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.

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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Today, a new chapter may have opened. In the wake of financial crises unprecedented since the Great Depression, persistent economic inequality, migratory pressures on Europe and the United States intensifying in the mid-2010s, Brexit, the norm-breaking U.S. Trump administration of 2017-21, the first global pandemic in a century, an accelerating climate crisis, the Russian invasion of Ukraine, and the newest Israel-Gaza war, the world looks to have moved into a distinct era echoing many of the interwar tensions that the post-World War II settlement sought to overcome. And unlike in the 1920s and 1930s when radio first became widely available, modern media display global stresses to everyone visually and in real time and amplify them in a way undreamed of then. How much reversion toward the troubled past is likely, and to what extent will that reversion undermine the global community’s ability to address common challenges, some inconceivable before World War II?

As an economist, I will focus mainly on issues related to commerce and finance, but the nature of the current malaise underscores the inherent inseparability of geopolitics, domestic politics, and economics. The destabilizing potential of this interplay was less salient for parts of the postwar period, especially in the quarter-century or so from the collapse of the Soviet bloc over 1989-91 to the mid-2010s. After that brief belle époque, however, history has indeed returned, with a vengeance.

In this paper, I start by briefly summarizing challenges the Bretton Woods system’s monetary, financial, and commercial arrangements were meant to overcome, and factors that led to the system’s unraveling by 1973. I then describe how economic globalization exploded under the newer floating exchange rate arrangements, and how the Global Financial Crisis years 2008-09 appear under various metrics to be a watershed for global economic integration. Geopolitical developments in recent years may have accentuated the disintegrative forces in the global economy—it is still early days. I therefore turn to the links between geopolitics, domestic politics, and economics and the prospects for future multilateral global cooperation on a range of macro-critical common threats.

Maurice Obstfeld, C. Fred Bergsten Senior Fellow at the Peterson Institute for International Economics, is the Class of 1958 Professor of Economics emeritus at the University of California, Berkeley, where he taught between 1991 and 2023.

To read the abstract published by the Peterson Institute for International Economics, click here.

To read the full working paper, click here.

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The theme of APTIR 2023/24 is “Unleashing digital trade and investment for sustainable development.” Prepared in collaboration with the United Nations Conference on Trade and Development and the United Nations Industrial Development Organization, the report explores the roles of digital trade and investment in guiding the Asia-Pacific region towards sustainable development. It examines digital trade and investment patterns in the region and provides an overview of the digital trade and investment policy environment, viewed through a sustainable development lens. The report also assesses the potential of unilateral policies on trade and investment, as well as the impact of multilateral and regional cooperation, in maximizing the benefits of digital trade and investment while focusing on the Sustainable Development Goals (SDGs). Incorporating a quantitative assessment, this study evaluates the role of digital trade in archiving the SDGs and examines the impact of various policy scenarios. Building on this understanding, the report concludes by offering a series of action-oriented policy recommendations, specifically targeting the trade and investment domains, to ensure that digital and investment policies effectively unlock the potential of digital trade and investment for sustainable development.

EXECUTIVE SUMMARY

To read the abstract published by United Nations Economic and Social Commission for Asia and the Pacific, click here.

To read the full report, click here.

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The robust recovery in 2021 – driven by strong consumer spending and some uptake in investment, with trade in goods surpassing pre-pandemic levels — marked the highest growth rate in more than four decades, the Report highlighted. Yet the momentum for growth – especially in China, the United States and the European Union – slowed considerably by the end of 2021, as the effects of monetary and fiscal stimuli began to recede and major supply-chain disruptions emerged. Rising inflationary pressures in many economies are posing additional risks to recovery.

“In this fragile and uneven period of global recovery, the World Economic Situation and Prospects 2022 calls for better targeted and coordinated policy and financial measures at the national and international levels. The time is now to close the inequality gaps within and among countries. If we work in solidarity – as one human family – we can make 2022 a true year of recovery for people and economies alike.”

– António Guterres
Secretary-General of the United Nations

With the highly transmissible Omicron variant of COVID-19 unleashing new waves of infections, the human and economic toll of the pandemic are projected to increase again. “Without a coordinated and sustained global approach to contain COVID-19 that includes universal access to vaccines, the pandemic will continue to pose the greatest risk to an inclusive and sustainable recovery of the world economy,” noted Liu Zhenmin, Under-Secretary-General of the United Nations Department of Economic and Social Affairs.

To read the full report by the United Nations, please click here.

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Read the pronouncements that come out of Brussels, Geneva, and New York, and you might well be forgiven for wondering if the last four years were just a bad dream. After years of taking a severe beating not only directly from the former President of the United States (US), Donald J. Trump himself, but also populists in other countries, multilateralism seems to have acquired a fresh lease of life. In a series of executive orders signed immediately after taking up office, President Biden not only reinstated the US back into the Paris Agreement, but also halted the withdrawal of his country from the World Health Organization (WHO). After months of delay, the World Trade Organization (WTO) finally got its new Director General in Ngozi Okonjo-Iweala; while her appointment had been opposed by the Trump administration, the Biden team contributed to a smooth way out of persistent deadlock. Observing all these developments, the great and the good of the world breathed a collective sigh of relief. This was reflected in Chancellor Angela Merkel’s speech at the Munich Security Conference in February this year: “The prospects for multilateralism are much better now than they were two years ago. This has very much to do with the fact that Joe Biden is now the President of the United States of America”. In fact, as I argue in this article, the relief may be rather premature: the troubles of multilateralism are far from over.

