KUCHING: Seventeen countries, including Malaysia, have objected to the unfair EU Deforestation Regulation (EUDR) in a joint letter they sent recently to European Union (EU) Commission and Parliament officials.
The letter described EUDR as an “inherently discriminatory and punitive unilateral benchmarking system that is potentially inconsistent with WTO (World Trade Organisation) obligations.
EUDR, which was passed and became law on May 31, 2023, will be implemented on Jan 1, 2025.
Besides Malaysia, the other countries are Indonesia, Thailand, Argentina, Brazil, Bolivia, Colombia, Dominican Republic, Ecuador, Ghana, Guatemala, Honduras, Ivory Coast, Mexico, Nigeria, Paraguay and Peru.
The signatories to the letter called for a change to the legislation and ‘open dialogue” about possible mitigation measures, in particular to help small and medium-sized companies, according to a report in International Tropical Timber Organisation (ITTO) Tropical Timber Market Report (Sept 16-30, 2023).
The International Trade Centre (ITC) executive director Pamela Coke-Hamilton was reported as saying by a Financial Times article that the EUDR may have a “catastrophic” impact on global trade if the European bloc does not help small producers and developing nations to adapt.
ITC is a joint agency of the United Nations (UN) and WTO.
Coke-Hamilton said a ban on goods linked to deforestation from entering the EU favoured big companies that can trace where their produce had been grown and risked “cutting off” smaller suppliers.
“What the biggest producers may do is, not being able to do the traceability for these small farmers, simply cut them off. If small producers could not meet the requirements for exporting goods covered by the law, this risked a vicious cycle.
“Once you have loss of market share, you have loss of income, then you have lots of increased poverty, then increased deforestation because at the root of deforestation is poverty. We (risk) falling into the trap of reinforcing something that we are trying to change.
“Depending on how well the EU addressed the outreach to developing countries, the impact of the law on global trade could be “catastrophic or it could be OK,” she added.
Coke-Hamilton said information requirements and the obligation to use geolocation technology presented too much of a burden as many smallholders are trying to just keep up with post-COVID, the cost-of-living crisis and climate change. “They are just caught in this maelstrom of survival.”
In response, the EU spokesperson said the EUDR “applies to commodities, not countries, and is neither punitive nor protectionist, but creates a level playing field. It will be implemented in an even-handed manner that does not constitute arbitrary or unjustifiable discrimination of third-country producers or a disguised restriction on trade.”
The ITTO report said similar concerns about the potential impact of EUDR on smallholders were raised in an article published on Sept 20 on Mongabay, an environmental website, drawing on interviews with independent trade analysts.
The Mongabay article suggested that “while the regulation is a step towards transparency and international deforestation-free supply chain management, observers say it place millions of smallholders who depend on access to the EU market in a vulnerable position. Many small-scale farmers lack the technical capacity and financial capital to meet the hefty due diligence requirements of the new rules.”
Quoting Phus Xuan To, a policy adviser to the Forest Trends thinktank, Mongabay noted that smallholders produce 95 per cent of Vietnam’s coffee, 42 per cent of Indonesia’s palm oil and 95 per cent of Thailand’s rubber.
In Vietnam alone, more than two million smallholders operating across roughly six million plots of land are engaged in the country’s three major forest-related commodities that enter EU markets and are directly affected by the new rule. Vietnam’s timber, rubber and coffee generate combined revenue from the EU in excess of US$2.5 billion annually.
According to Phuc, there are a lot of concern and worries about the EUDR, and that entire sectors, like the Vietnam coffee industry, are unsettled, and many do not know where to start and it is particularly challenging for smallholders.
He told Mongabay that the process of verifying land use rights and plantation registration certification, let alone gathering geolocation data, is protracted, complex and slow in many parts of Southeast Asia. Phuc said that the monitoring systems and databases simply do not exist and the EUDR compliance will be “highly challenging if not impossible “ over the short term.
Phuc also highlighted to Mongabay the challenges of dealing with the complex supply chains that are typical of Southeast Asia.
“If we look at how Vietnam imports timber from Laos, rubber from Cambodia, coffee from Laos, once it enters the country, it is mixed with locally sourced suppliers and then exported to Europe. How can these imports
be traced? We are not talking about small-scale imports here, there is more than US$1 billion worth of rubber imported from Cambodia each year, it is on a massive scale.”
Tran Quynh Chi, a regional director at IDH-the Sustainable Trade Initiative, a social enterprise headquarters in the Netherlands told Mongabay that about 10 per cent to 15 per cent of smallholders engaged in the coffee sector in Vietnam live in poor rural regions close to forest edges.
If mechanisms are not put in place to help such producer groups maintain access to supply chains, there is a very big risk that they will be excluded from the EU market, and that will drive up poverty levels.
Tran further said that smallholders living close to natural forests who are unable to comply with the new regulations might be forced to go further into the forest to eke out a living if they are excluded from the EU supply chain.
The ITTO report said the comments by policy makers and trade analysts in recent media articles imply that there will be winners and losers from the EUDR when enforcement begins on Jan 1, 2025.
A revealing insight into where the balance of advantage and disadvantage might lie in trade terms is provided by a presentation by Mathew Spencer of the IDH Sustainable Trade Initiative delivered to a meeting of the Amsterdam Declarations Partnerships (ADP) in London in May 2023.
Spencer’s central message is that there may be “wider wins from EUDR” including stronger enforcement of national forest laws, acceleration of land titling programmes and widespread implementation of “new accessible and cheap traceability solutions.”
However, these “wins” will only materialise if “production countries feel respected and supported to be partners in implementation.
“According to Spencer, without adequate dialogue and support, negative outcomes are possible, particularly resulting from market exclusion of smallholders.”
