How EU’s ban on deforestation-linked goods will affect Thailand
The European Union introduced the EU Deforestation Regulation (EUDR) in June 2023 in a bid to combat worldwide deforestation.
This regulation will initially affect seven groups of products, including rubber, palm oil, cattle, timber, coffee, cocoa and soybean, as well as derived products like rubber gloves, paper and wooden furniture.
The regulation mandates rigorous scrutiny and origin reporting for goods to ensure they are not tied to deforestation. Currently, in the transitional phase, the EUDR will be fully implemented on December 30, 2024.
Assessing EUDR’s global implications, Thailand’s Krungsri Research has expressed concerns for importers and exporters worldwide due to its advanced and strict nature.
The EUDR this year covers imports worth US$401.1 billion (14 trillion baht) in 2022, with timber and wood products accounting for 56.3% of total EU imports.
Most affected countries
Germany stands out as a crucial supplier of EUDR goods, featuring among the top five import sources for all goods. Other major exporters include Poland, Italy, the Netherlands, France and Belgium.
While the impact on EU trade is initially expected to be limited, it will likely rise with the expansion of EUDR’s product range.
Impact on Thailand
Although the EUDR does not impose deforestation costs, Thai entrepreneurs may face increased expenses in the form of the Carbon Border Adjustment Mechanism (CBAM).
Notably, this includes costs associated with inspecting and reporting that the manufacturing of products aligns with EU criteria.
The EUDR is expected to affect Thailand in the following ways:
• Rubber, wood and oil palm industries: Manufacturers and exporters may encounter higher costs related to reporting and supply chain traceability.
• Competitive concerns: Small entrepreneurs may struggle to remain competitive if they fail to meet EUDR criteria.
• Global disconnection risk: Thailand may gradually be disconnected from global supply chains and investment is classified as a high-risk country.
Opportunities for Thailand
While challenges loom, Thailand has a chance to benefit if it adapts by:
• Developing data storage and tracking systems for traceability
• Enforcing environmental, social and governance laws effectively
• Supporting sustainable production standards for farmers and SMEs
• Opening trade and investment opportunities in the EU and global production chain
• Elevating conservation efforts for forest areas and aligning with global sustainability trends.