There are two competing narratives on multilateralism emerging. The divisions on these are evident even in the transatlantic relationship, though the fault-lines do not fall exactly or neatly between Europe and the US. How this contestation plays out – not only in the transatlantic partnership, but also across the different world regions – will be crucial in determining the future of the multilateral order.

My analysis proceeds in three parts. I first provide a brief overview on the importance of narratives, and how they can make a critical difference in shaping multilateralism itself, and also its ownership and implementation by multiple stakeholders. In the second step, I outline two competing narratives: one seeks only minimal reform; the other, albeit still in early stages of development, suggests a route of major restructuring. Both narratives have their respective advantages and limitations. I discuss these and their policy implications in the third section.

Why and How Narratives Matter
Pioneering a new and rapidly developing field of Narrative Economics, Robert Shiller defines a narrative as “a simple story or easily expressed explanation of events that many people want to bring up in conversation or on news or social media because it can be used to stimulate the concerns or emotions of others, and/ or because it appears to advance self-interest.” (1)

“Narratives” are related to several other concepts (including identities, norms, framing) all of which have attracted different levels of attention from diverse academic disciplines. Paul Collier offers a useful way of categorizing these, and writes: “Culture is constituted by mental frameworks i.e. beliefs, and social networks. There are three types of beliefs: identities (which “influence preferences”), narratives (which “influence how causal relationships are (mis)understood”), and norms (which “determine self-imposed constraints”).” (2)

Narratives matter because they can serve as “major vectors of rapid change in culture, in zeitgeist, and ultimately in economic behavior.” (3) Sitting between higher-order questions of world-views, identities, and norms on the one hand, and more tactical issues of framing on the other, narratives are a powerful and pliable tool for policy intervention. (4)

Narratives – true or false – do not materialize out of thin air. Politicians, scholars, policy-makers, journalists, “influencers” and concerned citizens serve as instigators of stories that help people make sense of “facts”. For “winning” narratives to emerge from such stories, dissemination is important; in the case of international politics, this requires building inter-state coalitions and working in multi-stakeholder networks that engage with multiple layers of society. Moreover, narratives solely on the universal public good are unlikely to win, especially under conditions of economic or other forms of hardship; rather, successful narratives will usually persuade people also at the individual and local levels. Narratives fixated solely on meticulous technical detail – even if rooted in scientific evidence – are unlikely to find resonance beyond the “global elite”; it is only by bringing in different actors, and having some emotional appeal, can they emerge as winning narratives.

Some examples may be useful to illustrate how narratives can make a difference. Recall, for instance, the attraction of “America First” and “Make American great again”, which contributed to Trump’s popularity and electoral success. French President Macron’s counter-narrative of “let’s make our planet great again” was politically correct, but contributed to discontent within his own country, epitomized by the Yellow Vests’ protests. The protests should not have come as a surprise: for individuals who would be hit by mitigation measures, the promise of possible gain for future generations (conditional on other countries also doing their parts) offered cold comfort for serious economic hardships that they would have to endure in their own lifetimes. Had Macron’s narrative paid attention to not only making the planet great, but also improving the lives of the French electorate, it might have been more successful. Or, illustrating the limitations of factual (and somewhat stodgy) narratives, recall the Brexit referendum. Even though the economic case to remain in the EU was solid, the “exit” narrative with its passionate commitment to “take back control” turned out to be the more persuasive one. (5)

Get the narrative on multilateralism right, and we have the possibility to harness international cooperation for global peace and prosperity; get it wrong, and we risk disengagement, fragmentation, decline in welfare across countries, conflict, and war.

Competing Narratives on Multilateralism
Luckily for all of us, the debate on multilateralism, and how to reform it, is rich and vibrant. But it is deeply polarized.

The polarization derives in good measure from the stresses that the system has endured, and continues to suffer from. The “China shock” had already thrown sand in the workings of the system, even as member countries of different multilateral organizations struggled to better accommodate the new balance of power; finding the pace of reform too slow, the rising powers sometimes attempted to create parallel international institutions. The “Trump shock” exacerbated previous problems; while the US had been signaling that it was no longer willing to act as the world’s policeman, (6) the severity of public critique and disengagement from multilateral institutions went much further during the Trump years. Coming from the world’s leading power, which had served as a founder and guarantor of the post-war multilateral order, such attacks on the system were especially damaging. The COVID shock has shed a harsh new light on weaknesses that the system had accumulated.

At a human level, response to such acute stress would be a fight-or-flight response; in the debate on multilateralism, this has translated into two divergent narratives. One narrative asks that we resuscitate and reinforce the system; the other pushes for a fundamental restructuring.

