Reconciling GHG Mitigation Objectives and WTO Rules: the EUDR’s Key Challenges under the TBT Agreement

Table of Contents: 1. Introduction. – 2. The impact of the EUDR on imported products: an analysis of the measure’s key features. – 3. Legal analysis of the EUDR under the TBT Agreement. – 3.1. The qualification of the measure under the TBT Agreement. – 3.2. Legal assessment under Article 2.1 TBT Agreement. – 3.3. Analysis pursuant to Article 2.2 of the TBT Agreement. – 4. Conclusion.

Abstract: The European Union Deforestation Regulation (EUDR) represents a major policy instrument aimed at halting deforestation and forest degradation while contributing to climate change mitigation by regulating trade in certain deforestation-risk products and commodities. This paper evaluates the EUDR’s compatibility with the World Trade Organization’s (WTO) Agreement on Technical Barriers to Trade (TBT Agreement), focusing on the principles of non-discrimination and necessity under Articles 2.1 and 2.2. The paper situates the analysis within the broader context of the climate crisis, highlighting the increasing use of trade-related measures by the European Union (EU) and other WTO Members to achieve environmental objectives. It assesses the EUDR’s risk-based approach, considering whether it constitutes a legitimate exercise of regulatory autonomy or whether it amounts to arbitrary or unjustifiable discrimination and unnecessary barriers to trade, particularly for developing and least-developed countries. Drawing on relevant WTO case law, including the EU – Palm Oil (Malaysia) dispute, the study anticipates potential outcomes should the measure be challenged. The findings indicate that although the EUDR imposes significant compliance costs with trade implications, its core objectives are justifiable under WTO law and thus likely legitimate. However, elements such as unilateral benchmarking and the imposition of differentiated obligations based on it may give rise to concerns regarding potential WTO inconsistency. The paper argues that the EUDR exemplifies the need to align climate-related trade measures with WTO disciplines, which provide tools to balance climate mitigation and trade liberalization. Parallels with the EU’s Carbon Border Adjustment Mechanism, already under WTO scrutiny, highlight the broader systemic implications of trade-climate interactions.

Keywords: EUDR – trade-related climate measures – TBT Agreement – deforestation – mitigation – climate change.

1.   Introduction

Climate change constitutes one of the most pressing and complex crises confronting the contemporary world. As early as the late 1980s, States recognised the phenomenon as a ‘common concern of humankind,’ necessitating timely multilateral cooperation and concerted action.[1] Since then, governments have consistently recognized climate change mitigation, especially the reduction of greenhouse gas (GHG) emissions, as a global priority.[2]

Despite the adoption of three major multilateral treaties in this field – the 1992 United Nations Framework Convention on Climate Change (UNFCCC),[3] the 1997 Kyoto Protocol,[4] and the 2015 Paris Agreement[5] – States continue to encounter considerable challenges in aligning domestic implementation measures with the commitments undertaken, and in achieving substantial reductions in GHG emissions.[6]

In this context, deforestation and forest degradation significantly exacerbate climate change by increasing GHG emissions.[7]The burning of forests not only results in the irreversible loss of essential carbon sinks, but also diminishes the adaptive capacity of affected regions and contributes directly to the release of carbon dioxide (CO₂) into the atmosphere.[8]

Against this backdrop, an examination of the nationally determined contributions (NDCs) submitted pursuant to the Paris Agreement reveals a discernible tendency among States to employ trade-related measures as instruments for advancing their climate mitigation objectives. [9] This development has been enabled, in particular, by the flexible, bottom-up architecture that underpins the design of the Paris Agreement[10] and has proven to be effective in reducing GHG emissions.[11]

The European Union (EU) has, over time, assumed a leading role in the adoption of trade-related climate measures. It has introduced a series of initiatives designed to advance its ambitious climate objectives, most notably the pursuit of climate mitigation and neutrality.[12] One of the most prominent initiatives in this regard is the ‘Fit for 55’ legislative package,[13] which contains an extensive array of trade-related measures in support of the Union’s climate ambitions. Among these, the Carbon Border Adjustment Mechanism (CBAM)[14] and the Regulation on Deforestation-Free Products (EUDR)[15] have attracted particular controversy, especially in relation to their consistency with the law of the World Trade Organization (WTO). 

