The European Union’s recently adopted environmental protection legislation, the EU Deforestation Act (EUDR), has sparked widespread concern in global trade. Under the law, the EU will no longer import any goods related to deforestation. The impact of the regulation is evident on developing countries such as Africa, where Ethiopia’s coffee industry has been severely injured. It is that EU coffee orders from Ethiopia have been exhausted, affecting about 5 million local farmers.

Johannes Dengler, executive of German coffee baker Dallmayr, noted that since the EUDR will come into effect at the end of 2024 and the currently purchased coffee beans will be included in the products sold in the EU in 2025, the regulation has begun to work. The EUDR not only affects coffee, but also cacao, soybeans, palms, cattle, wood and rubber and other products. Importers must prove that their goods come from cultivated land that has not destroyed forests, otherwise they will face huge fines.

Coffee giant JDE Peets has said that cooperation with them will be suspended in March next year if it fails to find a plan to coexist with small producing countries. In order to comply with EUDR, the European Commission has proposed a number of incentive plans, including a €70 million funding scheme promised at the COP 28 Climate Summit. But importers are asked to create a digital map describing where raw materials are produced in their supply chain, which may involve millions of small farm data. This demands challenges in communication and trust, especially in developing countries behind infrastructure.

Due to these challenges, European importers may choose to directly exclude suppliers who cannot comply with the EUDR. A local coffee representative in Ethiopia noted that many local coffee farmers have never heard of the EUDR and their educational level does not support building digital maps.

Developing countries account for a large proportion of the supply of many goods, and the reorientation of the supply chain triggered by the EUDR is unlikely to really affect the issue of deforestation, which may lead to a recovery in food inflation. The EU believes that the construction of digital maps and the cost of forestry will be offset, so that food inflation will not rise again. However, many intermediaries have strong pricing power in negotiations and are difficult to be excluded from the supply chain. In some areas, forestry has been severely degraded and forestry is unlikely.

Renske Aarnoudse, senior project manager for the non-profit organizationIDH, questioned this, pointing out the issue of funding for the relocation of residents from forest areas to other lands. Overall, the implementation of the EU deforestation law poses serious challenges to many developing countries, affecting their trade relations with the EU.