Narrative 1: Resuscitate and Reinforce
A narrative of reviving existing multilateral institutions points to the many global problems that the world faces, which even the most powerful states cannot handle on their own. Containing global pandemics and mitigating climate change are tasks that require global cooperation. The world needs more multilateralism, not less.

This narrative is cognizant of the shocks that the system has faced. But the explanation for ineffective handling of these challenges, as per this narrative, lies not in the institutions of multilateralism but in the member-states. It points to Trump’s trade wars as an example of abuse of the system by its most powerful member. The holding up of the appointment/ reappointment of the WTO’s Appellate Body members by the US is another example. If multilateralism is to function effectively against such misuses of power, then its institutions need to be strengthened.

Tempting though it is to assume that this is a narrative of naïveté (given that it seems to attribute the primary blame for multilateralism’s problems to Trump), many variants of it are not. Take the case of arguments on vaccine access; advocates of this narrative point to the urgency of vaccinating populations nationally and globally in order to make their own electorates safe locally. Putting one’s interests first, according to this narrative, is not only morally repugnant but also rationally unviable. Angela Merkel’s speech at the Munich Security Conference used precisely such an argument:

“… if the virus is not defeated all over the world, then none of us will be safe, no one can truly be kept safe from the virus. We will be confronted with mutations time and again. The equitable and swift distribution of vaccines to everyone in the world is therefore one of our main tasks. During the recent G7 meeting, Germany pledged an additional 1.5 billion euro for the ACT-Accelerator and, in particular, for the COVAX vaccine facility. We’ve therefore now made pledges to the tune of 2.5 billion dollars for this programme; and we’ve done so out of conviction.”

The universal embrace that this narrative offers is still rooted in the hope that had driven the multilateralist outreach of the post-1989. While its optimism is now more cautious in light of the growing influence of authoritarian states, it continues to advocate cooperation with systemic competitors and rivals. Merkel’s MSC speech reflected this: “On the one hand, China is a systemic competitor. On the other, we need China to help resolve global problems, for instance those relating to biodiversity or climate change mitigation.” Sabine Weyand, Director General, EU Trade, similarly defended the EU-China Comprehensive Agreement on Investment (CAI) in a similar way: “There is no alternative to engagement and that is what we need to do here.”.

The strongest support for this narrative is usually found in Eurocrat circles in Brussels, and trade/ UN circles in Geneva and New York. Big businesses too point to the attraction of international markets, and emphasize the importance of sustaining and increasing trade and investment flows amidst worldwide concerns of a post-pandemic recovery. Within governments, ministries mandated to deal with trade, finance, and development issues tend to have sympathy with this narrative. Epistemically, this narrative draws succour from the writings especially of trade lawyers and economists.

Recommendations resulting from the resuscitation and reinforce narrative involve increasing funding for multilateral organizations (such as the WHO) and ensuring smooth trade flows worldwide (by re-energising the WTO). And while seldom shy of referencing values, this narrative uses a narrower frame (e.g. usually linking trade and investment agreements to labour and environmental standards). Overall, even with such references thrown in, the narrative remains a pragmatic one that seeks to avoid rocking the boat in a precarious sea.

Narrative 2: Restructure
The second narrative calls for a fundamental restructuring. Akin to the first narrative, it acknowledges the gravity of global problems that the world faces, and also recognizes the importance of collective action in resolving them. But rather than attribute the failures of multilateralism to its member-states, it points to defects of institutional design. More multilateralism in its current form will only exacerbate the problem. This does not mean giving up on multilateralism in principle. But the practices of multilateralism will need to be rebooted, and its institutions will need to be redesigned, before they can be entrusted with more authority.

The failures of multilateralism, as per this narrative, are many and run deep. The sins of omission and commission of the WHO in its handling of the COVID19 pandemic provide one example of the damage that flawed multilateralism can contribute to. (7) Rampant globalization, nurtured by the WTO and other international organizations and pursued as a panacea for all problems, has fostered global value chains that lack reliability. Production patterns based on high levels of economic integration have created opportunities for profit, but also allow for the “weaponization of interdependence”. (8) The multilateral order was not built for a system where the very ties of interdependence – which were supposed to bind countries together into prosperity and peace – could be misused by geopolitical rivals. The rules of multilateral engagement need to be rehauled and updated for a world of weaponized interdependence.

Unlike the first narrative, this narrative does not see an opposition between putting one’s own country first and multilateral cooperation. If anything, it sees a strong and robust base at home as a necessary condition for the practice of effective and legitimate multilateralism. (9) The Biden administration embodies this balance: for instance, it maintains its first priority remains “ensuring every American is vaccinated” while also committing to Covax. The US narrative (and policy) stand in dramatic contrast to Europe’s which has continued to export vaccines as part of its multilateral efforts, even in the face of severe vaccine shortages and (avoidable) deaths at home.

