to engage in exaggerated rhetoric to “sell” an agreement. That said, that an agreement may deliver benefits smaller than what proponents promise is not an argument against ratifying the agreement. The net benefits are still positive.

Numerous economic analyses have confirmed these benefits. In a comprehensive 2021 study of the economic impact of trade agreements, for example, the USITC concluded that trade agreements signed by the United States “have had a small, positive effect on the US economy.” The study weighed the economic impact of 16 bilateral and regional agreements with 20 other nations as well as the multilateral 1994 Uruguay Round Agreement that established the WTO.

The USITC analysis determined that the cumulative impact of those agreements has been to boost total US gross domestic product by $88 billion (0.5 percent), average real wages of US workers by 0.3 percent, and total employment by 485,000 full-time equivalent jobs (0.3 percent). Those gains are not spectacular, but they are real, and they refute the dire warnings that enactment of FTAs would lead to slower growth, fewer net jobs, and lower real wages. The opposite is true. The USITC said the gains were driven by economic efficiency gains, higher US employment, and growth in domestic investment, which expands the productive capital stock of the US economy.

The gains were not equally distributed across sectors or income groups, but they were widespread. College-educated workers enjoyed the biggest employment gains, but employment also grew for workers with only a high-school education. The service sector enjoyed most of the economic gains from trade agreements, but the manufacturing sector also grew by $3.5 billion compared to the baseline scenario of no trade agreements. Some manufacturing sectors, such as textiles, did lose jobs because of trade agreements, according to the USITC analysis, but that was caused by efficiency gains within manufacturing and not by an overall decline in output.

Many economists have also noted that the USITC’s methodology tends to understate the economic gains from trade agreements. The USITC analysis focuses on one-time “static gains” as resources shift from less-competitive US sectors to those that are more competitive. Understated are the “dynamic gains” from trade liberalization—such as the new products and production efficiencies stimulated by increased competition and the long-run (if modest) increases in productivity that compound over decades.

Geopolitical Benefits

Aside from more concrete economic benefits, FTAs provide less tangible but still important geopolitical benefits. The enhanced economic interdependence formed by FTAs helps foster stronger diplomatic ties and incentivizes other forms of cooperation among FTA member nations to tackle challenges that transcend political borders. Likewise, FTAs strengthen alliances with like-minded nations and can help counterbalance the geopolitical influence of rival countries such as China. Finally, FTAs are a tool of soft power to influence foreign countries to adopt American-style rules and norms—classic standard setting. For example, Phil Levy analyzed the US-Peru FTA and found that for Peru, the agreement was primarily about locking in the country’s economic liberalization in order to encourage investment, not about tariff reductions.

China’s Entry into the WTO

One of the most misunderstood “trade agreements” in recent US history is technically not a trade agreement at all: the granting of permanent normal trade relations (PNTR) and China’s entry into the WTO. As part of China’s WTO accession, the United States negotiated a bilateral agreement with China in 1999. However, all the obligations to liberalize were on China, and the bilateral agreement did not finalize China’s WTO accession (which entailed bilateral negotiations with several other governments, a multilateral “Working Party Report,” and final consent from all WTO members). In joining the WTO, China agreed to numerous domestic and trade policy reforms, including lowering tariffs on goods imported from all other WTO members—benefits the United States could only access by granting China PNTR. (Without PNTR, China would still enter the WTO but grant additional market access to all members except the United States.)

As a result of the accession and PNTR, Chinese tariffs on US exports were reduced from an average of 25 percent to 7 percent, and the Chinese government relaxed restrictions on US service exports and direct foreign investment while committing to additional protections for US intellectual property. Bilateral trade predictably increased thereafter. From 2001 to 2017 (before COVID-19 and the Trump trade wars), US exports of goods and service to China grew almost eight-fold, from $25 billion to $188 billion; sales by US-owned affiliates in China grew 10-fold, from $33 billion to $345 billion. China is now the top market for US agricultural exports. China’s membership in the WTO has allowed the US government to challenge China’s trade practices in more than 20 cases.

As Scott Lincicome and Arjun Anand detail in a separate essay for this project, PNTR likely did accelerate Chinese imports into the United States, and this heightened import competition likely did result in some US manufacturing job losses. However, economists strongly disagree about the magnitude of this so-called China Shock, which—by even the most severe of estimates—accounted for only about a fifth of the net reduction in manufacturing jobs and only about 5 percent of involuntary job losses between 2000 and 2007. Economists also generally agree that the China Shock produced small but significant economic benefits for American consumers and the US economy as a whole, that Chinese imports remain a small part of Americans’ overall consumption, and that, whatever the China Shock’s impact, it was a one-time, transitory event that will not (and cannot) be repeated.

China’s WTO accession and PNTR also helped to usher China into the system of global trade rules and allowed the US government to pursue several cases through the WTO’s dispute settlement mechanism that resulted in improved Chinese compliance. And opening China’s economy not only increased the sale of US goods and services there (through exports and affiliates) but also helped to lift tens of millions of Chinese people out of abject poverty. China’s WTO membership, especially its post-accession backsliding on protectionism and industrial policy, is certainly not without problems, but few if any of those would be solved by refusing PNTR in 2000 or repealing it today. Instead, China’s economy would have continued to grow, and Chinese goods would have still entered the US market (directly or indirectly), but US companies would have lacked access to China’s market, and the US government would have lacked multilateral mechanisms to negotiate or challenge Chinese economic malfeasance.

Downsides

As noted, even free traders acknowledge that trade agreements are imperfect. For example, the proliferation of FTA trading blocs and customs unions outside of the WTO creates inefficiencies and complications in the multilateral global trading system—setting back the cause of nondiscriminatory multilateral trade. By lowering tariffs on trading bloc members, FTAs can divert trade from a more efficient nonmember exporter to less efficient member exporters—what economists call “trade diversion.” This can concentrate production in a country with higher opportunity costs and lower comparative advantage. Such trade diversion imposes costs not only on the broader global economy but can also harm the importing country because the increased imports may be suboptimal due to price discrimination against a third country’s products.

