Adapting to the EU Deforestation Law, Vietnam's Tactical Way to Win the European Market
Instead of refusing, Vietnam chose to adapt to the European Union's Deforestation Law to win the coffee market in Europe.
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Vietnamese coffee farmer, Le Van Tam, shows his coffee plants in his garden in Dak Lak Province on February 1, 2024. Since 2019, he has transformed the processing of his coffee garden to be environmentally friendly and sustainable, abandoning the use of chemical fertilizers.
Le Van Tam started his coffee business from scratch. He began by planting robusta coffee on a piece of land outside the city of Buon Ma Thuot, a highland region about 1,300 kilometers south of Hanoi, Vietnam, since 1995. He has been engaged in this activity for almost three decades, making him knowledgeable about the ins and outs of global coffee trading.
For years, Tam has focused on quantity rather than quality. To improve his harvests, he used large amounts of fertilizers and pesticides.
Starting from 2019, Tam made a 180-degree change. He left behind pesticides and chemicals and switched to organic products after collaborating with Le Dinh Tu from Aeroco Coffee, an organic coffee exporter. Their target market for coffee is Europe and the United States.
Coffee plantation processing is now more "green" and sustainable. Now, coffee plantations resemble forests, even though sunlight can still penetrate through dense leaves and shine on the surrounding soil of the plants.
Also read: Destroyed Forest Wider Than Indonesian Palm Oil Plantations, European Union Proposes Restoration
Not only is his garden always planted with coffee plants. Tam's robusta coffee plants grow alongside the tamarind trees that send nitrogen into the soil and support the growth of black pepper plants.
Tam changed his mindset. Instead of removing grass around his coffee plants, he views it as a plant that helps maintain soil moisture and prevent pests. The intercropping he has been practicing has also increased Tam's income.
Tam said that the production of his coffee plants had not increased. "But, the value has increased," said Tam.
Le Van Tam, a coffee farmer from Vietnam, shows freshly picked coffee beans from his farm in Dak Lak Province, Vietnam, on February 1, 2024.
The massive growth of coffee agriculture in Vietnam since the 1990s has contributed up to one-tenth of Vietnam's export value. In the year 2000, Vietnam became the world's second largest coffee producer.
European Deforestation Act
The confusion regarding the implementation of the Deforestation Law which was passed by the European Union (EU) last year has made many countries nervous. This is because the EU requires imported agricultural products to be products sourced or grown in gardens. In other words, the product is not harvested on land designated as forest.
Starting December 30, 2024, under the EU Deforestation Act (EUDR), the European Union will prohibit the sale of products harvested on deforested land to European Union countries. Coffee is one of the agricultural products targeted by the law, along with cocoa, soybeans, palm oil, wood, rubber and livestock products.
Starting from December 30, 2024, based on the European Union Deforestation Regulation (EUDR), the European Union will prohibit the sale of products harvested from deforested lands to EU countries.
According to the law, business entities or individual entrepreneurs are not allowed to sell their products to Europe if they cannot prove that the products they produce are not related to deforestation or forest destruction.
This new rule aims to reduce the risk of illegal logging and large-scale deforestation. In order to sell these products in Europe, large companies must provide evidence that the products come from land where the forests have not been logged since 2020. The requirements for individual or small business entities are simplified. They have until July 2025 to prepare everything.
A worker waters coffee seedlings being sown at a nursery in Dak Lak Province, Vietnam, February 1, 2024.
Deforestation is the second-largest source of carbon emissions after fossil fuels. According to a 2021 report by the World Wide Fund for Nature, Europe ranks second after China in the amount of deforestation caused by imports in 2017.
"If implemented properly, EUDR can help reduce deforestation, especially if strict standards for tracing the origin of these products become a new norm," said Hellen Bellfield, Director of Global Canopy Policy.
Also read: European Union tries to pressure Indonesia via EUDR
However, the potential for failure is also present. Manufacturers can choose to redirect the sale of their products that do not meet the requirements to other countries or regions without reducing deforestation rates.
The fate of small farmers
Another potential issue is the thousands of small farmers who do not have access to technology and will be marginalized by these regulations. Bellfield said that this ultimately results in the readiness of larger businesses or entities to respond to these new regulations.
He stated that the government must assist small farmers by building a national system to ensure that their exports can be traced. If not, consumers in Europe may buy from large agricultural lands that can prove their compliance.
This situation happened to the coffee farmers of Ethiopia. Ethiopian coffee orders continue to decline. Likewise with Peru. In this Latin American country, state institutions do not have the capacity to provide the necessary information about coffee and cocoa grown in the Peruvian Amazon region. In fact, according to research by the Amazon Business Alliance and USAID, some farmers do not even have land titles.
