Tina Morrison
Wellington, October 8, 2024
The rules require some commodity exporters to prove their supply chains do not contribute to the destruction of forests
The European Union (EU) may extend a deadline for exporters to comply with new deforestation rules that were to come into effect at the end of this year, prompting a sigh of relief from New Zealand officials and industry representatives.
The EU Deforestation Regulation (EUDR), introduced in June last year, was due to come into effect from December 30, 2024, for large companies exporting commodities associated with deforestation including cattle, cocoa, coffee, palm oil, rubber, soy and wood.
Under the rule, exporters would have to prove their supply chains did not contribute to the destruction of forests after December 31, 2020, and would be required to digitally map their supply chains down to the plot where their raw materials were grown.
The law aimed to limit the European Union’s impact on global deforestation, forest degradation and biodiversity loss, and reduce the region’s contribution to greenhouse gas emissions.
Pushback
It was hailed as a landmark in the fight against climate change but has prompted pushback from countries and industries around the world and within the EU itself where the rules would apply for exports to member countries.
The European Commission has proposed delaying implementation of the law by a year amid concerns it could end up excluding millions of poor, small-scale farmers from the EU market, disrupt supply chains and push up prices, Reuters reported.
The proposal would need the approval of the European Parliament and member states, and the commission would also be publishing additional guidance documents, Reuters reported.
Ministry for Primary Industries Divisional Manager Bilateral Relations and Trade, Steven Ainsworth, said the proposed delay if passed by the European Parliament, would alleviate the considerable uncertainty New Zealand Exporters have been under thanks to delays from the commission to issue guidance on key aspects of the regulation and allow more time to prepare to meet the new requirements.
“While this proposed delay is welcome, we remain concerned about the EU deforestation regulation and the unjustified costs it places on New Zealand exporters,” Ainsworth said.
“We will continue to engage constructively with European officials to ensure they understand New Zealand’s production systems, our approach to sustainable forest management, and the ways in which New Zealand is improving land management practices.”
Ainsworth said New Zealand shared the European Union’s ambition to address global deforestation as a critical way of reducing climate impacts and was committed to continuing to work with the New Zealand beef and forestry sectors in relation to the EU deforestation regulation.
Delaying Implementation
A Spokesperson for the Ministry of Foreign Affairs and Trade said New Zealand had consistently advocated for a delay to the implementation, both bilaterally with the EU and alongside other partners through the World Trade Organization.
“We welcome the news today that the European Commission has proposed a 12-month delay to implementation,” the Spokesperson said on Thursday.
“A delay would provide an opportunity for the EU to work with New Zealand to implement the EUDR’s objectives without undue trade impact, in a way that is consistent with our shared ambition of addressing global deforestation, and which reflects the quality of our partnership and cooperation on sustainable development issues. We encourage the EU to act on the European Commission’s proposal.”
Deforestation was not an issue in New Zealand, the spokesperson said, noting that from 1990 to 2021 New Zealand’s total area of forested land increased by over 637,000 ha.
New Zealand was an active voice in the promotion of sustainable forest practices but despite this, the EU rules would require New Zealand producers to establish onerous new systems in order to continue to provide their goods to the EU market, the Spokesperson said.
“We consider this to be an unjustified trade impact of the regulation.”
The Wood Processors and Manufacturers Association of New Zealand welcomed the prospect of more time before the rules came into effect.
“We are in a position where we have got a solution for our wood product exporters, but having more time will help us develop that solution,” said Chief Executive Mark Ross. “The delay is helpful in getting that right.”
“New Zealand exported $100 million of wood products to the EU last year, which makes it a smaller market in the context of $2.8 billion of total exports, but it was an important market for value-added products and a critical market for some companies,” Mr Ross said.
“It is definitely a strong market and one we want to grow,” he said.
The EU is also a small market for New Zealand beef exports, accounting for just 2% of annual exports which are limited by quota restrictions and tariffs.
Disrupt Global Supply Chains
The Meat Industry Association welcomed the announcement on the proposal to delay the regulations which it said would impact about $200 million of beef and leather exports to the EU.
The Association’s Manager, Policy and Trade, Ashlin Chand, said the red meat sector had been advocating strongly for a delay and a review for almost two years.
“Today’s announcement shows that the haste with which this regulation was designed and implemented was going to disrupt global supply chains and threaten $200m worth of New Zealand exports,” Chand said.
While the red meat sector supported the intent to tackle global deforestation, Chand said the regulations had been poorly designed and poorly drafted, and were set to be poorly implemented.
“Instead of incentivising the trade of deforestation-free products, the EUDR sees exports from countries with extremely low instances of deforestation, like New Zealand, treated the same as countries where there is a high risk of this occurring.”
The Association noted the announcement was not a reversal of the legislation and said it would continue to strongly advocate for a more pragmatic and sensible solution where the country’s sustainability credentials were formally recognised, and treated differently to competitors with deforestation issues.
Trend of Afforestation
Beef + Lamb New Zealand Board Chair Kate Acland said that unlike some of the country’s competitors, New Zealand had a significant trend of afforestation, not deforestation.
“The regulation was not appropriate for New Zealand’s situation and complying risked adding additional unnecessary cost into the supply chain,” she said.
“Maintaining market access settings in a cost-effective way for New Zealand’s beef is critical with approximately 60% of export revenues flowing through to farmers,” said Ms Acland.
Matt Lythe, Managing Director of Prism Earth, which provides an auditable data trail for Exporters and Importers to meet the new regulations, welcomed the prospect of extra time before the rules came into force, although he wanted to preserve New Zealand’s first mover advantage.
“We were really hustling, I guess, to try and get it all done,” he said. “We were committed to our plan, and want to be at the start line early as a country, which puts us in a good position as an attractive trading partner against our competitors.
“There is no real change in the regulation, there is just some breathing space.”
Tina Morrison is a Senior Business Journalist for Newsroom. The above article which appeared in the Newsroom has been reproduced under a Special Agreement.