Beyond tariffs, FTAs create additional rules and regulations, above and beyond what are required under baseline WTO rules.

As trade economist and evangelist for free trade Jagdish Bhagwati wrote in his 2008 book Termites in the Trading System: How Preferential Agreements Undermine Free Trade:

Crisscrossing [preferential trade agreements (PTAs)], where a nation has multiple PTAs with other nations, each of which then had its own PTAs with yet other nations, was inevitable. Indeed, if one only mapped the phenomenon, it would remind one of a child scrawling a number of chaotic lines on a sketch pad … [or a] spaghetti bowl.

This “spaghetti bowl” of rules and rules and regulations make the trading system more complicated to navigate for consumers and businesses.

Trade agreements can also reinforce mercantilist views of trade—exports are a benefit and imports a “concession”—or even lock in protectionism. For example, under the terms of the USMCA, 40 percent of the manufacturing labor incorporated into a passenger vehicle (45 percent for trucks) must have a base wage rate of $16 per hour for an auto to qualify for preferential tariff rates. Given that this rate is substantially above the average auto manufacturing wage in Mexico, it serves as a protectionist tool to ensure a larger share of production of automobiles takes place in the United States, which has higher wages. Other FTA “rules of origin” are similarly protectionist, reducing interparty trade instead of expanding it. In his essay, Lester cites several other examples of such measures, such as intellectual property.

Finally, there is the issue of opportunity cost. Negotiating FTAs is a technical and time-consuming matter, which can divert attention—and negotiators’ and diplomats’ time—away from unilateral liberalization or multilateral negotiations through the WTO system, which is a forum that is more likely to establish nondiscriminatory, near-universally accepted trade rules.

Given these risks, each FTA should not be rubberstamped but instead judged on its merits following a detailed review of its actual provisions (see, e.g., the Cato working paper “Should Free Traders Support the Trans- Pacific Partnership? An Assessment of America’s Largest Preferential Trade Agreement”). In general, however, US FTAs have each liberalized trade on net, and their benefits have substantially outweighed their downsides.

As the United States Dithers, the Rest of the World Is Moving Forward

It has been more than a decade since the United States entered into an FTA with new trading partners and is not currently negotiating any. In fact, the current US trade representative, Katherine Tai, has said that FTAs are “tools of the 20th century,” which is probably news to most of the rest of the world.

As mentioned, CPTPP went into effect without the United States. Today, American consumers pay higher prices for imports from CPTPP nations than they would otherwise; meanwhile, American exporters face higher barriers than competitors within the trading bloc. Though less ambitious than CPTPP, the Beijing-led Regional Comprehensive Economic Partnership was implemented in 2022. By sitting on the sidelines, the United States is ceding the ability to shape the rules and norms of international commerce in the Asia Pacific region to others, including China.

The African Continental Free Trade Area, which includes 47 African nations, went into effect in 2018. A more comprehensive deal, the East African Community expanded in 2022 to include the Democratic Republic of Congo and now covers about a quarter of Africa’s population.

The European Union (EU), likewise, has continued to move forward with FTAs with dozens in force, provisionally applied or in negotiation. Following the United Kingdom’s decision to leave the EU, it has entered into a number of FTAs and is negotiating more. The British government is taking the final steps necessary to enter the CPTPP.

India and China—two traditionally protectionist countries—are moving forward with liberalization. India has pursued a robust, liberalizing agreement with Australia and inked an FTA with Norway, Switzerland, Iceland, and Lichtenstein. India is also engaged in FTA talks with the EU. China is negotiating or implementing eight FTAs, on top of the Regional Comprehensive Economic Partnership and applying to join the CPTPP. In other words, even notoriously protectionist countries are moving forward with liberalization.

As of 2024, the WTO’s database shows there are nearly 370 regional FTAs in force worldwide. The rest of the world continues to move forward with liberalizing FTAs even if the United States does not. Over the long term, a nonexisting trade agenda is a recipe for economic stagnation and a loss of influence around the world. In short, it’s time for Washington to get its act together and get back in the FTA game.

Conclusion

Americans are broadly supportive of US efforts to expand trade with the rest of the world. In its annual polling of public attitudes toward trade, Gallup has found that a solid majority of Americans—more than 60 percent—see foreign trade more as an opportunity compared to 35 percent who view it more as a threat. While trade agreements are hotly debated in Congress, they are seldom a central issue in elections. Despite ever-present political pressure from protectionist interest, US politicians enjoy ample political space to do the right thing by negotiating and enacting further trade agreements.

The rest of the world is even keener on FTAs. The WTO has counted more than 300 FTAs in effect; this includes 100 negotiated in the past decade, while over the same period, the United States has signed none. US dawdling on the sidelines means that US exporters increasingly face discriminatory tariffs in those countries while their competitors in FTA countries enjoy duty-free access to those markets. US businesses that rely on imported inputs are similarly placed on the backfoot in a competitive global market. The United States and its most competitive producers are being left behind as the world moves ahead in lowering trade barriers.

Trade agreements have played an important and positive role in expanding the freedom of Americans to engage in commerce with the rest of the world. Those agreements have opened markets for hundreds of billions of dollars of US exports and foreign investment while lifting the standard of living for millions of American families through lower consumer prices and better jobs. Those agreements have brought the rule of law and equal treatment to global commerce while discouraging politicians from retreating into destructive trade wars during times of economic challenge.

To read the essay as it was published on the Cato Institute webpage, click here.

The post How Trade Agreements Have Enhanced the Freedom and Prosperity of Americans appeared first on WITA.