Although their primary rationale is climate mitigation, these measures are trade-related in nature and, having been adopted by the EU as a WTO Member, must comply with the rules and principles of the multilateral trading system.[16]

For reasons of brevity and clarity, this paper will confine its analysis to the EUDR, examining its compatibility with the Agreement on Technical Barriers to Trade (TBT Agreement),[17] which would, in all likelihood, constitute the first point to be analysed by a panel in the event of a dispute.[18]

The significance of this study lies not only in the growing number of trade-related climate mitigation measures being introduced by WTO Members,[19] but also in the fact that the EUDR’s ‘problematic sibling’ – the EU CBAM – has recently been challenged before the WTO Dispute Settlement Body (DSB).[20] It is therefore highly likely that the EUDR will also face a legal challenge. Indeed, the measure has already attracted considerable criticism within the Committee on Technical Barrier to Trade (TBT), the Committee on Market Access (CMA), and the Council for Trade in Goods (CTG) from other WTO Members.[21] Concerns have also been raised regarding the Regulation’s potential adverse effects on developing countries.[22]

In instances of non-compliance, WTO Members are initially obligated to bring their measures into conformity. In the event of non-compliance, they may be subject to compensation and the suspension of concessions or other obligations by other Members.[23]

Against this backdrop, the present study seeks to anticipate the potential findings of a panel based on precedents established in previous case law. The analysis proceeds as follows: first, it considers the impact of the EUDR on the importation of the covered products and commodities within the EU market; second, it highlights the relevance of the TBT Agreement and explores the challenges associated with the legal qualification of the measure; and finally, it evaluates the EUDR in the context of the principle of non-discrimination under Article 2.1 and the requirement to avoid unnecessary trade restrictions under Article 2.2 of the TBT Agreement. The concluding section will offer final reflections on the compliance of the EUDR with the TBT Agreement and – more broadly – the legitimacy of trade-related climate mitigation measures. 

2.   The impact of the EUDR on imported products: an analysis of the measure’s key features

The EUDR was adopted on June 29, 2023, with the aim of mitigating GHG emissions and preserving biodiversity by ensuring that specified products placed on, or exported from, the EU market do not contribute to deforestation or forest degradation globally.[24] In practice, the Regulation attempts to address the impact of the EU on global deforestation[25] and forest degradation[26] by promoting the consumption of ‘deforestation-free’ products. In this regard, the EUDR applies to both illegal and legal deforestation when the criteria set forth in the definition of ‘deforestation’ are met.[27] Precisely, the adjective ‘deforestation-free’ refers to commodities and products that ‘have been produced on land that has not undergone deforestation after December 31, 2020, and in the case of relevant products that contain or have been made using wood, that the wood has been harvested from the forest without inducing forest degradation after December 31, 2020’.[28] These commodities are currently seven and consist of cattle, cocoa, coffee, palm oil, soya, rubber, wood, and soya as well as certain ‘covered’ products, which contain, have been fed with or have been made using these commodities. These products include meat of cattle i.e. beef, leather, cocoa butter, chocolate, selected palm oil-based derivates, furniture, printed paper, and plywood.[29]

The EUDR applies to both imported and exported products, with no provision for exemptions. It establishes a comprehensive prohibition on the placement or availability[30] of the designated commodities and products within the EU market, encompassing both importation and exportation. 

