- Brussels commits to addressing US concerns on deforestation regulation following pressure from Washington;
- Special treatment for US producers could undermine negotiations with Indonesia and other palm exporters;
- It would also be a repeat of special treatment for US soybean under the RED – which also discriminated against Indonesian palm
The European Union has committed to work with the United States to address concerns about the EU Deforestation Regulation (EUDR), acknowledging that “production of the relevant commodities within the territory of the United States poses negligible risk to global deforestation.”
The commitment, embedded in the broader US-EU Trade Framework Agreement announced last week, represents a significant victory for American exporters – particularly paper manufacturers – who have lobbied aggressively against the regulation.
However, this preferential dialogue creates an immediate dilemma for Brussels: any special treatment granted to the US must either be extended to all trading partners – including Indonesia and Malaysia – or risk severely damaging those relationships and inviting WTO challenges.
The US paper sector, which ships $3.5 billion worth of forest products annually to the EU, has emerged as the most vocal opponent of EUDR requirements. AF&PA President and CEO Heidi Brock welcomed the trade framework but emphasized that “the EUDR remains a significant non-tariff trade barrier for U.S. producers.”
The association’s core complaint centers on traceability requirements that demand plot-level geolocation data for all wood-based products, regardless of origin. AF&PA argues that “American manufacturers must comply with the same costly and complex geolocation tracking as producers in higher-risk regions,” despite the US not being considered a deforestation hotspot.
Sound familiar? This is precisely the argument being used by European member states and parliamentarians.
Establishment of a “zero-risk” or “null-risk” classification that would substantially reduce or eliminate due diligence requirements for countries deemed to pose negligible deforestation threats.
AF&PA explicitly requested that the US administration “press for a U.S. exemption from the EUDR,” arguing the regulation fails to recognize American sustainable forestry practices.
However, as we’ve pointed out previously, this would raise serious World Trade Organization consistency issues. The EUDR’s universal application across all countries – regardless of development status or perceived risk – represents its strongest defense against discrimination claims under WTO rules.
Indonesia, which has reduced deforestation rates could have legitimate grounds to demand the same “negligible risk” designation granted to the US. Its ISPO certification system could claim equivalence to American soybean standards.
Either everyone gets simplified compliance or no one does – there’s no middle ground that survives WTO scrutiny.
The precedent would effectively force Brussels to abandon uniform EUDR standards in favor of country-by-country negotiations, transforming the regulation from an environmental measure into a trade bargaining chip. This would fundamentally undermine the very premise of the EUDR as a non-discriminatory tool to combat global deforestation.
The timing is particularly sensitive given Indonesia’s recent IEU-CEPA agreement granting zero-tariff access for 1 million tons of CPO – contingent on EUDR compliance. Malaysia, still negotiating its own EU trade deal, would likely make EUDR parity with the US a red-line condition.
European environmental groups have warned that creating loopholes for politically powerful trading partners would transform the EUDR from a conservation tool into a trade weapon. But the greater risk for Brussels is that accommodating Washington forces identical concessions to all partners, effectively gutting the regulation’s universal application.
There is a parallel here from back in 2019, when the EU rapidly gave clearance to the US soybean sustainability scheme under the Renewable Energy Directive. We wrote about this back then. Just to remind:
“It’s reasonable to speculate that the soybean [sustainability certification] has been put into play by the EU in order to placate the US. The US and the EU avoided a trade spat in July [2019] by agreeing to eliminate non-tariff barriers on a range of goods. A self-imposed November deadline passed with no result. USTR Robert Lighthizer and Trade Commissioner Cecilia Malmstrom meet on January 9. Malmstrom will clearly be putting the soybean deal on the table.
Malmstrom clearly thinks that having US soybean squeeze out palm oil in EU biodiesel markets is acceptable – and any harm to Malaysia and Indonesia can be considered acceptable ‘collateral damage’.
The EU talks a lot about the significance of its relationships in the ASEAN region. But it’s just talk: the EU is apparently willing to sacrifice ASEAN to save its US relationships. The move on soybean again demonstrates clearly that for all the stakeholder consultations, technical research and regulation, it is politics that is driving the EU’s attitudes on palm oil.”
It’s worth noting that the EU has promised Indonesia “special treatment” on its commodity exports under the EUDR. The question will be whether Brussels considers Jakarta to be an equal of Washington.