It is all too easy to dismiss this narrative as a crude pursuit of nothing more than narrow national interests. In fact, however, prominent variants of this narrative also entail a strong commitment to values. Values matter if one wants to build reliable supply chains for strategic products, which in turn requires deeper levels of integration with like-minded and trustworthy allies. And values in this narrative, in contrast to the first narrative, are conceptualized in much broader terms such as democracy and liberalism. See, for instance, President Biden’s speech:

“Our partnerships have endured and grown through the years because they are rooted in the richness of our shared democratic values. They’re not transactional. They’re not extractive. They’re built on a vision of a future where every voice matters, where the rights of all are protected and the rule of law is upheld.”

This attention to national interests, weaponized interdependence, and values together makes the second narrative very different from the first. While recognizing the importance of technical details, this narrative is deliberately engaged with political questions. Its stronger versions do not assume or require multilateral initiatives with universal memberships, nor does it push for a pick-and-choose transactional plurilateralism. Rather, it calls for alliances and partnerships of the like-minded, based on values that work hand-in-hand with interests.

Variants of this narrative live in political circles in national capitals. The Biden administration has embraced some of its traits. The Secretary General of the North Atlantic Treaty Organization, Jens Stoltenberg, has been developing a similar narrative in recent years (e.g. by calling for a more “global approach” for the alliance that works “even more closely with our international partners to defend our values in a more competitive world. Partners near and far – like Finland and Sweden. But also Australia, Japan, New Zealand and South Korea”. Within countries in the global north, the restructuring narrative finds greater resonance in ministries dealing with foreign affairs and defence. Its supporters include NGOs and activists concerned about human rights violations, freedom of the press, rule of law and so forth. Small and medium-sized businesses, which stand to gain from a tightening of multilateral trade rules that this narrative entails, can also be supportive; they tend to be less vociferous than big business though, which have reason to fight against the short-term costs that restructured value chains would bring for them.

Recommendations stemming from the restructure narrative involve a variable geometry approach. Here – sometimes implicit, sometimes explicit – is the idea of (gradual) strategic decoupling. While partially disengaging with competitors and rivals, this narrative requires deeper integration and partnerships with others that are more like-minded.

Advantages, Limitations, and Policy Implications
The first narrative of resuscitate and reinforce offers stability in times of crisis. Its conciliatory tone is especially tantalizing after four years of Trump’s onslaught on multilateralism. Its biggest weakness lies in its proclivity to the status quo. And although reform for the sake of it is in no one’s interests, there are too many players today who believe themselves to be ill-served by multilateralism. These include countries in the Indo-Pacific affected by China’s rise, different regions of the world concerned about new debt traps, companies that are no longer willing to tolerate repeated violations of IPRs, governments that are concerned about the security threats posed by economic and digital interdependence, and individuals who have endured incalculable (sometimes avoidable) personal loss of life and livelihood due to the pandemic. Minor reform of a multilateral system that has sometimes aided and abetted these developments, and been unable to guard against them at other times, will not satisfy these diverse stakeholders. Turning a blind eye to current violations and carrying on with business as usual will likely damage the system further (https://www.orfonline.org/expert-speak/the-european-union-cai-and-abyss/). Pumping in more money to strengthen multilateral institutions that are already facing a crisis of both legitimacy and effectiveness will end up producing an even greater backlash against multilateralism.

The second narrative of restructuring overcomes the status quo orientation of the first; in addressing the flaws of the system, it takes the bull by the horns. In its hawkish version though, its problem lies in its swing in the opposite direction: major disruption. Skeptics argue that decoupling will produce a new cold war. Deep integration with like-minded parties will not suffice when dealing with problems like climate change and pandemics, which need all handson deck. (10) Talk of grandiose values may work, but walking this walk will be very difficult for most parties (including established democracies like the US and the EU, which have had their own share of problems in recent years).

The spatial dislocation between the two narratives is interesting. The old world of Europe still veers largely towards the first narrative of resuscitate and reinforce; somewhat expectedly, this is also the narrative that one hears frequently in international organizations. Under the previous and current US administrations, we have seen some shifts towards the second narrative of restructuring.

From the perspective of the “global south”, there is some irony to witness these developments in the US. After all, multiple actors in the regions of Asia, Africa, Middle East, and Latin America, have – sometimes since decades – been arguing that the multilateral system needs a major overhaul in order to become more inclusive, more transparent, more accountable, and better able to accommodate alternative goals (for instance, by balancing the pursuit of trade liberalisation with the goal of food security). This includes countries like Brazil, India, South Africa, and also other middle-income developing countries and least developed countries. Doubling the irony is the fact that while the US is calling for a major update of the rules – especially to enable multilateral institutions to cope better with China’s rise – China itself is also attempting to restructure the regional and global order. While not many members of the global south would readily embrace the minor tinkering envisaged by the resuscitate and reinforce narrative, skepticism towards the Chinese narrative is also rising. Those in the global north aiming to restructure multilateralism would be well-served to engage with like-minded state and non-state actors in the global south also seeking change. While the priorities of these diverse players will not align perfectly with the transatlantic partners, there are many potential overlaps and complementarities in values and interests that could contribute to a shared agenda of meaningful reform.

