BackEU deforestation rule could cost India up to $1.3 bn in exports every year: GTRI
The European Union has approved a deforestation law to ban imports into the EU of coffee, wood, wood articles, chocolates, soy and other commodities if they are linked to the destruction of the world's forests
PremiumNew Delhi: India’s exports worth about $1.3 billion could be affected every year due to the European Union Deforestation Regulation (EUDR) adopted earlier this week, a report by economic think tank Global Trade Research Initiative (GTRI) said on Thursday.
The European Union has approved a deforestation law to ban imports into the EU of coffee, wood, wood articles, chocolates, soy and other commodities if they are linked to the destruction of the world's forests.
The law will require companies that export goods to the European Union to produce a due diligence statement and "verifiable" information proving their goods were not grown on land deforested after 2020, or risk steep fines.
The new rules will apply on large firms in December 2024 and smaller companies in June 2025.
The EU has come under intense criticism for its unilateral moves to resolve environment concerns faced globally. The EUDR comes close to the approval given to the first ever carbon tax that is expected to be challenged by most developing countries at multilateral forums such as the World Trade Organization (WTO).
As per GTRI, the significant products affected and their export value to the EU in calendar year 2022 are coffee at $435.4 million, leather hides, skin, preparations $83.5 million, oil cake $174.5 million, paper, paperboard $250.2 million, and wood furniture $334.6 million.
“For the products covered under the Carbon Border Adjustment Mechanism (CBAM) and EUDR, EU’s share in India’s global exports is 23.6%. Most such exports will be adversely affected. The product list will be expanded soon," the report said.
Ajay Srivastava, founder, GTRI, said that the EU claims it wants to reduce its contribution to global deforestation by promoting “deforestation-free" products, but this is seen as a deceptive narrative.
“The EU itself has extensively expanded agricultural land by cutting down primary forests, which now account for less than 0.7% of its total forest area, compared to the global average of 33%.
Many other countries, facing the need to convert primary forests into cultivable land to feed growing populations, have a much larger share of primary forest. The EU, however, aims to prevent others from following a similar path while having already done so in the past," Srivastava added.
To implement the regulation, the EU, within 18 months from now, will classify countries as low, standard, or high-risk. High-risk countries must meet more obligations and be subject to more checks. For instance, EU Customs will check 9% of firms or consignments from high-risk countries, 3% from standard-risk countries, and 1% from low-risk countries.
Such arbitrary categorization of countries violates both the national treatment and most favored national principles of the WTO and is likely to be challenged, Srivastava added.
The regulation prescribes four penalties for violations: fines up to 4% of a firm’s annual turnover in the EU, confiscation of product, confiscation of revenues gained from a transaction and exclusion from public procurement processes
Countries which would be most adversely affected-Malaysia, Indonesia, Brazil, Argentina, Ecuador, Peru, Guatemala, and Costa Rica. Colombia, Côte d’Ivoire, India, and Vietnam.
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