Navigating Barriers to Reverse Logistics Adoption in Circular Economy: An Integrated Approach for Sustainable Development

Abstract

Achievement of sustainability goals is an epic task for developing economies that still strive to fulfil their basic needs. The availability of limited resources in the developing world vis-à-vis the ever-increasing demand poses further challenges to developing economies willing to transition into circular economies. Reverse logistics (RL) can facilitate this transition towards a circular economy (CE) by maximising resource utilisation and minimising waste, contributing to sustainability goals. This paper contributes to emerging literature by analysing the development and comprehensive potential of reverse logistics as a sustainability tool. It explores the significant barriers to the adoption of reverse logistics towards a circular economy, considering long-term sustainability. In the first phase, thirteen barriers have been identified from the past academic literature. Three barriers with a defuzzification number less than the threshold limit are excluded, and the final ten barriers are then prioritised using the decision-making trial and evaluation laboratory (DEMATEL) method. The findings suggest that a lack of strategic plans for returns is crucial for RL adoption towards a circular economy, followed by a lack of visibility for recycling/reuse. Organisations can increase customer satisfaction, promote environmental sustainability, and gain a competitive edge in the market by creating a strategic plan for reverse logistics. Organisations may lower costs and contribute to a more sustainable and ecologically responsible supply chain by improving visibility across the reverse logistics process. The results serve as a framework for decision-making in RL towards sustainable development. Managers and policymakers can formulate more robust and realistic decisions that align with “maximising profits,” “saving the planet,” “social concerns,” and, most importantly, “consumer concerns” in the circular economy ecosystem. Several implications are derived, leading to increased competitiveness and resilient business strategies. The novelty of this work lies in the identification of barriers to reverse logistics adoption towards a circular economy using an integrated fuzzy Delphi-DEMATEL approach, considering long-term sustainability. This approach is studied for the first time in a developing economy context, proposing social, economic, and environmental effects and actions to be taken by organisations for sustainable development.

1. Introduction

The Circular Economy (CE) aims to reduce waste and maximise resource utilisation, making a significant contribution to the Sustainable Development Goals (SDGs) (Kumar et al., 2023). The CE is a strategic plan to address our unsustainable resource consumption and help businesses better understand the natural inputs that sustain them (Frei et al., 2020, Kandasamy et al., 2022). The idea of a circular economy has drawn increasing attention, particularly from scientists, consultants, lawyers, and lawmakers who approach the topic from a more sustainable society perspective (Sonar et al., 2024a). Key principles of the circular economy include closing the loop, resource efficiency, design for longevity and recyclability, and a shift to service-based models. According to Schultz et al. (2021) and Batista et al. (2018), involving various stakeholders in circular supply chains and business models requires a wider value chain view.

The circular economy, which promotes reducing the number of materials disposed of in landfills and incinerators and returning the residues to productive business cycles, is founded on the core idea that products must be given a longer shelf life (Sonar et al., 2024b). Primary actors like consulting firms, NGOs, and legislative and governmental bodies have initiated numerous measures for implementing the circular economy, such as the 4Rs (reduce, recycle, reuse, recover), waste reduction, eco-effectiveness and eco-efficiency, and stock optimisation (Kalmykova et al., 2018, Arena et al., 2021). Organisations frequently use various management techniques in the supply chain to enhance sustainability.

Reverse logistics, which streamlines a circular economy by taking, making, using, reusing, repairing, and recycling, has become central to discussions on gathering and distributing goods (Bernon et al., 2018, Julianelli et al., 2020, Kazancoglu et al., 2021). Reverse logistics is an important component of the circular economy as it allows for the sustainable management of product life cycles, ensuring that resources and products are properly recovered, reused, refurbished, or recycled (He et al., 2024). This process eliminates waste, reduces the demand for raw resources, and lowers the environmental impact of manufacturing and consumption. Reverse logistics promotes the principles of a circular economy by closing the loop in supply chains, ensuring that resources are used for as long as feasible and fostering sustainability. This helps to advance sustainable development by preserving natural resources, reducing greenhouse gas emissions, and stimulating economic growth through new business opportunities and green jobs, ultimately leading to a more resilient and environmentally friendly economy. However, little is understood about reverse logistics’ role in the circular economy.

Literature highlights a few theoretical frameworks from the perspective of CE that support reverse logistics for the sustainable development of Closed-Loop Supply Chain (CLSC) Models, Sustainable Supply Chain Management (SSCM), and Industrial Ecology. CLSC models cycle materials and products within the system rather than discarding them after use (Mondal and Roy, 2021, Schneikart et al., 2024). SSCM underlines the integration of sustainability values into supply chain operations (Julianelli et al., 2020, Carissimi and Creazza, 2022). Industrial Ecology offers a comprehensive outlook on resource utilisation, waste generation, and environmental impact, providing guidance for enhancing resource efficiency and minimising environmental footprint (Wiprächtiger et al., 2023). Additionally, various business models have emerged to uphold circular economy principles, such as product-as-a-service, remanufacturing, and resource recovery (Hapuwatte and Jawahir, 2021, Sharma et al., 2021). These models frequently rely on reverse logistics to facilitate product return, refurbishment, and redistribution, enabling organisations to capture added value from products after their life cycle. Recycling and reuse through reverse logistics reduce the need for new manufacturing, thus lowering carbon emissions and energy usage. This mitigates environmental impact, contributing to climate action and achieving SDG-13. Encouraging product recycling and reuse aids in resource conservation, particularly energy and water, contributing to maintaining a clean and healthy environment (SDG-6) (Chen et al., 2024, Jayarathna et al., 2024).

Reverse logistics involves moving goods from their presumed destination to another location, adding value that would not otherwise be possible, or correctly discarding the goods (Guarnieri et al., 2020, Mishra et al., 2022). In the circular economy, reverse logistics is the process of collecting and aggregating products, components, or materials at the end-of-life for reuse, recycling, and returns, leading to sustainable development (Vargas et al., 2024). There could be several causes for this product translocation (Sellitto and de Almeida, 2020). It might relate to providing good customer service (returning damaged goods, unsold goods, etc.), the environment, or the economy (Nanayakkara et al., 2022). The shared responsibility principle must strengthen the configuration and fulfilment of the reverse logistics system. Due to the recent emphasis on recycling and related challenges, some nations have passed waste management-specific legislation (Guarnieri et al., 2016, Arena et al., 2021). This issue is most prevalent in developing nations, where reverse logistics and waste management are still in their infancy. Most developing countries use the “take-make-dispose” loop model to manufacture and consume consumer items (Bhattacharyya et al., 2023, Esposito et al., 2017). While this model benefits the consumer market and plays an important role in the sector’s economic development, it also has detrimental effects on the environment and society (Andrews, 2015). According to Schroeder et al. (2018), a paradigm that must be dismantled is based on the careless use of limited resources and inappropriate disposal (either as a source of energy or as raw materials). This linear pattern negatively impacts a corporate organisation’s competitiveness.