To overcome the polarisation of the debate, the solution may thus lie in using the restructuring narrative as a focal point. Such a version does not demand that all existing multilateral institutions be razed to the ground. But it does ask for a careful reconsideration of the very purpose of multilateralism. This purpose will probably involve a commitment to values such as liberalism, pluralism and democracy. But it cannot be imposed by the EU and the US on others; it requires engagement with other democracies as equal partners in these endeavours (including countries like India, which has its own powerful traditions of liberalism and pluralism that predate European ones).

A restructured multilateralism need not be a closed shop: countries that are willing to abide by its tightened rules would be welcome to join. For those that clearly adhere to fundamentally different values and pose a geopolitical/geoeconomic threat, entry will admittedly be difficult – perhaps even impossible. In such cases, dialogue will continue; to avoid sending mixed signals, however, side-deals involving deep integration such as the CAI will not.

A multilateral order built on the restructure narrative – even in its moderate version – will likely result in some decline in prosperity. Some decoupling would have to take place, but only step-by-step and in key strategic sectors, in sync with allies. The cost will also be a shattered dream of all humanity working together as one towards shared visions and goals. But these losses may well be compensated by gains in security, and survival of the values that make us who we are.

This was originally written for the Observer Research Foundation’s Raisina Files, March 2021.

By Amrita Narlikar, President of the German Institute for Global and Area Studies (GIGA), and Professor at Hamburg University. She is also non-resident Senior Fellow at the Observer Research Foundation.

To read the original report by the Global Policy Journal please click here. 

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Official statistics for some of the world’s major trading economies further indicate the extent of the downturn in international trade caused by the COVID-19 pandemic. During 2020, none of the major economies has been spared.

China’s trade patterns have diverged from other economies. After falling in the early months of the pandemic, Chinese exports stabilized in Q2 2020 and rebounded strongly in Q3 2020, with year-over-year growth rates of almost 10 per cent. Overall, the level of Chinese exports for the first nine months of 2020 was comparable to that of 2019 over the same period. On the import side, the Chinese demand for imported products recovered following a decline in Q2 2020. Contrary to other major economies, Chinese imports stabilized in July and August then grew substantially in September.

Regional trade trends

The sharp and widespread decline in international trade in Q2 2020 has been similar for developing and developed countries. However, trade in developed countries appears to have fallen marginally faster, both in relation to imports and exports. Trade among developing countries (South-South) has been relatively more resilient with a decline of about 16 per cent in Q2 followed by a decline by 8 per cent in July.

No region has been spared from the decline in international trade in Q2 2020. However, trade in East Asia appears to have fared relatively better than in other regions. This trend is even more evident for the month of July. On the other hand, the sharpest decline has been for the West and South Asia region, where imports have dropped by 35 per cent, and exports by 41 per cent. As of July, the fall in trade remains significant in most regions.

Global trade at the sectoral level

Economic disruptions brought about by COVID-19 have affected some sectors significantly more than others. In Q2 2020, the value of global trade in the automotive and energy sectors was about half of what it was in Q2 2019. Trade also declined significantly in chemicals, machineries, metals and ores, and precision instruments. On the other hand, imports increased in office machinery and textiles and apparel. Such increases are linked to the COVID-19 pandemic as these sectors include home office equipment and protective equipment such as masks.

The data for July and August 2020 indicates similar patterns. The value of international trade in the energy and in the automotive sectors was still substantially below its levels of 2019. On the other hand, increases in demand of home office equipment and personal protective gear resulted in positive growth rates for trade in the communication equipment, office machineries, and textiles and apparel sectors.

To download the full report, please click here.

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Covid-19 has served as a reminder that we live in a closely interdependent world that brings opportunities but also carries dangers. It has, just as importantly, shed light on a whole series of pre-existing conditions – from heightened inequality, to unsustainable debt and rampant environmental destruction – that were left unaddressed after the Global Financial Crisis. The world at the end of 2019 was, in truth, a good deal more fragile than many were willing to acknowledge.

As a result, Covid-19 obliges us to think carefully about what makes for healthy and resilient communities, at the global level as much as the local level and take to heart the lessons we have learned in the last decade.

This year is shaping up to be a very difficult year for the global economy. With many countries unprepared to respond to a health pandemic, lockdown seemed to be the only plausible way to protect lives and preserve health systems. Doing so triggered an economic crisis that spread as quickly as the virus itself. Data for the first two quarters of this year show output contracted more sharply than in 2008-2009, and in some cases registering the steepest drop on record. Estimates for the year point to a generalized global recession matching the Great Depression of the 1930s.

Next year will likely see a rebound. However, it will be uneven within and across countries and uncertainty will persist. Unemployment will be on an upward trend, more and more companies will be facing the threat of bankruptcy; supply chains will be fragile; confidence will be shaken; demand will be weak. Debt levels across the world, in both the public and private sectors, will have risen significantly from the historically high levels registered before the crisis. In this condition, the wrong policy steps – and ignoring the experience of the last decade – could trigger further shocks which would not only derail recovery but could usher in a lost decade.