This prohibition is governed by three cumulative criteria, all of which must be met for commodities and products to qualify for entry into the EU market. Specifically, the commodities and covered products must: (i) have been produced on land that has not undergone deforestation or forest degradation after December 31, 2020; (ii) comply with the ‘legality requirement,’ meaning they must have been produced in accordance with the relevant laws and regulations of the country of production; and (iii) be covered, upon entry into the EU, by a Due Diligence Statement (DDS).[31]

As evidenced by the multiple delays in its implementation, the EUDR imposes complex and multifaceted obligations that are likely to exert a significant impact on the imports of the covered goods.[32]

Notably, the due diligence obligations are tripartite and are applicable to both operators and traders, albeit in slightly different manners.[33] These entities are indeed required to establish and maintain a due diligence system – a comprehensive framework for collecting relevant information[34] – conduct risk assessments[35] and implement risk mitigation measures.[36] In addition, operators must prepare a DDS and submit it through an information system to ensure transparency.[37] Finally, both operators and traders are required to communicate all pertinent information to other operators and traders further down the supply chain, including the reference numbers of DDS filed with the competent authorities.[38]

Against this background, it is noteworthy that the applicable due diligence obligations are also subject to variation based on the deforestation risk present in the country of origin. The EU has implemented a process for unilateral benchmarking and categorizing countries or parts of countries, including EU Member States, with the objective of assigning each country a risk level for deforestation (low, standard, and high).[39] The recently published list reflects these risk levels[40] and determines the scope and intensity of due diligence obligations. Products and commodities originating in low-risk countries are subject to simplified obligations,[41] whereas those from standard- or high-risk countries must comply with the full range of requirements. Importantly, the classification of countries is not static; it may evolve over time as new evidence becomes available.[42]

In instances of non-compliance with orders issued by the national authorities –responsible for conducting checks using a risk-based approach[43] and reviewing documents kept by the EU operators and traders – or in instances of repeated infringements, the authorities of Member States may impose a comprehensive range of sanctions on operators and traders.[44] Such sanctions may include, but are not limited to, temporary import bans, fines, and other forms of economic sanctions.[45] Furthermore, the products in question and any revenues derived from them may be confiscated, and non-compliant companies may be prevented from receiving public funding and participating in public procurement procedures.[46]

Given the characteristics outlined above, it is evident that the Regulation entails significant administrative and bureaucratic costs and may, therefore, create barriers to trade, particularly for products originating from standard- and high-risk countries. This underscores the necessity of assessing the Regulation carefully under WTO law.

In this context, it is noteworthy that WTO law grants Members a degree of ‘policy space’ to pursue non-economic objectives, including environmental protection, subject to conditions that generally require a balancing of interests in the form of exceptions and exemptions. 

Accordingly, the following sections examine the EUDR specifically in relation to the non-discrimination and necessity principles under the TBT Agreement.

3.   Legal analysis of the EUDR under the TBT Agreement 

As mentioned above, despite its climate mitigation purpose, the EUDR has been the subject of criticism from many WTO Members, particularly developing countries and emerging economies belonging to the BRICS group.[47] These Members have maintained that the EUDR breaches, inter alia, the non-discrimination and market access commitments under the GATT,[48] as well as the non-discrimination obligations under the TBT Agreement, and constitutes an unnecessary barrier to trade.[49]

As the TBT Agreement ‘expands on pre-existing GATT disciplines,’[50] measures to which both the GATT and the TBT Agreement apply[51] should be assessed primarily under the TBT Agreement,[52] which will indeed be the focus of this analysis.

In addition to the criticisms related to WTO Agreements, the EUDR has also been alleged to conflict with one of the foundational principles of the international climate change regime, namely the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC),[53] as embedded in Articles 2.2 and 4 of the Paris Agreement.[54] In practice, some WTO Members view the EUDR, similarly to the CBAM, as a measure that imposes unilateral climate standards and constitutes a trade barrier to trade for third countries, especially developing nations.[55]

Both the EUDR and the CBAM apply their requirements uniformly, without taking into account countries’ differentiated responsibilities, respective capabilities, or particular national circumstances.[56] While a full assessment of the EUDR under the CBDR-RC principle lies beyond the scope of this study, this principle may nevertheless inform the interpretation of WTO provisions, notably Article 2.1 of the TBT Agreement, as interpreted in light of Article XX of the GATT.[57]

Given the broader scope and complexity of the matter, this paper focuses specifically on a limited set of aspects under the TBT Agreement that have generated considerable debate, namely the qualification of the EUDR as a technical regulation within the meaning of Annex 1.1, and its compliance with Articles 2.1 and 2.2 of the TBT Agreement.