Four interconnected marketing environment factors—customer expectations, corporate social responsibility, legal requirements, and economic ramifications—affect the growing need for reverse logistics systems (Dev et al., 2020, Kusumowardani et al., 2022). As businesses continue to look for competitive advantages, the economic ramifications of reverse logistics are becoming clearer. According to Guide & Wassenhove (2009), the total value of returned goods for a single store can reach hundreds of millions of dollars, most of which are not currently recovered. Reverse logistics can provide businesses with several financial advantages, including lower material input costs, decreased risks related to price volatility and supply disruption issues (Gaustad et al., 2018, Wilson and Goffnett, 2022), and new revenue streams from remanufactured and recycled goods (Larsen and Jacobsen, 2016, Münch et al., 2023). Significant changes have occurred in industrialised nations, and reverse logistics are being promoted for these interconnected foci. However, reverse logistics practices are notably lacking in India (Dutta et al., 2021).

According to the literature, researchers have previously attempted to prioritise the barriers to reverse logistics (Badenhorst, 2016, Lamba et al., 2020); however, quantitative models that account for how the barriers are related and support the implementation of reverse logistics by outlining suitable strategies to lessen their impact are still in their infancy. More research is needed to evaluate the effectiveness of RL on sustainable development by understanding approaches like refurbishing, remanufacturing, and repurposing. The development of a standard framework assessing RL’s contribution to the circular economy would benchmark reverse logistics systems that align with circular economy goals. To close this research gap, this study has created a taxonomy of reverse logistics barriers relevant to business and supply chains from the circular economy perspective in developing economies, particularly in sectors like consumer electronics, e-commerce, manufacturing, and retail. Additionally, the study outlines the connections between reverse logistics barriers towards a circular economy for developing countries. The following are the research questions that this study will address:

RQ1: What are the barriers to reverse logistics towards a circular economy?

RQ2: Which barriers must be prioritised for successfully implementing reverse logistics towards a circular economy? And how are these barriers related to each other?

Based on the research questions, the study develops the following research objectives:

RO1: To identify and prioritise the crucial barriers based on their influence on reverse logistics to attain circular economy goals.

RO2: To investigate and develop the interrelationship between these barriers for strategy formation.

The study uses an integrated approach of methodologies to accomplish the developed objectives. Existing literature has been reviewed from the Scopus database for the years 2000–2023 to identify the barriers to reverse logistics towards a circular economy. To select the appropriate barriers, the study uses the fuzzy-Delphi method. To rank and investigate the interrelationships among the barriers, it uses the DEMATEL technique. This article has six sections: the first is the introduction. The literature review is presented in Section 2, the study’s methodology in Section 3, and the results and analysis in Section 4. The managerial implications of the study are presented in Section 5, followed by the conclusion and suggestions for further study in Section 6.

2. Literature review

A circular economy (CE) as a concept can only be advanced with the help of reverse logistics (RL). In a linear economy, goods are produced, used, and then thrown away, depleting resources and harming the environment. By extending the life of products and resources, a CE seeks to maximise resource utilisation while reducing waste. RL, which emphasises the return, recovery, and reuse of goods and commodities, is crucial to achieving this shift. Researching RL for the CE is essential for resolving societal, economic, and environmental issues. It encourages resource conservation, waste reduction, environmental sustainability, and economic rewards, while assisting businesses in adhering to rules and involving consumers in sustainability initiatives. RL is a crucial enabler of the shift to a more sustainable and circular future.

2.1. Reverse logistics (RL)

Reverse logistics involves handling the flow of goods, materials, and information in the reverse direction of the traditional supply chain (Ravi and Shankar, 2004). Where forward logistics focuses on the movement of goods from the manufacturers to the customers, RL includes recycling, refurbishment, repairs, product returns, and disposal. This process becomes essential when products need to be returned due to customer dissatisfaction, expiration, damages, or defects. RL aims to extract maximum value from returned products while minimising waste and environmental impact (Dutta et al., 2020). Increasing environmental concerns have created regulatory and social pressures on manufacturers globally, demanding the safe and eco-friendly disposal of products at the end of their life (Ren et al., 2023). Businesses are held responsible for their “take-make-dispose” linear economy, which leads to environmental and social issues such as climate change, wastage, toxicity, etc. (Mallick et al., 2023). Businesses are held accountable and are expected to take corrective actions and devise damage control mechanisms (Butt et al., 2023). These increasing expectations from producers pave the way for RL to emerge from an eco-friendly initiative to a strategic decision from an economic, regulatory, and social perspective (Dutta et al., 2021). RL is defined by Carter & Ellram, (1998) as the philosophy that businesses should emphasise the reuse, reduction, and recycling of end-of-life or end-of-use products. RL is the mechanism by which the original manufacturer arranges to collect the remains of previously distributed products with the intent to reuse, recycle, or dispose of them (Wilson and Goffnett, 2022, Alarcón et al., 2021). Though RL can be costly (Julianelli et al., 2020), increasing customer expectations are compelling organisations to implement it. Wilson & Goffnett, (2022) have studied multiple companies that have successfully implemented RL systems. Based on the study, they offer multiple solutions for the successful implementation of RL that can be beneficial from environmental, social, and economic perspectives. Guarnieri et al., (2020) while understanding the implementation of RL in Brazil, claimed that though the term circular economy is not formally used in the nation’s policy, the essence of the study is based on CE principles. Thus, RL and CE are cohesive elements for a sustainable economy.

2.2. Circular economy (CE)

A circular economy is a business approach that has a restorative and regenerative nature in all its processes, right from the design stage. While studying 114 definitions from varied perspectives of CE, Kirchherr et al., (2017) concluded that it is the systemic shift towards adapting reuse, reduction, recycling, and remanufacture. CE is about extracting the complete utility value of a product to its fullest extent for the betterment of the environment, society, and efficient use of resources. Zhang et al., (2021) claim that CE is different from sustainability in that it demands circularity and improved efficiency of resources, unlike sustainability which focuses only on people, the planet, and profit. To imbibe CE values in the supply chain and ensure the circularity of resources, RL plays a decisive role (Shahidzadeh and Shokouhyar, 2022) as closing the loop of traditional supply chains is not possible without RL. They have analysed and found a strong relationship between RL and the circularity of resources.