These threats are greatest in the developing countries where the ability to respond to the crisis, on both the health and economic fronts, has been hampered by years of austerity combined with massive debt servicing, high levels of informality and policy space constricted by the rules we’ve chosen to manage globalisation.

To date, the international community has not matched its expression of concern with commensurate support and action. Multilateralism was already under stress before the crisis, but Covid-19 has highlighted the need for frank discussion and bold proposals that match the ambition shown when the global system was founded. This year’s Trade and Development Report argues that the global economic crisis caused by Covid-19 throws up a stark choice: continue misguided policy choices or collectively chart a new path that leads from recovery to a more resilient, more equal and more environmentally sustainable world in line with the ambition of the 2030 Agenda for Sustainable Development.

Neither path is preordained. Building a better world is a matter of conviction and collective action. The lives of future generations and of the planet itself will depend on the choices we all take over the coming months.

Mukhisa Kituyi
Secretary-General of UNCTAD

Mukhisa Kituyi, of Kenya, became UNCTAD’s seventh Secretary-General on 1 September 2013. After serving an initial four-year term, he was reappointed by the General Assembly in July 2017 for an additional term that began on 1 September that year.

To download the full report, please click here. 

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The five targets that set out the level and ambition of SDG 2 (ending hunger; ending all forms of malnutrition; doubling the agricultural productivity and incomes of small-scale food producers; ensuring sustainable food production systems; and maintaining genetic diversity), as well as trade itself, often constitute distinct policy priorities for governments. Trade and related policy measures which may be designed to achieve one target can potentially have unintended negative consequences that undermine the achievement of other targets, both within the country where the measure is applied and in the trading partner countries.

It is therefore important that policy-makers identify and recognize areas in which difficult tradeoffs may be needed between competing policy objectives, and identify possible ways in which these can be addressed. Furthermore, while the different targets set out under SDG 2 are mutually interdependent and inter-related, it is important to address the trade policy dimension of each component individually as part of a broader plan of action.

This paper highlighted the various policy measures that can affect trade and markets. These include border measures such as tariffs, export restrictions, and non-tariff measures, each of which can have immediate effects on trade flows. At the same time, “behind-the-border” domestic support measures, such as input and output subsidies, market price support and public stockholding measures, and public investments in infrastructure and R&D, among others, can also have significant effects on trade and markets, through the impacts that such measures have on domestic production.

It is important to recognize that the same policy measure can have different implications for different SDG targets, depending on whether a country is a net exporter or importer; the size of its production, trade and consumption; and the way in which policies are designed and implemented, among other factors. The impacts may also vary in the short and long run, as the expectations of economic actors vary over time.

Reducing high import tariffs and gradually phasing out tariff-rate quotas on a given product, for instance, can contribute to addressing the priorities of SDG targets 2.1 and 2.2, by diversifying the supply of healthy food, lowering food prices, and generally, by helping to move food from regions of low production cost and ample supply to areas of high production cost and insufficient supply to meet demand, which can be particularly relevant for countries with a high dependence on imported food. At the same time, however, there may be implications for producers in importing countries, whose incomes might be undermined by import competition, thus negatively affecting the achievement of SDG target 2.3. There may also be consequences for the achievement of environmental sustainability objectives (priorities under SDG target 2.4), if the trading partners apply different environmental requirements, in which case removing tariffs can put farmers in countries with more stringent regulation at a competitive disadvantage and lead to carbon leakage.

The application of export restrictions also provides examples of the competing priorities between different policy objectives; particularly, between short- and longer-run objectives within the domestic market, as well as between the policy objectives of two trading partners. Export restrictions are often used with the objective of addressing domestic food security concerns related to rising food prices. In the immediate term, such measures may indeed boost availability and lower food prices in domestic markets, improving access to food and contributing to the achievement of SDG targets 2.1 and 2.2. However, even in the short-run, there are implications for producer incomes (SDG target 2.3) which may be significantly diminished by lower food prices. Moreover, in the medium-to-long run, the initial effects of the policy may be reversed as farmers respond to lower price incentives and policy uncertainty by decreasing area harvested for the affected product in the following cropping season. This can contribute to lower production and higher prices in the medium-to-long run, mitigating the initial positive implications of the measure for SDG targets 2.1 and 2.2. Crucially, the application of export restrictions can undermine the achievement of SDG targets 2.1 and 2.2 in importing countries by lowering food availability on world markets, and contributing to higher prices, particularly if the measures are implemented simultaneously by many exporting countries.

