One of the sayings that is often ignored in public policymaking is that there is often a simple, elegant, and wrong solution for a complex issue. The European Union’s (EU) so-called anti-deforestation legislation seems to be another example of this.
The measure compels companies that trade or export to the EU to put into practice a due diligence system to ensure that their products comply with a series of requirements, among them the guarantee that they do not come from areas with suppression of native vegetation, legal or illegal, after December 31, 2020. The legislation applies initially to rubber, coal, cocoa, coffee, beef, timber, palm oil, paper, soybean, and some products derived from these chains such as leather, chocolate, and furniture.
The EU states that the new measure will assure European consumers that the products traded in the bloc do not add to the destruction of forests and thus reduce the impact of its 27 countries on climate change and global biodiversity loss.
Some questions that should be made on this proposal: does the measure not go beyond what is reasonable to achieve the legitimate goal of fighting climate change? What will be the impacts of increasing production costs and food prices? How can European requirements be compatible with different national legislations, international agreements and commitments?
Based on the information released so far, one may think that the rule has the potential to create a trade detour and punish especially developing and underdeveloped countries.
The rule has an extraterritorial aspect and does not consider the legislation of each country and the established law to exploit private property, as well as not differentiating legal and illegal deforestation. This is a critical point of the proposal. In the case of Brazil, the national legislation allows the opening of areas, and the authorized percentage depends on the biome where the property is located and varies from 20% to 80%. The European norm will have the same impact as someone who purchases a property and, after years of living there, finds out that he or she can no longer use all its rooms.
The bill also lacks measures to strengthen the environmental ability of less developed countries and brings only punitive measures, failing to acknowledge the challenges faced by middle- and low-income nations to put into practice their environmental legislation, often due to the lack of financial and/or institutional ability.
The choice of products encompassed by the measure also has little effect on European agricultural production, since most of the impacted goods are not produced in the European bloc, such as coffee and cocoa.
The EU is the second main destination for Brazilian agricultural and livestock products, second only to China. From January to November of this year, Brazil exported US$ 23.8 billion to the bloc, 16% of all agribusiness exports in 2022. Due to its relevance, the sector must be aware of these and other measures that may negatively impact Brazilian exports.
The coffee chain, for instance, exports 49% of its production to the European market. In Brazil, there are 264 thousand coffee producers, most of them small and/or family-owned, who will have to adapt to the measure or will be left out of the European market.
The proposal will apply stricter measures to countries at greater risk of deforestation—which as a rule are developing nations—and will create competitive advantages for the ones with a temperate climate and greater development level, even though these have already depleted most of their natural resources.
Considering the current inoperative dispute settlement body of the World Trade Organization (WTO), a measure of this nature causes even more concern.
As a sector that depends on climate conditions to produce, agribusiness, not only advocates the adoption of emission-reducing measures but is also part of the solution.
A global and complex issue like climate change cannot be addressed thusly, with unilateral measures that hurt international trade and food security. Progress on the issue must consider actions in broader ways and use the appropriate forums. There is no magic or simple formula.
Sueme Mori is the Director of International Relations at the Brazilian Confederation of Agriculture and Livestock (CNA). Written in collaboration with Matheus Dias de Andrade, CNA Technical Advisor.