Julianelli et al. (2020) also studied the relationship between RL and CE, identifying five critical success factors of RL and claiming that RL is not only a regulatory requirement but has transformed into a value-creation tool for manufacturers. Along similar lines, Dutta et al., (2021) stated that RL is a value-creation tool for businesses and provided strategic solutions for enhancing the efficiency of RL. The real drive for CE comes from consumer-backed practices like reuse, recycling, refurbishing, repairing, etc., all of which are elements of RL. Thus, RL contributes towards CE (Mishra et al., 2022, Camilleri, 2019). The RL support for CE can be established only if the design, inputs, processes, and motives are aligned and form a circular supply chain that fosters the growth of a circular flow of resources impacting social, environmental, and economic factors (Julianelli et al., 2020). Zhang et al., (2021) emphasised that remanufacturing or recycling is a critical process and if it goes wrong, it can cost the company in terms of money, customers, quality, and brand value. Thus, the success of RL is critical for businesses from socio-economic and environmental perspectives (Sudarto et al., 2016a, Sudarto et al., 2016b, Vijayan et al., 2014).

2.3. Success factors

There have been multiple studies suggesting the success factors of RL towards CE. RL is stated by Alarcón et al., (2021) as complex and uncertain, affecting supply chain efficiencies. To reduce inefficiencies and improve RL effectiveness, a well-structured and standard RL process establishment was suggested. According to De Oliveira et al., (2014), the success of RL largely depends on awareness among consumers and a well-structured collection network. As a solution, creating customer awareness, ensuring optimum logistics network utilisation and efficient warehousing were proposed by Dutta et al., (2021). In a study involving outsourcing decisions and RL, Agrawal & Singh, (2020) suggested that outsourcing RL is a better solution to ensure efficient RL to support CE. For the success of RL for CE, Münch et al., (2023) suggested a few measures including the use of recyclable raw materials, innovative packaging, returnable transport items, and zero waste shops. They claimed that if businesses and consumers collaborate, RL for promoting CE would be a success. The work of Dev et al. (2020) suggests that implementing Industry 4.0 in RL management would ensure better tracking of products and higher efficiency, resulting in a circular economy.

2.4. Barriers

There have been a few studies about identifying the barriers to RL. Multiple barriers to RL implementation were identified by Dutta et al., (2021) including the quality of circular goods, lack of responsibility, and initiation by top management. The same barrier of lack of responsibility by the management was identified (Frei et al., 2020) in the case of RL in the retail industry. The study by Sudarto et al., (2017) revealed that though socially responsible RL is essential, product life cycle uncertainties make RL costly and difficult to manage. Through their research, they suggest that efficient flexible capacity planning can be a solution to the aforementioned challenges of RL. Ambekar et al. (2021) studied the barriers to the success of RL in the construction and real estate sector and identified that lack of awareness and government policies along with the absence of a standard code for RL are the major macro barriers. Inadequate information systems, lack of organisational policies, and stakeholders’ ignorance are the micro barriers affecting RL, preventing the establishment of a strong CE.

2.5. RL in multiple sectors

RL in retail is not necessarily at the end-of-life of the products, but because of product returns by consumers, and retailers consider it a cost of doing business without considering the impact on CE (Agrawal and Singh, 2020). Another study on the retail sector by Bernon et al. (2018) suggested a framework for embedding CE values among the stakeholders of the retail RL to ensure the successful implementation of RL supporting CE. Kazancoglu et al. (2021) measured the performance of RL and concluded that it contributes to improving green performance even in the food industry, supporting CE. Another study (Vijayan et al., 2014) of the food sector states that RL has to compete with the food wastage challenge and hence involves higher costs. Work in the automotive sector by Makarova et al., (2021) suggested that well-planned logistics processes can ensure efficient RL and transformation into CE.

Despite the boom of RL, past academic literature lacks important studies on RL from CE perspectives. The advantages of RL for the environment have been qualitatively described in numerous papers, but more thorough quantitative evaluations are required. The development of thorough life cycle assessments (LCAs) that evaluate the environmental impact of RL operations in circular supply chains should be the main focus of research. It is crucial to identify important barriers to RL towards CE from a strategy perspective. In this regard, the novelty of this work lies in the identification of important barriers to RL adoption and finalisation using the fuzzy Delphi method. The DEMATEL method has been used to rank and develop causal relationships between identified barriers. Several barriers were identified from Scopus and Web of Science databases.

3. Research methodology

The purpose of this work is to identify and rank the barriers to reverse logistics towards a circular economy. Initially, 13 barriers were identified from past academic literature, and then 10 barriers were finalised using the fuzzy Delphi method. These barriers were then prioritised using the DEMATEL method. Many researchers (Ahmad et al., 2023, Chauhan et al., 2020, Kashyap and Shukla, 2022, Liang et al., 2022) have used this method in different contexts.

A few organisations were identified using the snowball sampling method. Experts from these firms were contacted via email and telephone. A few of the experts declined to take part in this study, but eleven experts ultimately agreed to participate. Seven experts are from the manufacturing domain, three are from consumer electronics, and one expert is from e-commerce. All the experts have a minimum of five years of experience in their respective domains and are located in Maharashtra state, western region of India. These experts are involved in reverse logistics processes in their respective organisations. The reasons for reverse logistics were also discussed in depth during semi-structured interviews. These experts provided their opinions to finalise the barriers and offer judgement on the DEMATEL method. The expert judgements were aggregated using the consensus method. The detailed steps followed for both the fuzzy Delphi and DEMATEL methods are discussed next.