3.1.  The qualification of the measure under the TBT Agreement

The preliminary issue that arises under the TBT Agreements concerns the legal qualification of the measure.[58] This passage constitutes a fundamental prerequisite for conducting a proper legal analysis under the relevant provisions of the TBT Agreement. As a matter of fact, different obligations are imposed depending on whether the measure qualifies as a technical regulation, standard, or conformity assessment procedure. 

In the case of the EUDR, the qualification of the measure has proven controversial. A notable divergence has emerged between the EU and other WTO Members regarding the characterization of the EUDR as a technical regulation.[59] Within the WTO Committees, the EU has maintained that the Regulation does not constitute a ‘technical regulation,’ as it neither establishes nor imposes any product characteristics, whether positively or negatively.[60] In contrast, several WTO Members have contested this view, contending that the EUDR does, in fact, establish or mandate product characteristics and therefore falls within the scope of a technical regulation.[61]

Annex 1.1 TBT Agreement defines a technical regulation as ‘a document[62] which lays down product characteristics or their related processes and production methods, including applicable administrative provisions, with which compliance is mandatory […].’ However, to establish whether a measure fulfils these requirements the WTO dispute settlement bodies have set out a three-tier test[63] requiring that it (i) applies to an identifiable product or group of products; (ii) lays down product characteristics or related processes and production methods (PPMs);[64] and (iii) its compliance with the product characteristics laid down is mandatory. In addition, the determination of whether a particular measure constitutes a technical regulation shall be made in the light of the characteristics of the measure at issue and the circumstances of the case.[65]

Against this background, the question of whether the EUDR satisfies these requirements arises. Article 3 EUDR sets out a general prohibition to place or make available on the market or export the relevant commodities and relevant products – listed in Annex I of the Regulation – that (i) are not deforestation-free; (ii) do not comply with the ‘legality requirement’; and (iii) are not covered by the DDS. 

As mentioned above, a technical regulation must apply to an identifiable product. Otherwise, its implementation and enforcement would be impossible.[66] Explicit reference to the products in the measure is not required; however, they must at the very least be capable of identification.[67] One potential means of identifying the product is indeed through the very ‘characteristic’ that is the subject of the regulation.[68]

A particular point of debate, which also arises in the assessment of the second factor outlined above, concerns whether the ‘non-deforestation-free’ status should be classified as ‘product characteristics’. In EC – Asbestos, the Panel was called upon to establish whether the ban on ‘products containing asbestos’ amounted to a technical regulation. In that case, the Panel found that despite the formulation of the requirement being in a negative manner, products containing asbestos were prohibited. Accordingly, the measure effectively prescribed or imposed certain objective features, qualities, or ‘characteristics’ on all products.[69]

A similar conclusion was reached by the Panel in EU – Palm Oil (Malaysia), the first case concerning a climate mitigation measure brought before the WTO DSB. The Panel identified specific product characteristics and qualified the measure as a technical regulation. This determination was made by noting that the measures under review – the 7% maximum share and the high ILUC risk cap and phase-out – both applied to ‘biofuels produced from food and feed crops’, with the ‘food and feed’[70] component serving as the defining product characteristic. Nevertheless, in both of the aforementioned cases, a physical characteristic constituted the defining feature of the products: in one instance, the asbestos fiber component, and in the other, the food or feed component that formed the basis of the biofuels.

Consequently, the circumstances may differ in the case of the EUDR, where the defining attributes – in particular, the deforestation-free status[71] – do not constitute tangible characteristics and cannot be physically traced within the final products or the covered commodities.