Among behind-the-border domestic support measures, input and output subsidies as well as market price support measures are among the most contentious elements of governments’ agricultural policies. One of the reasons for this is that such measures can involve important choices between different policy objectives. Input subsidies for instance, can be crucial for improving agricultural productivity and lowering farmers’ production costs, with positive implications for SDG target 2.3. Market price support measures can directly aim to improve producer incomes, by providing a guaranteed outlet and more predictable prices than achievable on the open market, therefore having similar positive implications for SDG target 2.3. However, in addition to the high fiscal costs and administrative burden associated with such measures, they can also have implications for the achievement of environmental sustainability priorities (SDG target 2.4), for instance, if they provide production incentives for products with high greenhouse gas emissions. At an international level, there may be consequences of such measures for producer incomes in the trading partners (SDG target 2.3), as they can under-price competitors and undermine the opportunity for small producers in the importing country to sell their products abroad, even if they are actually more efficient and competitive. Moreover, they can result in an inefficient allocation of productive resources across regions and exacerbate environmental pressures.

A deliberate effort to ensure complementarity of trade and agricultural policies can go a long way in ensuring the effectiveness of policy measures, and potentially resolving some of the trade-offs associated with them. For instance, there are many cases in which policy makers provide farmers with incentives to produce, such as through input subsidies and market price  support measures, while at the same time applying export restrictions that have the opposite effect on producer incentives. Improving coordination across different ministries and agencies responsible for designing and implementing agricultural and trade policies can help to resolve such inconsistencies. Moreover, while trade and agricultural policies can have a direct effect on SDG 2 outcomes through their impact on production and markets for food and agriculture, policies in other areas can be important too, including in areas such as environment, energy, and health and nutrition. Government frameworks that affect how markets function in these areas can translate directly into impacts on food and nutrition security and sustainable agriculture, and must therefore be part of a holistic, complementary policy package.

It is also important to note that there are some measures that generally have positive implications for the achievement of the SDG 2 targets. These include public investments in infrastructure, such as storage facilities that can improve farmer prices (affecting SDG target 2.3), rural roads that can connect producers to markets (affecting SDG target 2.3), and efficiencies in trade and logistics that can reduce food waste and bring farm products where they are promptly needed (affecting SDG targets 2.1 and 2.2). Similarly, public investments in R&D have some of the highest rates of return among all rural development initiatives, with positive implications for agricultural productivity, nutrition and food security (affecting SDG targets 2.1 to 2.3). From a trade perspective, and in contrast with input or output subsidies, such support measures do not involve transfer to individual producers but rather to the sector as a whole and often focus on the delivery of public goods. For this reason, in the WTO they usually fall under the green box category and are not subject to any limitation. Depending on the specific circumstances, increasing public expenditure in these types of measures can offer a “win-win” solution for many countries.

Lastly, understanding and monitoring progress towards SDG 2 will be key to ensuring that the goals and targets are achieved within the time-frame that leaders have agreed. In the area of trade and markets, governments will need to go beyond a narrow focus on the elimination of agricultural export subsidies, and take a broader approach to indicators of progress that encompasses the range of measures that affect trade and markets in the global food system.

Ishrat Gadhok is a Trade Policy Consultant in the Trade and Markets Division of FAO. She supports the organization’s analytical and capacity development activities on trade at the national, regional and global levels.

Georgios Mermigkas joined the FAO Trade and Markets Division in May 2016, as a member of the trade team, dealing with issues related to trade and food security and trade agreements.

Jonathan Hepburn is a Senior Policy Advisor with IISD’s Economic Law and Policy program, focusing on agriculture, trade and food security. He has two decades of experience working on economic policy, trade and development.

Christophe Bellmann is an Associate in IISD’s Energy program, a senior resident research associate at ICTSD, and a visiting fellow for the Institute for International Trade at the University of Adelaide. He has more than 25 years of experience working on trade policy and sustainable development in international negotiations.

Ekaterina Krivonos is an Economist in the Trade and Markets Division of the Food and Agriculture Organization of the United Nations (FAO) in Rome, Italy. Her work is focused on analyzing trade policy issues in relation to agricultural markets and food security, including multilateral and regional trade negotiations.

To download the full report, please click here.

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Before the COVID-19 pandemic erupted, governments’ pledges for sustainable development were flourishing, most notably as countries signed up to the United Nations Sustainable Development Goals (SDGs). However, the devastating health and economic impacts of COVID-19 on the decade-long progress to fight poverty have forced governments to rethink their socioeconomic models so that they do not compromise human health and ecosystems. In this context, voluntary sustainability standards (VSS) are being increasingly recognized as potentially transformative tools for governments to realize their sustainability commitments.

This 4th Flagship Report aims to provide an understanding of the role of government as a vehicle to drive the adoption of VSS. The effectiveness of VSS to contribute to sustainable development partly depends on their degree of adoption by economic operators. In this respect, governments can play a significant role through public procurement and trade policy.

The integration of VSS into public procurement and trade policies is potentially a powerful means to upscale their adoption. Public procurement represents, on average, 12 per cent of gross domestic product (GDP) in countries of the Organisation for Economic Co-operation and Development (OECD), and up to 30 per cent of GDP in developing countries. Given the magnitude of such spending, in combination with the pressing need for sustainable production and consumption, sustainable public procurement (SPP) has become imperative. In addition, trade policy is increasingly being used to pursue non-trade objectives, including those relating to sustainability.