3.1. Fuzzy Delphi method

Murray Thomas created the fuzzy Delphi method, which uses fuzzy set theory to achieve consensus by addressing the fuzziness and ambiguity of expert judgements. Addressing situations where respondents are unable to accurately define a judgement using fuzzy set theory also improves the effectiveness and quality of surveys utilising the conventional Delphi approach. Eleven expert responses were collected and analysed using the fuzzy Delphi method. A 9-point fuzzy scale was used in this study with a threshold value of 5.6, as stated by Zhang, (2017). 

3.2. Dematel method

One of the most widely used methods for establishing relationships between criteria is the DEMATEL method. Cause and effect serve as the foundation for DEMATEL’s division of the factors into two quadrants (i.e., cause and effect). Each respondent’s or expert’s in-depth knowledge is incorporated into the DEMATEL model. It is very helpful for identifying and illustrating the causal connections between different criteria or elements in a decision dilemma. It can aid stakeholders in understanding how multiple aspects interact, which isn’t always clear in other MCDM techniques. The approach can show interdependencies and feedback loops, which are crucial for understanding how modifications to one criterion can spread across the system and influence other criteria over time.

This technique was developed by the Battelle Memorial Institute through its Geneva research centre to determine the causal connections between various criteria in a challenging process (Bacudio et al., 2016, Wu and Lee, 2007). DEMATEL is a methodical structural modelling approach that employs a causal diagram to identify interference between system components. Lin, (2013) emphasised that the DEMATEL modelling technique produces a digraph and a cause-and-effect relationship that illustrates how each criterion is related to the others. By constructing a cause-and-effect diagram, DEMATEL helps decision-makers understand the direct and indirect interactions among factors. Factors with high cause values are identified as driving factors, meaning they significantly impact other factors. Conversely, factors with high effect values are those that are significantly influenced by other factors. The DEMATEL steps are discussed below:

Step 1: Instead of using a four-point scale to represent the input values, a five-point scale is used to increase the scale’s range and the accuracy of the expert inputs that are gathered, which in turn improves the accuracy of the model that is developed. Very Low is equal to 0, Low is equal to 1, Medium is equal to 2, High is equal to 3, and Very High is equal to 4. The degree of direct influence matrix for each factor ‘i’ on factor ‘j’ is then to be filled out by the invited experts in the relevant field. For all invited experts, an average matrix D is produced by taking the mean of the same factor across all direct matrices.

Step 2: Equations 2 (C=AS) , 3 (S=max1≤i≤n∑j=1naij) can be used to create the initial direct influence matrix X after normalising the average matrix.

Step 3: Equation 4 (T=CI-C-1) can be used to create the total influence matrix (T), where J is a matrix with square identities. The matrix shows the overall influence between each pair of tasks, whereas the tij element shows the indirect effect challenge i has on challenge j.

Step 4: The matrix in its entirety Each row and column’s T was calculated separately. Let di represent the sum of the ith row in the matrix (T). The value of di, rj, (di + rj), and (di-rj) demonstrates how the barriers interact with one another. The di and ri each stand for the sum of the jth column and the ith row, respectively. The outcome of (di + rj) reflects the overall effect of both the given and the results acquired by challenge i if i = j. The (di + rj) thus denotes a level of significance. In addition, barrier i will be the cause if (di-rj) is positive and the effect if (di-rj) is negative.

4. Result and discussion

This work employs a hybrid methodology that combines a qualitative method (Delphi) with a mathematical tool (fuzzy analysis) to confirm sustainable reverse logistics barriers. Furthermore, the DEMATEL technique has been used by the authors to group challenges into cause-and-effect categories in this section. A total of 10 barriers were selected through the fuzzy Delphi technique.

Based on the values of (D+R) in Table VI, the barriers are prioritised as Ch9 > Ch1 > Ch10 > Ch8 > Ch3 > Ch7 > Ch4 > Ch2 > Ch16 > Ch5. Based on the positive and negative signs of the components, causal and effect factors can be distinguished. The causal factors can be sorted as Ch4 > Ch7 > Ch8 > Ch6 > Ch5 > Ch2, and the ranking of effect barriers is obtained as Ch10 > Ch1 > Ch3 > Ch9. Out of 10 barriers, six barriers—Less return on investment (Ch4), Lack of top management initiation (Ch7), Demand uncertainty for return products (Ch8), Lack of government policies on recycling (Ch6), Lack of KPIs to track reverse logistics activities (Ch5), and Difficulty in segregating waste/returns at collection points (Ch2)—fall under causal factors. Four factors are effect factors: Lack of information on RL for stakeholders (Ch10), Lack of visibility for recycling/reuse (Ch1), Difficulty in deciding 3PL to partner with (Ch3), and Lack of strategic plans for returns (Ch9).

The highest positive value in this study’s findings is the lack of strategic plans for returns (Ch9) with a value of 10.8404 for sustainable supply chain and reverse logistics. Developing an effective strategy and plan for reverse logistics is essential for companies to minimise costs, reduce waste, and meet environmental regulations. This includes tracking the movement of returned products, providing customers with clear instructions for returning products, and communicating with retailers and distributors to ensure that returned products are properly processed. Companies should also consider implementing a reverse logistics information system (RLIS) to manage the flow of information and improve visibility into the reverse logistics process. On the other hand, the lack of KPIs to track reverse logistics activities (Ch5) has the least importance. Less return on investment (Ch4) is the main causal factor found in the results. Lower ROI in reverse logistics is due to the complexity of the process.

Reverse logistics often involves a wide range of activities, including product inspection, testing, and refurbishment, as well as transportation and storage of returned products. This complexity can lead to higher costs and longer processing times, which can reduce the overall profitability of the reverse logistics operation. Now that this has been established, it is clear that the significance of reverse logistics and sustainable supply chains is determined by the following three factors: i) their importance to the system (i.e., (D+R) values); ii) whether they are causal or effect factors; and iii) their relationships with others. From a research perspective, this method is useful for assessing the relative significance and potency of the various relationships in MCDM. The factors should be further analysed by being divided into different quadrants, with the elements above the X-axis being the most important causal factors and the factors below the X-axis being effectors because of their dependence on the causal factors.

