An agreement between the European Union and a South American trade bloc comprising Brazil, Argentina, Paraguay, and Uruguay could include a “rebalancing mechanism” that allows member states to challenge the EU’s deforestation regulation (EUDR) if it is deemed to harm the bloc’s trade interests.
Known as Mercosur, the pact encompasses more than 700 million people and accounts for over a quarter of global GDP. It was formally passed for ratification by the European Commission on Wednesday. The inclusion of the rebalancing clause, however, has prompted warnings from environmental groups that it could be used to further water down the regulation.
Laura Restrepo Alameda, Advocacy Coordinator at Climate Action Network Latin America, said the EUDR was “among the files most at risk.” Her comments come as Global Forest Watch reported record global forest loss in 2024, with nearly seven million hectares of tropical primary forest destroyed — almost double the 2023 figure. Brazil accounted for more than 40% of that loss, driven partly by cattle ranching and soybean production. Despite this, the European Commission designated Brazil as ‘standard risk’ in May.
Under the EU’s risk‑based system, companies sourcing from low‑risk countries must prove their products are deforestation‑free, but are not required to assess or actively manage deforestation risks. The Commission was already under pressure to dilute the law, which was originally due to take effect in January 2025 but was postponed by one year last November. A Commission‑commissioned report estimated that a further one‑year delay could result in an additional 230,000 hectares of global deforestation.
The regulation is also facing pressure from the United States. Last month, Wood Central reported that a July agreement between the EU and U.S. President Donald Trump to avert 30% tariffs on European exports, negotiators are working to “address the concerns of US producers and exporters regarding the EU Deforestation Regulation” with the aim of “avoiding undue impact on US–EU trade.” Although the U.S. is currently listed as ‘low risk’, trade officials are lobbying for a new ‘negligible risk’ category that would streamline due diligence for all U.S.-origin products, effectively creating a “green lane” for $3 billion worth of forest products exported to the EU each year.
- To learn more about the EUDR’s country classification scheme, click here for Wood Central’s special feature. And to understand why transhipment can muddy the waters on compliance and enforcement, click here for more information.