This report seeks to answer the following key questions:
• What are the determinants of VSS adoption at country level?
• How can public procurement and trade policy serve to increase VSS uptake, and how do they contribute to the effectiveness of VSS?
• What are the key considerations and implications of VSS integration into SPP and trade policy?

Based on these questions, the report analyses VSS adoption dynamics and trends, and the drivers for their adoption in SPP and trade policy. The following are its major observations.

VSS are gaining ground, especially among diversified, export-oriented economies with relatively well-functioning governments and higher levels of development.

The number of VSS, their geographical coverage and the market shares of certified products are, overall, increasing at the global level. However, while VSS are being actively adopted in all countries, their adoption levels vary greatly across countries. VSS adoption scores are more or less aligned with income levels: large developed and middle-income countries tend to have more VSS. Thus, Brazil, China, the United States and many European countries have adopted many VSS;. middle-income countries such as Viet Nam, Indonesia and India also score fairly high on VSS adoption, suggesting that an export-oriented industrialization policy can influence higher VSS activity. Similarly, low-income countries, such as Ethiopia and the United Republic of Tanzania, also score high in VSS adoption due to their export commodities, such as coffee, which tend to be certified by multiple certificates. Generally, it is found that open economies with diversified economic sectors, relatively well-functioning governments and a high of development tend to adopt more VSS.

Increase in VSS adoption is driven by consumer and business demand, and by their integration into public policy.

Markets with a relatively high level of consumer demand for sustainable products can lead to an increased adoption of VSS. Business demand can also increase VSS uptake, as VSS can serve as a means for differentiation and reputational risk management, and as proof of compliance with due diligence requirements or with government regulations. Depending on the structure of the economic sector, and more specifically on its level of concentration, VSS can also spread more or less easily, as business actors with strong bargaining power can influence other actors along the value chain to take up VSS. Lastly, SPP and trade policy play a particularly important role in the integration of VSS into public policy.

SPP can strengthen the design of VSS.

This will depend on how VSS are integrated into legal frameworks, and on the criteria established to recognize VSS in the context of SPP. Considering that procurement is involved in many segments of the value chain (i.e. sourcing of a commodity, purchasing the commodity, and quality control), the integration of VSS into SPP could foster the supply of sustainable products. It would also provide governments with additional enforcement mechanisms, and induce efforts to promote capacity-building. This in turn could create a spillover effect on the community of VSS, both in terms of scaling them up and making them more reliable and credible with regard to how they are designed and how they operate. This report identifies three challenges to enhancing the potential of VSS in SPP. First, procurement policies should strengthen requirements for the recognition of VSS. Currently, the integration of VSS into SPP involves requirements that are related mainly to their standard-setting processes, but rarely to their standards enforcement procedures, such as monitoring, conformity assessment, complaints handling and sanctions. Requirements relating to these other components need to be further developed. Second, there are no, or very few, VSS available for products for public procurement in several prominent sectors (e.g. the health sector). Third, there is a risk that SPP discriminates by excluding products or services of similar environmental and social performance but that do not hold certificates due to the high costs of certification.

Free trade agreements, preferential trade agreements, market access regulations and export promotion measures are relevant instruments to increase VSS uptake.

Between 2010 and 2017, VSS have been increasingly incorporated into some free trade agreements (FTAs), although it may be too early to detect a clear trend. Still, such inclusion tends to be more prominent in FTAs involving the European Union (EU), which reflects the Union’s commitment to promoting fair and ethical trade schemes in its trade policies. In preferential trade agreements (PTAs), and in generalized systems/schemes of Preferences (GSP) in particular, it has been observed that both VSS and GSP schemes aim to foster sustainable development and good governance, and proposals are discussed to integrate VSS into the GSP of the European Union. Moreover, making market access conditional on certification and developing export promotion measures in favour of certification can contribute to further upscaling VSS adoption.

Integrating VSS into SPP and trade policies might also produce several challenges.

A strong increase in demand for VSS could create capacity issues, with some VSS schemes lacking the capacity to deal with the increased demand. Besides, the current lack of availability of VSS for products in the prominent sectors of public procurement might lead to the creation of additional labels, thereby aggravating the problem of a proliferation of VSS. This could increase confusion for consumers and economic actors in distinguishing between credible and non-credible VSS. There is also a possible risk of proliferation of recognition systems with more or less similar requirements but also possible small differences in requirements. This would make it difficult for various VSS schemes to comply with them all. Additionally, if an increase in business demand for VSS does not align with consumer demand for VSS, it might lead to the problem of over-certification. Moreover, there is a possible distributional effect of upscaling VSS related to the “stuck to the bottom” problem, whereby some producers, especially in least developed countries (LDCs), are excluded from the VSS dynamics as they cannot afford high certification costs, which present a significant barrier to their adoption of VSS. This report explores governments’ role in upscaling VSS adoption through SPP and trade policy. It shows that VSS can generate significant impacts on the ground and transform market dynamics. Hence, boosting the uptake of VSS could improve their overall effectiveness in contributing to sustainability on a large scale.

To download the full report, please click here.

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