4.1. Theoretical contribution

This study focuses on the hierarchical evaluation structure in a full model and proposes a novel method using fuzzy Delphi and DEMATEL to resolve the interrelationships and incomplete information to ascertain the degree and relationship of the barriers to reverse logistics and sustainable supply chains in developing economies for sectors like consumer electronics, e-commerce, manufacturing, and retail. The fuzzy Delphi technique, a qualitative method for gathering opinions from various participants, can capture the ambiguity and uncertainty in the data. From a research perspective, this method is useful for assessing the relative significance and potency of the various relationships in MCDM.

The goal of this paper was to provide a thorough framework for sustainability that takes reverse logistics into account. The elimination or reduction of barriers to any firm helps in balancing the sustainable supply chain and reverse logistics. In the present study, ten critical barriers to reverse logistics and sustainable supply chains were identified through literature and expert opinion surveys, and their cause-effect relationships were established. The result of the study highlighted that a lack of strategic plans for returns (Ch9) and a lack of visibility for recycling/reuse (Ch1) were the most significant barriers, which demand the maximum attention of decision-makers.

Furthermore, this is the first comprehensive study of the barriers to reverse logistics and sustainability for firms. The need for awareness programmes for firms to adopt reverse logistics should be a priority for the government and larger supply chain partners. Firms will become more competitive and resilient if timely initiatives are taken in this direction. For future directions in this context, academic experts and researchers from around the world should concentrate more on case studies and empirical research.

4.2. Managerial implications

Reverse logistics implementation aims to maintain the interest of supply chain participants, including customers, shareholders, the economy, society, and the government (Kazmi et al., 2021). Environmental concerns are thought to be a factor that encourages consumer participation in reverse logistics, especially in product take-back programmes, and the benefits to other stakeholders are directly related to the returned products (Govindan and Bouzon, 2018). This study proposed a model consistent with the sustainability concept, which analyses the barriers to reverse logistics specific to consumer electronics, e-commerce, manufacturing, and retail sectors.

The study helps the decision-makers in each of the sectors identify the sector-specific barriers and address them for successful RL implementation. The consumer electronics sector faces multiple barriers, namely, ‘Lack of Resources’, ‘Lack of Strategic plans for returns’, ‘Difficulty in segregating waste/returns’, and ‘Less Return on Investment’ that adds up to the cost due to the complex nature, size of the products, poor condition of returned products, refurbishment, recycling cost, etc. Thus, the managers should plan and deploy RL strategies considering the nature and size of the products to ensure optimal resources to execute RL, resulting in better ROI. The strategic plan should also ensure the availability of segregation facilities for harmful elements to reduce environmental hazards.

In the e-commerce sector, RL is a must-have activity for companies, not because of their environmental concerns, but to gain buyers’ confidence. The e-commerce sector faces barriers like ‘Lack of Strategic plans for returns,’ ‘Demand uncertainty for return products,’ and ‘Difficulty in deciding 3PL partners’. Awareness of these barriers can help managers devise an RL strategy plan partnering with the most efficient 3PL service providers. Also, the managers should work on forecasting RL patterns to optimise RL costs.

The retail sector is dynamic due to the unpredictability of demand, the large variety of products, varied shelf lives, and marginal per unit contribution. The barriers towards sustainable RL for this sector include ‘Lack of visibility for recycling/reuse,’ ‘Lack of government policies on recycling,’ ‘Demand uncertainty for return products,’ and ‘Difficulty in deciding 3PL partners’. Primarily, the government should frame policies on the recycling and reuse of products. It is also important for managers to ensure the visibility and traceability of products being recycled and reused. Additionally, the application of forecasting models may help in gauging the demand for return products, and accordingly, RL can be optimised by partnering with the most efficient 3PL partners.

The barriers faced by the manufacturing sector include ‘Lack of support from other supply chain members’, ‘Lack of Key Performance Indicators (KPI) to trace RL activities,’ ‘Lack of top management initiation,’ ‘Lack of resources’, etc. The top management of manufacturing organisations should take the lead and inculcate the culture of circularity so that RL becomes an integral part of the supply chain and all stakeholders coordinate and contribute to its success. The organisation-wide culture of circularity will also ensure the availability of required resources. Managers should also align the performance of employees with RL-linked KPIs.

The absence of clear and comprehensive government policies creates a regulatory vacuum, leading to varied interpretations and enforcement of existing laws. These ambiguities can deter businesses from investing in reverse logistics due to the perceived risks and potential legal complications. Practical managerial implications include the need for organisations to actively engage with policymakers to advocate for clearer, more cohesive recycling regulations. Additionally, companies should invest in legal expertise to navigate the current legislative landscape effectively, ensuring compliance and minimising risks. By doing so, businesses can foster a more predictable and stable environment for implementing reverse logistics, ultimately contributing to sustainable development and a more robust circular economy. The adoption of reverse logistics practices, supported by clear policies and reduced legislative ambiguities, can lead to a significant reduction in waste and pollution. This contributes to a healthier environment and can raise public awareness about sustainable consumption and waste management practices.

Consumers will benefit from increased availability of refurbished and recycled products, potentially at lower costs, and can also participate more easily in recycling programmes, reducing their environmental footprint. Business owners will gain insights into overcoming barriers to implementing reverse logistics, such as understanding the impact of regulatory ambiguities. By effectively managing reverse logistics, companies can reduce waste disposal costs, recover value from returned products, and enhance their corporate social responsibility profiles. Public entities and governments can use this information to refine legislative frameworks, making them more supportive of reverse logistics. Clearer regulations can facilitate smoother operations for businesses, encourage investments in recycling infrastructure, and ultimately lead to a reduction in environmental pollution. By understanding the importance of reverse logistics, unions and employee groups can advocate for better training and working conditions in recycling and refurbishment sectors. This can lead to the creation of green jobs and enhance workers’ skills, contributing to a more sustainable economy.

This study further provides decision-makers with the cause-and-effect relationships between the barriers to RL for each sector under consideration. Managers may work on these barriers and create a better ecosystem towards sustainability through improved RL, contributing towards circularity. This work has considered the top five barriers and their effect on social, economic, and environmental aspects.

