Ethiopia’s coffee exporters heave a sigh of relief as the pending implementation of the European Union’s Deforestation Regulation (EUDR) gets tabled for a year-long extension. The EU Commission proposed the extension last week after considerable pressure from international trading partners, lawmakers, and business groups. If the proposal gets approval from the EU parliament next month, it would see the December 30 deadline get pushed by a year.
While seven commodities (cattle, cocoa, coffee, palm oil, rubber, soy, and wood) fall under the EUDR’s purview, coffee represents a uniquely valuable economic bridge between Ethiopia and the EU. The 27-member strong union accounted for 34.5% of all merchandise exports from Ethiopia in the second quarter of 2023/204, with coffee contributing nearly a third of the total outflow.
UK-based think tank ODI recently modeled the potential fallout from EUDR on Ethiopia. In the most extreme scenario, where exports to the EU cease completely, Ethiopia could face an 18.4% drop in overall exports, a 5.8% fall in imports, a 0.6% decrease in GDP, and a 3.3% reduction in public revenue.
The EUDR introduces stringent due diligence requirements to ensure that the agricultural commodities imported into the Union are free of links from deforestation, forest degradation, human rights violations, and even indigenous community rights post-December 2024. Compliance with these standards entails investments in geo-referenced production, which gets tricky for countries like Ethiopia that aggregate coffee produced from around 5 million smallholder farmers. Nearly 85% of Ethiopia’s coffee is planted on less than half a hectare.
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