How Will a Global Plastics Treaty Impact Trade?

As this year’s World Trade Organization (WTO) Trade and Environment Week coincides with the homestretch of negotiations on the world’s first global plastics treaty, the trade implications of the treaty are frequent topics of discussion. 

Plastic products and components are one of the most traded goods. Unsurprisingly, with governments increasingly taking action to restrict plastic use, various frictions are emerging between trading partners. In fact, 21 plastic policy measures have already triggered specific trade concerns or trade policy review questions at the WTO. 

With the plastic talks set to wrap up in early December at the fifth and last scheduled session of the Intergovernmental Negotiating Committee (INC-5), negotiators need to understand the possible trade-related implications of the treaty. How will the treaty be structured? What issues are likely to have the most trade-related implications? What are the next steps? 

What is the status of the global plastic talks?

In March 2022, United Nations member states adopted Resolution 5/14, which established a mandate for countries to end plastic pollution and establish the world’s first legally binding international agreement on the full life cycle of plastics. Governments have already engaged in four INC meetings. At INC-4, delegates agreed to establish two ad hoc intersessional open-ended expert groups to help advance certain areas of negotiations. These intersessional co-chair reports are expected to be published here on October 14, 2024. 

INC-5 is scheduled to take place from November 25 to December 1, 2024, at the Busan Exhibition and Convention Center in Busan, South Korea. 

What are the objectives of the plastics treaty? 

The treaty aims to leverage international cooperation to tackle the global plastic pollution crisis by reducing plastic waste, enhancing recycling, and transitioning toward a circular economy, including through improving design standards. The text emphasizes protecting ecosystems, particularly marine environments, and supports innovation in waste management practices. The overall goal is to curb plastic pollution by 2040 and mitigate its environmental and health impacts globally. Key objectives include eliminating single-use plastics, reducing plastic production, encouraging sustainable alternatives, and increasing the responsibility of producers in managing the life cycle of plastics.

Many advocates are pushing to ensure that the treaty also addresses a range of known health concerns related to plastic in the environment, such as toxic chemical exposure, microplastics in food and water, air pollution through incineration, and endocrine disruptors. 

What will the treaty look like?

While the final form of the treaty remains unclear at this point, some observers expect it to function as a framework agreement, similar to the Paris Agreement on climate change. For example, countries may be able to negotiate specific protocols or commitments that could be strengthened over time. In such a scenario, countries could be expected to develop and implement national action plans specifying how they intend to reduce plastic pollution, manage plastic waste, and transition to a circular economy.

Importantly, obligations undertaken by signatories are likely to be legally binding. They will include possible commitments to phase out single-use plastics, minimize virgin plastic production, and promote product design innovation, reuse, and recycling. Financial and technical assistance mechanisms are also likely to be present as a means to support developing countries in their efforts to meet the treaty’s obligations.

Trade-related implications of bans and other restrictions

One of the more contentious areas of negotiations relates to possible restrictions on the most problematic plastics, polymers, and chemicals. These could, for example, target single-use plastics, such as plastic bags, straws, and packaging, as well as chemicals that negatively impact human health when used in plastics. 

Countries with export-dependent industries, especially developing and least developed countries, may be adversely impacted if they are compelled to utilize alternatives to plastic. This could lead to a loss of market access and impede competitiveness. In the absence of commonly agreed upon and clearly defined lists, the implementation of the treaty may lead to market disruptions as countries and exporters struggle to coordinate.  

The treaty could also impose limits on the production of virgin plastic. An important and particularly challenging task for those taking on this obligation would be defining trade controls that could ensure production by those taking on the commitment is not simply transferred to other countries. At the same time, such measures could also prompt a faster shift toward more trade in recycled plastic materials and sustainable alternatives. 

Some groups of negotiators are pushing for measures such as the removal of subsidies on plastic production or the application of a plastic tax. Both approaches would pressure the industry to seek out alternatives as costs increase. 

As they weigh these important and useful initiatives, policy-makers will need to think through how to manage the economic consequences of the new restrictions. New plastic measures might spark friction between trading partners if implementation is not properly coordinated, and the short time frame for implementation would not allow for harmonization. Countries that implement stricter regulations in line with the treaty could decide to impose barriers on plastic imports from nations with weaker environmental protections. Transparency and clarity in how these changes are phased in will help trading partners keep up. 

The treaty may also encourage the harmonization of global standards on plastic products, waste management, and recycling. While a more uniform approach to regulations across countries could simplify trade, stricter compliance requirements could present challenges for certain industries and be perceived as non-tariff measures, leading to disguised restrictions on trade.

Finally, compliance with the WTO rules could also play a key role in shaping the treaty, as WTO laws forbid quantitative restrictions, such as prohibitions or bans, except under certain conditions.

Implications related to product design

Harmonization of global product design and recyclability standards could improve trade flows, spur better circular economy practices, and increase the pace of development of local plastic waste recycling and processing industries.

New market opportunities for exporters of eco-friendly products may emerge as countries move away from single-use plastics. Countries and companies with expertise in advanced recycling technologies could also see increased global demand. Trade in technology and expertise for better plastic waste management could grow as a result of the treaty’s commitments. This, in turn, could reshape global supply chains. 

Global standards with a higher threshold can also lead to higher compliance costs for certain countries and companies with limited capabilities. Likewise, countries with limited capabilities to implement such standards may struggle and view restrictions as a non-tariff barrier. 

The concerns of developing countries are expected to remain a significant part of negotiations, as any new design requirements could lead to the displacement of established industries and the use of more sophisticated technologies. Impacts on market access can be offset by technical assistance and development programs. 

Finally, intellectual property rights could be an important area of negotiation, as innovations may lead to patent barriers and limit access to technology. A discussion on technology transfer can act as an enabler for ensuring smoother trade on alternative products. 

Implications related to treaty financing

Because a financing gap exists between the ambition of the treaty and current commitments, a number of fees and other financial obligations are being proposed to bridge the gap. Most notable—and controversial—is a possible plastics fee, which could function like a tax on the production or import of virgin plastics. Revenue generated from this fee could potentially fund waste management systems, recycling infrastructure, and environmental clean-up efforts.

Other financing mechanisms could include extended producer responsibility fees requiring plastic producers to fund waste collection, recycling, and disposal systems, as well as possible non-compliance penalties, including fines or tariffs.

Industrialized countries may also be required to contribute to a global fund to help developing nations build plastic waste management systems. Other fees, such as environmental impact fees, may apply to companies based on the pollution their plastic products cause.

How trade concerns can be avoided 

Thankfully, avoiding the vast majority of trade frictions can be addressed easily through thoughtful plastics policy measures. IISD has identified the six most common types of plastic-related trade concerns and has proposed recommendations to ensure these are avoided. 

In short, policy-makers must ensure that policy implementation timelines are reasonable and are shared with trading partners. They must also ensure that new measures are transparent, publicized, and accessible. Formal opportunities must be available for stakeholder engagement so they can provide input, suggestions, and feedback on potential trade impacts. Policy-makers should also ensure that implemented measures are proportional in scope and impact to the problem they are designed to address. Likewise, they should ensure that measures provide the necessary scientific, technical, or technological justification to support a particular rationale. Finally, they must ensure they avoid discriminating against goods produced by trading partners. 

In order to ensure trading partners are not subjected to discrimination through a given policy, introduced measures should not favour domestic economic actors, and they should be consistent with national treatment obligations. In general, any exemptions, flexibilities, or temporal grace periods provided by the implementing member should be equally accessible to domestic producers and trading partners.

Following these guidelines will help ensure that plastic pollution measures find widespread support and are effective in the long term.