Why Trade Matters in the Plastic–Pollution Treaty Negotiations

Introduction

What do World Trade Organization (WTO) disputes concerning dolphin-safe labelling of tuna products and the use of palm oil in renewable energy mix have in common? They show that trade and environmental action are deeply connected. The same goes for the current global push to tackle plastic pollution.

The current draft text of the international legally binding instrument (ILBI) on plastic pollution aims to end plastic pollution by 2040. To achieve this, the treaty needs to be effective. The United Nations Environment Program's (UNEP's) Advance Report warns that mismanaged plastic could rise by 50% by 2024 without urgent action.

With this steep target, the stage is now set for the United Nations Intergovernmental Negotiating Committee (INC-5) to convene this November and deliver on its March 2022 resolution to change how the world deals with plastic from production to disposal.
Plastics are one of the planet's most traded goods and components. Thus, understanding and addressing the treaty's trade implications is critical to making sure the agreement is as effective as the world needs it to be.

What has been done so far at the INC?

The new iteration of the non-paper issued by the Chair of the Committee lays out the treaty's broad contours and essential elements. The non-paper considers recommendations from two expert groups constituted after the last INC session, touching upon three key trade issues. Recommendations from the first group, contained in Advance Report 1, focus on treaty financing by analyzing potential financial sources and means that could be mobilized to implement the ILBI objectives. The recommendations in Advance Report 2 focus on criteria and non-criteria-based approaches concerning plastic products, chemicals of concern in plastic products, and product design. These recommendations relate to potential controls on the supply and demand for plastics, product design, and innovation.

Tackling supply-side issues

Supply-side controls involve possible options to curb "virgin" (new) plastic production, thus aiming to reduce the availability-and thus increase the price-of primary plastics. Making new plastic more expensive or harder to produce could lead manufacturers to seek alternatives.

Possible measures could include imposing a production ban, imposing restrictions on production, or putting a cap on production, as well as some measures related to plastic production costs, such as removing plastics subsidies.

Two important trade-related issues arise here:

• Import substitution. Parties to the treaty may agree to limit their plastic production, while non-parties may continue to increase theirs to meet the rising demand. This may lead to treaty members importing plastics rather than producing them, potentially undermining the agreed rules. A country that prohibits the production of primary plastic products, for example, may find its primary plastics industry simply relocated to a neighbouring jurisdiction without the same restrictions. Production controls that reduce the overall supply of plastic products within a country would be more effective at reducing the risk that production "leaks" overseas without changing overall supply in the country. Developing a common understanding of trade restrictions and monitoring mechanisms on plastics imported from non-parties could help, but this would involve an additional burden on border agencies.
• Life-cycle coverage. Effective measures should extend beyond virgin plastic and encompass all stages of the entire plastic value chain. Without them, producers will shift the production of their semi-finished or finished plastic products and then import them into participating countries. Such market manipulation will continue to expand the global markets for plastics without reducing their footprint, undermining the treaty objectives.

The latest Chair's non-paper suggests closing the information gaps regarding existing and sustainable levels of plastics production. It encourages parties to cooperate to achieve sustainable production levels, including making a decision to take further action at a later meeting of the Conference of the Parties (COP) and developing a reporting mechanism on the production of primary plastic polymers. These can be good starting points for further discussions.

Addressing demand-side issues

Reducing plastic consumption (what the treaty refers to as demand-side controls) will be as important as managing production. While noting the existence of multiple yet fragmented efforts, the non-paper identifies a two-pronged approach to tackle demand-side issues:

• Identifying and acting on an initial list of plastics to be controlled, along with potential exemptions. An additional set of criteria could also be used to identify additional plastic products or chemicals of concern.
• Using the COP process to identify further plastic products and chemicals of concern as used in plastic products, including a review of the lists. The Chair's non-paper hints at giving a closer look on a sectoral basis and developing guidance in the interim.

Identification of products can then lead to specific solutions, which can take the form of

• an ambitious global ban of problematic products, or at least a prohibition of such products in public procurement, and
• technical regulations, like prescribing guidelines for standards that would dissuade the use of problematic or short-lived plastics for specific purposes, product labelling, or promoting refilling and reusable systems.

