By Chris Wellisz
Developing countries must contend with a plethora of trade-related regulations as well as voluntary standards to meet market demands aimed at ensuring that global value chains comply with environmental and social objectives.
Among them is the European Union’s Deforestation Regulation (EUDR), which is part of a broader EU effort to reduce carbon emissions and preserve biodiversity.
The regulation requires EU businesses placing wood, coffee, cocoa, palm oil, and several other commodities onto the EU market to demonstrate that these goods aren’t linked to deforestation. In practice, the burden of supplying data to show compliance falls largely on suppliers, many from countries where small and medium-sized firms predominate.
With the approach of a 30 December, 2024, deadline for compliance, the World Bank convened a seminar to discuss the challenges facing developing countries seeking to meet their climate goals while continuing to leverage international trade to reduce poverty and generate jobs.
Participants included representatives of the private sector, government, and international organisations. The following transcript has been edited for length and clarity.
Miguel Ángel García Paz, Peru’s Director of Aid for Trade at the Ministry of Foreign Trade and Tourism, discussed the hurdles facing the government and the private sector in the trade of coffee and cocoa, which are important exports to the EU. Peru has been working with the World Bank to map gaps in its ability to comply with the EUDR to identify ways to fill those gaps.
First, it would be ideal to have more information, especially from the European Commission, regarding how these requirements will be met and how our exporters can demonstrate compliance.
Second, although we are currently in the process of registering certain aspects of our small producers related to the EUDR, we would like to proceed at a faster pace since time is short. In this sense, the support of international cooperation through knowledge, resources, and technological solutions will be of great help.
Third, we must develop the capacities of our regional and local governments, which will be critical in assisting small producers and exporters.
Additionally, the private sector itself needs to strengthen its capacities. While they are aware of this regulation, they lack detailed knowledge of it. Therefore, they need training and more information.
Abdullah Bagersh, general manager of SA Bagersh Plc, an Ethiopian coffee exporter, discussed the difficulties of tracing the origin of coffee produced by close to 5 million smallholder farmers, who supply about 30 percent of their crops to the EU through a network of processors and other traders.
We have been frantically trying to figure out exactly what needs to be done and what are the requirements. When the regulations came out, they explained what is required in a very general way. But in terms of practice and implementing these requirements, it would mean setting up a lot of infrastructure.
Each of these farmers must be geolocated. And then the flow of coffee, which is typically a few tens or a few hundreds of kilos coming from each farmer, must be traced through this network until it is included in a container of coffee in one of several hundred exporters’ warehouses, and all of that must be tracked to confirm that it has not caused deforestation.
It can be done, but over maybe a span of 10 years with an army of technical workers going out and managing all these relationships with each farmer and measuring these locations. It will be impossible for us to meet the 30 December deadline.
Ignacio García Bercero, former Director at the Directorate General for Trade at the European Commission, described the support offered by the Commission.
There’s a lot of consciousness in Europe that as we look to the implementation of legislation like the Deforestation Regulation, we need to be very conscious about potential impacts on low-income and low middle-income countries.
My colleagues in Brussels are very, very conscious about the importance of providing the necessary information for companies to be able to comply. The European Union has also been very much involved in developing the technical assistance and technical support, and I think it’s very good news that the World Bank is also playing an important role.
Shane Sela, Senior Trade Facilitation Specialist at the World Bank, discussed the technical and financial assistance offered by the bank.
Coffee production is very different than palm oil or wood. And coffee production in Latin America is quite different from coffee production in Africa. So, it really is a question of understanding how that value chain operates and what type of capacity support is needed. That is something that the World Bank can do.
The Bank has financial instruments that can provide needed support. It might be in areas of supporting the private sector to access financing. It might be in terms of providing digitalisation for the government or providing interoperability between existing systems that are tracking some of the information that is needed to prove compliance.
The challenge is identifying what information is required to confirm compliance, but also being able to transfer that data through the value chain back up to the buyer. Some of that data might be in government hands, some might be in private-sector hands. It all needs to be harmonised and transferred.
The World Bank through its convening capacity can bring together the actors that need to be involved in the discussion to have the conversation with the EU and between the various actors in the value chain.
Kimberley Botwright, Head of Sustainable Trade at the World Economic Forum, described Action on Climate and Trade, a joint initiative with the World Bank and World Trade Organisation.
We’re bringing our respective programmes, knowledge, networks, and insights and putting them at the service of governments to help them figure out and develop a strategy for dealing with issues at the nexus of trade and climate change.
We’re starting in Indonesia and Rwanda this year. We go through a process of about six to nine months where we meet with the government, we understand where they are now in thinking about trade and climate and green trade issues. At the end of the process, we run a two-day public-private workshop to really dig into the analysis, unpack it, and align on priorities that can be moved forward.
It’s also about helping the stakeholders in-country to think about their strategy. That means the local private sector and how it connects with global multinationals as well as bringing those global multinationals into the conversation.
