WTO implications of the proposed “no risk” amendment to the EUDR
The EU Regulation on Deforestation-Free Products (EUDR) faced significant political pressure following its adoption, culminating in a proposal by the European Commission to delay its implementation and a series of legislative proposals in the European Parliament aimed at revising and weakening its core provisions. Among the most contested proposals was the introduction of a “no risk” country category under the EUDR’s existing risk benchmarking system — which classifies countries as high-risk, low-risk, or standard-risk according to their perceived risk of producing non-compliant commodities. The “no risk” amendment would exempt countries that fall within its scope from two key EUDR requirements, namely: that products placed on the EU market are deforestation-free; and the submission of a due diligence statement. These exemptions would make the “no risk” rating much less stringent than the existing benchmarking system.
According to the authors that proposed the amendments, to fall within the “no risk” exemption countries must meet three criteria: (i) their forest area development must have remained stable or have increased compared to 1990; (ii) they must have signed the Paris Agreement and international conventions on human rights and on preventing deforestation; and (iii) they must strictly implement and enforce regulations on preventing deforestation and forest conservation at the national level. While the criteria were presented as robust, critics argued that they would in practice exempt a broad range of countries regardless of their actual deforestation risk, fundamentally undermining the Regulation’s core logic and ambition.
Commissioned by Fern, this study undertakes a preliminary assessment of the WTO consistency of the EUDR, with a particular focus on the “no risk” amendment. The analysis finds that, should the “no risk” amendment be adopted, it would likely render the EUDR inconsistent with various provisions of the WTO covered agreements. In particular, a Regulation with a “no risk” exemption would amount to impermissible discrimination in violation of GATT Articles I and III. Moreover, such WTO inconsistencies would not be justifiable under the general exceptions clause of GATT Article XX, as the “no risk” exemption would likely constitute arbitrary or unjustifiable discrimination under the chapeau of that provision. Should a panel find the EUDR to be a technical regulation, it would likely also violate Article 2.1 of the TBT Agreement.
Any unresolved inconsistencies with WTO obligations could have significant implications for the EU. It would, for example, increase the likelihood of aggrieved WTO Members successfully challenging the EUDR before a WTO panel. The ultimate outcome of any such WTO dispute settlement process would depend on several variables given the current impasse to appoint appellate adjudicators. Nonetheless, a finding of WTO inconsistency could reinforce pushback from trading partners against the EUDR, risk hurting the EU’s credibility as a key player in multilateralism, and undermine the EU’s pioneering approach to global sustainability.
The “no risk” exemption was ultimately not included in the final text agreed by EU lawmakers, who instead voted to postpone the implementation of the EUDR by 12 months, while the Commission committed to providing further clarifications and exploring additional simplifications in full compliance with the objectives of the Regulation.