Meanwhile in Vietnam, challenges faced are more inclined towards natural conditions, not technological or administrative issues. "There will be winners and losers," said Bellfield.
Workers are drying coffee beans at a processing plant in Dak Lak Province, Vietnam, on February 1, 2024. The Vietnamese government does not want to lose the European coffee market and is ready to adapt to the EU Deforestation Law.
Adapt or fall
Tam and Tu, their export partners, have been preparing to face the implementation of the regulation. From a business perspective, they have been ready and adaptable. Although the cost is higher, Tu said that they can get a better price for high-quality coffee.
"We have to choose the highest quality. Otherwise, we will always be workers," said Tu as he sipped his favorite coffee in his company's coffee processing plant located next to Tam's farmland.
Also read: Palm Palm Ban, European Union's Love Language or Trade Politics?
In that location, dozens of trucks queue up to unload red coffee fruits, both robusta and arabica, coming from other plantations. In this factory, the drying process until the final product, roasted coffee beans, is carried out.
Tu already has a certificate from an international sustainability institution that allows it to overcome the obstacles of EUDR. However, according to David Hadley, Director of the Preferred by Nature Impact Program in Costa Rica, there may be a need for adjusting administrative obligations in each country.
Workers sort coffee beans at a factory in Dak Lak Province, Vietnam, February 1, 2024.
Vietnamese Minister of Agriculture Le Minh Hoang stated that facing the EUDR, Vietnamese farmers must not suffer losses because Europe is their biggest coffee market. According to data from the Vietnamese government, 40 percent of Vietnamese coffee products are sent to several European countries.
Also read: The World Fails to Address the Roots of Climate Change Problems
Efforts to adjust to the destination zone regulations have been made well in advance. Just six weeks after the approval of EUDR in June 2023, the Vietnamese Ministry of Agriculture began preparing coffee-producing provinces to face the transition.
Only six weeks after EUDR was approved in June 2023, Vietnam's Ministry of Agriculture began preparing coffee-producing provinces to face the transition.
The Vietnamese government has launched a national plan that includes a database of coffee plantation locations and mechanisms for tracking such information.
The Ministry of Agriculture of Vietnam stated in August 2023 that they have long been promoting sustainable agriculture. In their view, regulations such as EUDR cannot be avoided. In fact, in the government's perspective, the existence of EUDR accelerates the transformation process, not only in terms of agricultural administrative technology, but also in green and sustainable agricultural practices.
Workers move sun-dried coffee beans at a processing factory in Dak Lak Province, Vietnam, February 1, 2024.
Nevertheless, the challenges persist. Ensuring that half a million small-scale farmers in Vietnam are able to collect and provide data in accordance with EU's requirements will not be easy. Loan Le from International Economics Consulting said that many farmers will have difficulty using smart devices to determine the geolocation coordinates of their gardens.
Small exporters also need to prepare a system to prevent non-certified products from mixing with coffee that has met the EUDR standard requirements, including documents proving that they comply with national land use regulations in Vietnam, environmental protection, and labor regulations.
Also read: World Agrees to Accelerate Joint Climate Action
The ultimate goal is the digitization of the long coffee value chain, from production to collection and processing, which is free from documentation and recording errors.
Brazil-Ethiopia contrast face
Apart from Vietnam, Brazil—the world's largest coffee producer—is better prepared. Bellfield said, apart from the fact that the coffee land is far from forests and has a relatively better supply chain, a third of Brazilian coffee farmers already have sustainable coffee processing certification.
The European Union is still giving small farmers a grace period to adjust to the new regulations. The EU, in collaboration with countries affected by the regulations, aims to "allow for a transition" while giving "special attention" to the needs of small-scale farmers and indigenous communities. A review in 2028 will also examine its impact on small farmers.
Meanwhile, Ethiopia, a country where one-third of its income comes from coffee, is considered slow to react. Gizat Worku, Chairperson of the Ethiopian Coffee Exporters Association, stated that the national action plan launched in February 2024 was deemed unsuccessful in collecting data from millions of small coffee farmers and passing it on to potential buyers. Resource constraints became a constraint.
Giza stated that the order for Ethiopian coffee has decreased due to doubts about the country's ability to comply with EUDR. Some traders are considering shifting to other markets, such as the Middle East or China, where Ethiopian coffee is booming. However, moving markets is not easy. "This regulation will have a tremendous impact," said Giza. (AP)
