A landmark EU anti-deforestation regulation that entered into force in June 2023 could come down hard on smallholder farmers in mainland Southeast Asia who produce a significant proportion of the region’s forest products exported to the bloc, forest trade experts say.

The EU’s deforestation-free regulation (EUDR) aim to prevent seven forest-related commodities and their products from entering the EU market if they’re found to be linked to deforestation.

The rule requires producers and companies trading timber, palm oil, soy, rubber, cattle, cocoa and coffee into the EU to provide detailed evidence proving their goods were not grown on land deforested since 2020. The new regulations give producers and companies until December 2024 to fully comply.

While the regulation is a step toward transparency and international deforestation-free supply chain management, observers say it places millions of smallholders who depend on access to the EU market in a vulnerable position. Many small-scale farmers lack the technical capacity and financial capital to meet the hefty due diligence requirements of the new rules, experts say.

Smallholders produce 95% of Vietnam’s coffee, 42% of Indonesia’s palm oil, and 95% of Thailand’s rubber. Finding ways to avoid small-scale producers being shut out of EU supply chains should therefore be a top priority for both exporting countries and the EU, according to Phuc Xuan To, a policy adviser at sustainable finance think tank Forest Trends. 

“There are a lot of concerns and worries about [the EUDR],” Phuc told Mongabay. “[E]ntire sectors, like the Vietnam coffee industry, are unsettled; many don’t know where to start and it’s particularly challenging for smallholders.”

In Vietnam alone, more than 2 million smallholders operating across roughly 6 million plots of land are engaged in the country’s three major forest-related commodities that enter EU markets and are directly affected by the new rule. Vietnam’s timber, rubber and coffee generate combined revenue from the EU in excess of $2.5 billion annually.

Among the major challenges of the new rule is a stipulation that producers and traders provide precise geographical coordinates for all plots of land from which their products are sourced. This is meant to enable buyers in the EU to trace commodities back to the farm where it was grown in order to verify that they’re deforestation-free.

However, the process of verifying land use rights and plantation registration certification, let alone gathering geolocation data, is protracted, complex and slow in many parts of Southeast Asia. Phuc said the monitoring systems and databases simply don’t exist. It will be “highly challenging if not impossible” over the short term, he added.

A major stumbling block is working out how to finance the initial stages of putting land registration and geolocation mechanisms in place. “Getting land-use titles and clear land demarcations requires a lot of resources,” Phuc said. “You have to go to the land, measure the land, mark the boundary and so on, it costs a lot of money. The [Vietnamese] coffee sector estimate it would have to pay $3 billion for that sort of background work. Who is going to pay for that? The smallholders?”

Crucially, the new regulation risks neglecting the intricate webs of cross-border trade in forest products in Southeast Asia. By focusing on onerous and expensive data collection at the farm level, Phuc told Mongabay, the regulation is missing out on the opportunity to address the “substantial” regional cross-border trade of deforestation-linked goods that could ultimately reach EU markets.

“If we look at how Vietnam imports timber from Laos, rubber from Cambodia, coffee from Laos … once it enters the country it is mixed with locally sourced supplies and then exported to Europe,” Phuc said. “How can those imports be traced? We’re not talking about small-scale imports here, there’s more than $1 billion worth of rubber imported from Cambodia each year, it’s on a massive scale.”

Such mixing of forest products via processing countries like Vietnam typically means that commodities that harm local people and the environment in other countries could still be deemed as “legal” and enter supply chains to the EU.

A lot of work remains to be done before the EU rule can be effectively applied to cross-border trade, Phuc said. “The cross-border aspect is not factored into the new regulations. The tracing of where commodities are produced in each country is complex, and to some degree, I don’t think it’s going to work, at least in the near future.”

Protecting smallholders

Experts have also highlighted that given the new EU rule relies on national laws and human rights standards, which are often weak and poorly applied in many parts of Southeast Asia, smallholders are particularly vulnerable to a spectrum of abuses. 

If smallholders lacking official land-use rights, land tenure, or capacity to comply with the new regulation are shut out from the EU market, support systems that safeguard against land grabbing, dispossession and violence must be in place, said Nathalie Faure, a senior program officer at RECOFTC, a Thailand-based community forestry nonprofit. The new regulations have the potential to stimulate such much-needed legal reforms, she added.

“The purpose of the regulation is really to create the sustainability of products, so there’s potential for having better access to information, better rules around sustainability, greening local economies,” Faure told Mongabay. “And it might create legal reforms in relation to certain aspects, such as land tenure, sustainability and trustability.”

Faure added that there’s a risk of traders cutting ties with smallholders deemed “high risk” under the new EU rule and switching to larger, less scrupulous and less ethical suppliers, but with larger capital to comply. This, ultimately, would undermine the EU’s intention, she said.

Tran Quynh Chi, a regional director at IDH – the Sustainable Trade Initiative, a social enterprise headquartered in the Netherlands, told Mongabay the new rules serve as an opportunity for forest commodity sectors to develop more responsible approaches to business. “This is really an opportunity to make the markets and the sector transformed toward more transparency and sustainability,” Tran said.

Tran said 10-15% of smallholders engaged in the coffee sector in Vietnam live in poor rural regions close to forest edges. If mechanisms aren’t put in place to help such producer groups maintain access to supply chains, “there’s a very big risk that they’ll be excluded from the EU market, and that will drive up poverty levels,” she said.

Tran and her colleagues are now piloting a product traceability system in Vietnam in cooperation with smallholders, local governments and companies, with the end goal of developing sustainable business models that encourage producers and companies to join traceability schemes.

They’re also helping smallholders form farmers’ groups and cooperatives, “where they have sustainable governance structures and can reliably access big markets like the EU and meet the new regulation requirements.”

Ensuring that no one is left behind isn’t only important for people’s well-being, but also for environmental protection, Tran said. Smallholders living close to natural forests who are unable to comply with the new regulations “might be forced to go further into the forest to eke out a living” if excluded from EU supply chains.

“If we don’t provide them an alternative, then they have no other choice but to cut the forest. They still have to live,” Tran said.

Source : Mongabay

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