This issue acquires particular relevance in the assessment of the second factor, as it raises also the question of whether non-product-related processes and production methods (NPR-PPMs) fall within the scope of the TBT Agreement in the first place.[72]NPR-PPMs are indeed methods of production that do not alter the physical characteristics or inherent qualities of a product, but instead concern how the product is made or sourced.[73] In contrast, PPMs are considered to encompass more broadly any processes and methods used in production, as opposed to the physical characteristics of the final product itself.

While the term ‘lay down’ is relatively clear, denoting the establishment or definitive formulation of a principle, rule, or prescribed course of action,[74] under WTO law, the notions of ‘product characteristics’ and ‘related PPMs’ remain disputed and open to interpretation. The term ‘product characteristic’ has usually been understood to cover ‘any objectively definable features, qualities, attributes or other distinguishing mark of a product’ that may relate to a ‘product’s composition, size, shape, colour, texture, hardness, tensile strength, conductivity, density, or viscosity.’[75]

Given these premises, the requirement that commodities and covered products be produced on land not subject to deforestation or forest degradation after December 31, 2020, raises the question of whether these requirements should be classified as NPR-PPMs, rather than as PPMs or as product characteristics – understood as tangible attributes of the final product – and the legal consequences of such a classification.

In EU – Palm Oil (Malaysia), the Panel avoided taking a stance on the relevance of NPR-PPMs and the precise scope of PPMs under WTO law, and ultimately determined that the ‘product characteristic’ of biofuels depended on the type of raw material used in their production. Notwithstanding the potential for competition between products, the differing raw material was regarded as the factor distinguishing and defining the biofuel’s characteristics, irrespective of the ILUC risk.[76]

However, as anticipated, in the case of the EUDR, the situation is more complex. While it might be argued that the same reasoning could apply to the ‘deforestation-free’ covered products, which derive from the underlying commodities, this approach cannot be straightforwardly extended to the six commodities covered by the EUDR, as these commodities are raw materials in their initial form.

Consequently, the question of whether the EUDR should be regarded as ‘laying down a product characteristic or a related PPMs’ remains controversial and, in the absence of any previous case law, could ultimately be resolved only by a panel determination.

Regarding the mandatory character of the product characteristics, the fact that without a DDS a product cannot be placed on the market, exported or traded, and that sanctions are applicable to the operators and traders that do not abide by the EUDR suggests that the Regulation prescribes compulsory requirements in the meaning of previous case law.[77] In addition, the wording ‘shall not’ set out in Article 3 EUDR clearly provides for legally binding and mandatory language.[78]

In conclusion, despite the qualification of the EUDR as a technical regulation remaining controversial, it is reasonable to expect that, in line with the EU – Palm Oil (Malaysia) approach and findings, a panel would consider the EUDR to be a technical regulation at least in relation to the covered products. 

Its qualification as a technical regulation would trigger the applicability of Article 2 of the TBT Agreement and, accordingly, makes it relevant to proceed with an analysis of the measure under its substantive provisions enshrined in its paragraphs 1 and 2.

3.2.  Legal assessment under Article 2.1 TBT Agreement

Assuming that the EUDR is a technical regulation, the measure would be subject to Article 2.1, which sets out the non-discrimination obligations of most-favoured-nation treatment (MFN) and national treatment (NT).[79] The provision prescribes that ‘Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.’

As interpreted by the WTO dispute settlement bodies, Article 2.1 sets out a ‘three-tier test,’ which requires to verify whether (i) the measure is a technical regulation; (ii) the imported products vis-à-vis domestic products and products imported from different countries are all ‘like products’; and (iii) the imported products are accorded ‘treatment no less favourable’ than like domestic products or imported products produced in third countries.[80]

Assuming that the EUDR is – at least partially – a technical regulation, the question of NPR-PPMs becomes relevant once again in the context of evaluating the ‘likeness’ of domestic product vis-à-vis imported products and between imported products originating from different countries.[81] Despite the purpose-based approach for the interpretation of likeness[82] was rejected by the WTO dispute settlement bodies, the regulatory concerns underlying the measure can be relevant to the extent they have an impact on the competitive relationship between and among the like products concerned.[83] The fact that a product is deforestation-free may indeed shape consumer perceptions and behaviours. However, consumer preferences and consumption patterns are determined by a wide range of factors, including socio-economic status and position within the value chain. For instance, a furniture producer may be less susceptible to the issue of deforestation, including legal deforestation, than a furniture buyer. Consequently, reliance on consumer preferences as a sole means of tackling climate change may be considered an inadequate strategy.

