Deforestation regulation likely to impact India’s $1.3 bn worth exports to EU : GTRI report

The European Union (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 report said

Press Trust of India

New Delhi: India’s exports of products like coffee, leather hides and paperboard worth USD 1.3 billion annually to the European Union will get impacted due to the deforestation regulation adopted by the EU earlier this week, a report by economic think tank GTRI said on Thursday. Within three weeks of introducing the carbon border tax, the European Union Council on May 16 adopted the European Union Deforestation-Free Products Regulation (EU-DR).

The Global Trade Research Initiative (GTRI) said that the EU-DR appears to prioritise protecting its own agricultural sector and promoting exports, making imports more difficult as it is a trade barrier disguised as a green measure. The regulation covers cattle, buffalo, the meat of bovine animals, preparations, Oil cake, soya beans, palm oil, cocoa bean, powder, chocolate, coffee, leather hide, skin, paper, paperboard, wood, wood articles, wood pulp, boards and wood furniture.

The exporters now have to ensure that these products have been grown on land, which has not been deforested after December 31, 2020. The new rules will apply to large firms after 18 months and small firms after 24 months. Thus, the timeline for large firms is December 2024 and for small firms is June 2025.

“EU DR will adversely affect India’s exports to the EU of the value of US 1.3 billion (2022 data). The significant products affected and their export value to the EU are Coffee (USD 435.4 million), Leather hides, skin, preparations (USD 83.5 million), Oil cake (USD 174.5 million), Paper, paperboard (USD 250.2 million) and Wood furniture (USD 334.6 million),” the report said.

For the products covered under the carbon tax and EU-DR, the EU’s share in India’s global exports is 23.6 per cent, it said, adding the regulation poses challenges for small and medium-sized enterprises, as compliance costs and due diligence requirements may exclude them from global agricultural trade.

“Carbon tax would hit trade in industrial products and EUDR would hit trade in agri products. Both plan to cover all products in the near future. EU’s assault on trade is near total,” GTRI co-founder Ajay Srivastava said. The European Union (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 report said.

“The EU itself has extensively expanded agricultural land by cutting down primary forests, which now account for less than 0.7 per cent of its total forest area, compared to the global average of 33 per cent. 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,” it added.