- Biden administration officials have called on the EU to delay the EUDR until its “substantial challenges” have been addressed;
- Pulp and paper analyst says EUDR will raise operating costs for EU producers by as much as 11 per cent and destroy the EU’s export markets;
- EU’s largest confectionery groups point out that EUDR’s guidelines continue to fall short.
Both the Financial Times and Reuters revealed today that the Biden administration has called for delays to the EUDR.
In a letter dated May 30, USTR Katherine Tai, Commerce Secretary Gina Raimondo and Agriculture Secretary Thomas Vilsack wrote:
“We therefore urge the European Commission to delay the implementation of this regulation and subsequent enforcement of penalties until these substantial challenges have been addressed.”
The protest follows a March letter that we’ve highlighted previously to Tai, Raimondo and Vilsack from almost 50 US senators calling for the delay.
In other words, the objections of US stakeholders are being taken particularly seriously by the Biden administration: It’s not just legislators putting their weight behind this. This is the administration.
For a letter like this to make its way into the public means that the White House is quite prepared to take the fight into the public domain, especially now that the European elections are over.
As we’ve said before, it’s not because “big business” doesn’t want to comply. It’s because the regulation has been poorly thought out, poorly planned, and the Commission — specifically DG ENVI — didn’t consult appropriately with everyone in the supply chain to make sure it would work.
It’s not about wanting to cut more trees. It’s about having a regulation that’s workable for companies and actors that are already doing the right thing without marginalizing smallholders further and destroying livelihoods.
Pulp and paper is the elephant in the room
The key concern in the US is coming from the pulp and paper sector rather than other industries – and the sector’s counterparts in Europe have been raising the same issues, particularly from Germany and Austria.
So, what’s the problem? Just like palm oil, unless manufacturer are vertically integrated (or their suppliers have a high level of integration), buying bulk commodities on the open market – ‘market pulp’ — causes problems.
As market analyst Alejandro Lopez notes:
First, there might be difficulties in obtaining enough market pulp at a reasonable price, which could increase production costs and put domestic [EU] production at risk. Second, there is a potential for disruptions in global trade. If overseas suppliers redirect their exports away from the EU, European producers could benefit by substituting imports with domestic production. However, this assumes that all European producers can comply with the EUDR and maintain their exports. It also assumes a minimal loss of global competitiveness. In this scenario, operating rates could increase by up to 6 percentage points from our current forecast.
The decrease in competitiveness, along with the potential failure to comply with EUDR regulations, could affect European exports and create opportunities for producers in other regions, like Asia, to gain a larger share of the European market overseas. As a result, the EUDR could lead to an unintended increase in the use of high-deforestation-risk pulp and paper outside Europe. Without changes in domestic demand or capacity, operating rates for European graphic paper could decrease by as much as 11 percentage points from our current forecast, putting even more producers at risk.
The only disappointing part of these actions and analyses now is that it has taken so long for the industry to understand the Commission’s – and specifically DG ENVI’s – game. The EUDR is the EU Timber Regulation (EUTR) on steroids. Complying with EUTR was relatively simple for most timber, pulp and paper producers. Most had voluntary systems in place to prove legality and sustainability – and by extension a very small risk of deforestation.
The EUDR throws those existing systems out of the window and makes them irrelevant. It replaces them with requirements that even the most careful of forest managers would have difficult complying with.
Caobisco Adds its Weight
Caobisco, the EU’s body for the chocolate, confectionery and biscuit industry has also pointed out additional flaws in the regulation that apply specifically to its industry.
A letter to the EU Commission President highlights the myriad technical problems that will make production more problematic and expensive for one of Europe’s biggest industries.
The challenges they outline are unique to the confectionery industry. An example: Because they use cocoa, palm and coffee (and sometimes soy) all at once. And it’s not clear exactly where the use of mixed products — like chocolate — falls.
In addition: the difficulty for downstream operators to verify due diligence without access to primary data, especially geolocation information, excessive administrative load the EUDR could impose, potentially leading to market disruptions and food waste.
And of course, with the development of an API for the EUDR Information System, the system’s capacity to handle the vast data volume required.
Simply put: the EU’s guidelines for the EUDR continue to fall short.