Context: The European Union’s approval this week of new deforestation regulations poses a threat to Indian exports of items like coffee, leather, paper and wooden furniture.
The regulation is part of a larger trend of “demand-side” restrictions, in which major consumers of agricultural commodities are leveraging their market share to encourage sustainable production. The United Kingdom recently approved a similar regulation, and United States lawmakers introduced a similar bill in Congress. In March, the Chinese government announced an initiative with Brazil’s largest beef lobby for deforestation-free beef exports.
What is the new deforestation regulation of the European Union?
- It requires EU-based companies to ensure that their imports and exports are “deforestation-free” and uphold human rights, Human Rights Watch.
- The law establishes the legal requirements for European businesses regarding biodiversity loss and human rights abuses embedded in their international supply chains.
- On April 19, 2023, the European Parliament voted for the European Union Deforestation-Free Products Regulation (EUDR).
- Regulations covering wood, palm oil, soy, coffee, cocoa, rubber, and cattle they import or export have not been produced on land that was deforested after December 31, 2020.
- The law requires companies to trace the commodities back to the plot of land where they were produced, or, in the case of cattle, the particular locations where the animals were raised.
- The regulation also requires companies to ensure that these seven agricultural commodities are produced in conditions that comply with “relevant laws” in their country of origin.
- These include laws on land use rights; labour rights; human rights protected under international law; free, prior, and informed consent, as set out in the United Nations Declaration on the Rights of Indigenous Peoples; and anti-corruption laws.
- Even the European companies will also have to ensure that the commodities they produce domestically comply with the regulation, raising questions about some EU member states’ practices. In Sweden, for example, the timber industry has often encroached upon land that Sami people rely on for reindeer husbandry, a practice central to their cultural identity.
- Within 18 months after it enters into force, the European Commission will announce which producer countries – including EU member states – are deemed low, medium, or high risk based on their rate of deforestation and forest degradation, and the existence, compliance with, and effective enforcement of laws protecting human rights, the rights of Indigenous peoples, local communities, and other customary tenure rights holders, among other criteria.
- Products from countries determined to be “high risk” will face tougher scrutiny by EU customs authorities and require European companies to conduct greater in-depth due diligence when sourcing from those locations.
- Larger companies will have 18 months after the regulation enters into force to make changes to comply with the law before facing penalties for violations. The new rules will apply to large firms from December 2024 and small firms by June 2025.
Why such a move?
- Deforestation is second only to fossil fuels as a global source of greenhouse gas emissions fueling the climate crisis. Globally, industrial agriculture is the most significant driver of deforestation.
- Industrial agriculture has been linked to a range of human rights abuses, including forced and child labour, dangerous exposure to toxic pesticides, forced evictions and displacement, encroachment on Indigenous peoples’ traditional territories, and violence and intimidation against environmental defenders, among others.
- The volume of deforestation associated with EU imports is second only to China, according to a 2021 study by the World Wildlife Fund and Trase.
- For example: Nearly one-tenth (9.6 percent) of Malaysia’s sawn wood exports were headed for the EU in 2021, according to the Observatory of Economic Complexity (OEC), a trade database.
Impact on India:
- Regulations would impact 479 products exported from India worth around 1.3 billion dollars.
- This would make new participants in the agro-goods export-less. They would have to re-orient their policies.
- Indian exporters would have to look for new markets for their products in future. This would raise the transportation costs, partnership cost and insurance cost on the exported items. Thereby hurting the exports in the long-term.
India along with other developing and agro-exporting countries should create a platform and negotiate with the members of the European Union.