Many countries are already taking "demand-side" measures, including complete bans of particular plastic products, using sector- or thickness-based exemptions, gradual phase-outs, or prescribed assessment criteria for recycled PET (polyethylene terephthalate) packaging. Looking at overlaps in those shared experiences can help identify a potential starting list for INC-5 discussions.

In developing effective measures under the ongoing process, parties can benefit by considering key WTO principles and mechanisms:

• Non-discrimination: The WTO law prevents discrimination based on membership (or non-membership) to any multilateral environmental agreement. Thus, exports from all countries, including non-members of the new plastics treaty, must be treated equally by members.
• Transparency and monitoring: Transparency mechanisms allow for better implementation and monitoring of the agreed measures and solutions apart from allowing members to assess their commitment toward their treaty commitments. In the context of plastics, WTO's transparency and reporting mechanism allows for the examination of existing plastic-related measures and trade concerns raised by WTO members. WTO members have identified six distinct categories of issues that would benefit ILBI parties implementing the new instrument and minimize future trade frictions.

Product design and associated innovation as key trade issues

Redesigning more recyclable, reusable, innovative, and resource-efficient products is crucial for reducing plastic pollution. This approach includes using more recycled plastics, limiting virgin plastics usage, and encouraging reusable designs. Agreeing on a full set of disciplines in such broad areas might be challenging. Moreover, varied standards on product designs and production processes create barriers to trade and impediments to scaling up good practices and innovation. Harmonizing standards internationally would help boost better product designs and reduce plastic waste worldwide. This alignment can help develop larger markets for sustainable alternatives, which could contribute to reducing plastic pollution on a global scale.

Importantly, to avoid friction with trading partners, the standards developed should not be more trade-restrictive nor aim to create preferential conditions for domestic firms at the expense of their foreign competitors. Recognizing or incorporating the WTO's guiding principles on developing international standards could help set ILBI negotiations on standard development in the right direction.

Why is financing an important issue in the ongoing ILBI negotiations?

Heavy reliance on imported plastic and limited recycling infrastructure makes many countries, especially Small Island Developing States, vulnerable to plastic pollution's impacts. Developing critical infrastructure for waste management and an ecosystem for sustainable plastic production requires funding.

Potential funding sources for the treaty's implementation could include national funds, support from development institutions such as the World Bank, and even multilateral environmental funds like the Green Climate Fund. The Chair's document points out the importance of aligning public and private financial flows with the objectives and provisions of the ILBI. That could entail a mix of policies ranging from a possible plastics tax or environmental levies, reforming and redirecting existing subsidies toward better plastic management and pollution-reducing activities, debt instruments, or even innovative products like plastic credits.

Aligning public funding, like subsidies, with ILBI's objectives can lend meaningful support for its implementation, particularly where removing environmentally harmful plastic subsidies could mean additional financing available for friendly actions. This approach could also align with Target 18 of the Convention on Biological Diversity, which aims to identify and eliminate or reform subsidies or incentives harmful to biodiversity by 2025. Drawing on valuable examples like the curbs on fisheries subsidies agreed upon by the WTO, governments may need to align their public financial flows and revise their subsidy programs to fit into the ILBI objectives.

What's next?

International agreements on environment and trade can and should be mutually supportive (according to the Preamble to the latest non-paper). Trade can play a critical role in eliminating plastic pollution by fostering responsible production and consumption practices, enhancing market access to critical technology, and promoting sustainable alternatives to traditional plastic. Trade measures can also help limit the circulation of most harmful plastics, plastic products, and chemicals of concern and reduce future markets for such products. Aligning public funding and revising subsidy programs will be critical to achieving ILBI's objectives. Making ILBI's measures consistent with the WTO rules will ensure fair, coherent, transparent, and non-discriminatory global practices that can help eliminate plastic pollution by 2040.

The journey towards these goals continues in Busan at the fifth and final INC negotiation (INC-5) from November 25 to December 1, 2024.

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