5. Conclusion

The study was conducted to identify the barriers to reverse logistics in advancing a circular economy and to understand the interrelationship between these barriers. It also aimed to rank barriers based on their influence to suggest strategies for implementing reverse logistics towards a circular economy. The study began with a review of the existing literature on reverse logistics barriers. A total of 13 barriers were initially identified from past academic literature. In the current research work, an integrated approach of methodologies was adopted to accomplish the objectives. To select the appropriate barriers, the fuzzy Delphi method was used. Three barriers with lower defuzzification scores were excluded from further analysis. The DEMATEL method was used to prioritise the barriers and to develop causal relationships between them. These barriers were further categorised into cause-and-effect groups.

Lack of strategic plans for returns (Ch9) and lack of visibility for recycling/reuse (Ch1) emerged as the most significant barriers. The outcomes of the study can be used by decision-makers to align RL with a sustainable supply chain. The cause-and-effect groups of barriers, with systematically ranked barriers, will aid in managerial decisions. The study is the first of its kind to consider RL along with the circular economy and sustainability. The paper focuses on hierarchical evaluation structure and utilises a novel method combining fuzzy Delphi and DEMATEL to resolve the interrelationships.

It is essential to highlight that these barriers are not confined to any single industry. Across various sectors, organisations face universal challenges in implementing reverse logistics, including regulatory ambiguities, lack of comprehensive recycling policies, logistical complexities, and limited consumer awareness and participation. These barriers hinder the efficient recovery, reuse, and recycling of products, which are critical components of a circular economy. However, the principles of overcoming these challenges—such as advocating for clearer legislation, investing in advanced recycling technologies, improving supply chain coordination, and enhancing consumer education—are applicable across industries. By addressing these universal barriers with holistic strategies, businesses from diverse sectors can significantly advance their sustainability efforts, contributing to broader environmental and economic benefits. This cross-industry perspective underscores the importance of collaborative efforts and shared solutions in overcoming the obstacles to effective reverse logistics and fostering a sustainable circular economy.

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Navigating barriers to reverse logistics adoption in circular economy: An integrated approach for sustainable development

Abstract

Achievement of sustainability goals is an epic task for developing economies that still strive to fulfil their basic needs. The availability of limited resources in the developing world vis-à-vis the ever-increasing demand poses further challenges to developing economies willing to transition into circular economies. Reverse logistics (RL) can facilitate this transition towards a circular economy (CE) by maximising resource utilisation and minimising waste, contributing to sustainability goals. This paper contributes to emerging literature by analysing the development and comprehensive potential of reverse logistics as a sustainability tool. It explores the significant barriers to the adoption of reverse logistics towards a circular economy, considering long-term sustainability. In the first phase, thirteen barriers have been identified from the past academic literature. Three barriers with a defuzzification number less than the threshold limit are excluded, and the final ten barriers are then prioritised using the decision-making trial and evaluation laboratory (DEMATEL) method. The findings suggest that a lack of strategic plans for returns is crucial for RL adoption towards a circular economy, followed by a lack of visibility for recycling/reuse. Organisations can increase customer satisfaction, promote environmental sustainability, and gain a competitive edge in the market by creating a strategic plan for reverse logistics. Organisations may lower costs and contribute to a more sustainable and ecologically responsible supply chain by improving visibility across the reverse logistics process. The results serve as a framework for decision-making in RL towards sustainable development. Managers and policymakers can formulate more robust and realistic decisions that align with “maximising profits,” “saving the planet,” “social concerns,” and, most importantly, “consumer concerns” in the circular economy ecosystem. Several implications are derived, leading to increased competitiveness and resilient business strategies. The novelty of this work lies in the identification of barriers to reverse logistics adoption towards a circular economy using an integrated fuzzy Delphi-DEMATEL approach, considering long-term sustainability. This approach is studied for the first time in a developing economy context, proposing social, economic, and environmental effects and actions to be taken by organisations for sustainable development.

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Finding a Way Forward on Trade: Pragmatism in the Face of Challenges

A commitment to interdependent, rules-based, multilateral trade has underpinned the global economy for nearly a century. But that commitment is now crumbling. Around the world, advanced economies are increasingly deploying tariffs and other trade restrictions to address national-security concerns and domestic policy priorities. In “Finding a Way Forward on Trade,” Christine McDaniel and Barbara Matthews show how a principles-based, plurilateral approach can help protect national security while curbing protectionist tendencies, and tackle new issues such as climate action, renewable energy, and fisheries. 

The Dangers of Trade Fragmentation

At the end of World War II, policy architects sought to reduce the incentives for armed conflict by creating a web of economic interdependencies that would render supply-chain disruptions too expensive to contemplate. By the 21st century, however, new challenges have emerged. Geopolitical tensions stoked by authoritarian countries such as China and Russia have highlighted the risk: Economic interdependence also creates vulnerabilities to autocratic regimes.

Efforts to diversify supply chains away from authoritarian regimes are rational from a national-security perspective. But the resulting protectionism and the fragmentation of trade flows can also incur risks by increasing economic costs, dampening growth prospects, reducing real incomes, and weakening international cooperation. A World Trade Organization (WTO) riven by deep geopolitical divisions has been unable to address these challenges.

A Realigned US Trade Policy

The United States can face these challenges by realigning its trade policy with two major steps.

(1) Recommit to first principles by seeking to

treat imported goods the same as domestically produced goods,
treat other countries as “most favored nations,” and
find the least trade-restrictive ways to pursue domestic policy goals.

(2) Engage in plurilateral agreements to

find agreement where unanimous consensus cannot be reached,
eliminate tariffs and costly trade distortions,
promote trade creation and minimize trade diversion, and
tackle policy challenges in the energy, fisheries, and other sectors.

The Status Quo Is Stunting Economic Growth

To continue with the status quo means to accept a paralyzed WTO and a steady stream of trade initiatives that can only impair economic growth. Prioritizing pragmatic policies that promote cross-border economic cooperation can revitalize economic growth. A realignment in US trade policy around first principles and plurilateralism can provide a positive way forward and an example for other nations to follow.

4906_mcdaniel_matthews_pragmatism_trade_ss_v1 (5)

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