- Fairtrade calls on EU to give financial support for smallholders and provide clarification on EUDR technical terms;
- Traders have noted that the regulation is already pushing up prices on delivery contracts in the EU as buyers try to avoid uncertainty;
- EU’s trading partners note that the EUDR is an “irritant” in negotiations for FTAs
Fairtrade issues statement on EUDR: “Address shortcomings”
NGO and certification organisation Fairtrade has issued a statement on the EUDR, calling on the EU quickly address the multiple shortcomings in the regulation so as to not impact smallholders. The organisation said:
“[Fairtrade] is very concerned that producer organisations will be cut off from trade with the EU market or pushed out of supply chains by larger producers not because they farm on deforested land, but because they face challenges in collecting, managing, and submitting the necessary data.”
Fairtrade also made a plea to the Commission for “more financial support and clarification of the technical terms.”
However, one of the key asks is that the EU “provide an assessment of the EUDR’s expected impact on the most vulnerable stakeholders in the global supply chain – small-scale farmers – and their ability to comply with the regulation, the administrative burden, and the compliance costs.”
This still remains a key unknown for many farmers around the world. The Fairtrade position aligns with major producers in the palm oil industry, who have stated that smallholders will need to be removed from the EU supply chain, not because they are not compliant, but because the compliance requirements are likely to be too expensive or burdensome.
The EUDR has already pushed up prices
Bloomberg is reporting that the EUDR is already causing the price of coffee to spike, with traders attempting to get orders into Europe prior to the introduction of the EUDR. The journal notes:
“Futures for September delivery versus December contracts are surging in New York, widening the spread between them to the highest since it started trading in January 2022. [September is] the last time traders wanting to bring beans into the European Union can buy from New York and London exchanges without concern about the deforestation regulation. Taking delivery of the December contract would be risky because traders may not have enough time to clear it through customs before the law takes effect at year’s end.”
A key concern among traders is the compliance requirements that will be in place for shipments – the EU is yet to release guidance on what compliance will suffice. Bloomberg notes:
“About 98% of arabica coffee stockpiles are held in ports in Europe, mainly Antwerp. Out of about 800,000 bags, only 15% are considered EUDR-compliant, leaving the rest classified as transition stock subject to penalties after Dec. 30.”
Cocoa traders are reporting a similar impact: “[the EUDR] is putting massive pressure on European buyers to secure compliant supplies and the market is already starting to feel the pinch.”
Is the EUDR is putting EU FTAs at Risk?
The Financial Times reports that the EUDR is a key roadblock to the finalisation and ratification of the EU-Mercosur agreement. According to the newspaper:
“[I]irritants [for Mercosur] include a separate EU anti-deforestation law, due to come into effect next year, which will ban the import of goods such as wood, beef and coffee produced on deforested land. Mercosur wants guarantees that the legislation will not in effect nullify the benefits of a trade deal for its exporters, said one official.”
Indeed, there has been a similar sentiment expressed among Indonesian stakeholders, who have argued that Brussels continues to “move the goalposts” on the scope of the agreement by introducing new regulatory measures that hinder trade rather than liberalising it.
However, the reporting in the FT would appear to indicate that the EU is now more likely to soften its approach on FTAs, particularly now that the makeup of the European Parliament has a smaller influence from the Greens party.
And on the Indonesian side, there is some pressure to conclude the agreement prior to the changeover to the new Prabowo administration from October 20.
Officials have stated that there will no additional formal negotiating rounds – only informal intersessional meetings in order to finalise the agreement in the next two months.