In the case of the EUDR, it is hard to believe that there would be a different impact on competition since deforestation-free and non-deforestation free goods do have the same properties, nature, and quality of the products; presumably the end-uses of the products; and the same tariff classification.[84]

Against this backdrop, previous case law suggests that it is reasonable to expect a panel to find that deforestation-free and non-deforestation-free products qualify as ‘like products,’[85] a conclusion that may also be influenced by considerations of opportunity. Indeed, a failure to recognize the products as like products would preclude an assessment of the measure under the non-discrimination principle enshrined in Article 2.1.

Assuming that the products at hand are considered ‘like products,’ the element of ‘no less favourable treatment’ requires an examination of whether the measure modifies the conditions of competition in the relevant market to the detriment of imported products,[86] encompassing both de jure and de facto discrimination.[87] In the case of national treatment, this analysis must be conducted vis-à-vis the domestic like products, whereas in the case of most-favoured-nation treatment, it must be carried out in relation to like products imported from other third countries.

Since the EUDR applies to all commodities and covered products that are placed and made available in the market, without any distinction in terms of origin of the goods, it would be possible to conclude that there is no de jure discrimination between domestic and like products, as well as among products originating from third countries. Accordingly, a further assessment is required to determine whether de facto discrimination may exist. In this regard, it is important to evaluate whether the measure in question affects the equality of competitive opportunities between imported products and like domestic products and/or like products originating in other countries.[88] This evaluation has to be conducted by assessing the design, structure, and expected operation of the measure in question.[89]

However, the Appellate Body has clarified that the existence of a detrimental impact on imports alone is not sufficient to establish ‘less favourable treatment’ under Article 2.1, because such an impact must not[90] arise exclusively from a ‘legitimate regulatory distinction.’[91] This interpretation is based on the context provided by other provisions of the TBT Agreement. In particular, Article 2.2 suggests that ‘“obstacles to international trade” may be permitted, provided that they are not “unnecessary”’ and the sixth recital of the Preamble, which, recalling the wording of Article XX chapeau GATT, provides that ‘no country should be prevented from taking measures necessary […] for the protection of human, animal or plant life or health, of the environment, […] subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade, and are otherwise in accordance with the provisions of this Agreement.’[92]

Although preambles are not legally binding, they serve as a valuable interpretive tool to clarify treaty obligations.[93] Notably, while the TBT Agreement does not include an explicit ‘general exception clause’ like Article XX of GATT,[94] such an exception could effectively be recognized within Article 2.1, applied indirectly through the interpretation of the ‘no less favorable treatment’ concept. This approach is also consistent with the object and purpose of the TBT Agreement, which has been found to strike a balance between the objectives of trade liberalization on the one hand and the right of Members to regulate on the other.[95]

In assessing the potential for the detrimental impact of the EUDR, the unilateral benchmarking of countries based on deforestation risk and the resulting differentiated obligations assume particular significance. The classification of countries based on deforestation risk is carried out unilaterally by the EU, using data from ‘internationally recognised sources.’[96] Specifically, the classification is based on (i) the rate of deforestation, (ii) the production trends of relevant commodities and products, and (iii) the rate of expansion of agricultural land.[97] The ranking is determined based on both the availability and quality of data.[98]

In this context, the absence or incompleteness of data may negatively affect the categorization of a country’s risk level, potentially resulting in the imposition of more onerous obligations than would otherwise be appropriate. In other words, it is plausible that countries with inadequate documentation systems may face discriminatory treatment, as their classification may not accurately reflect their actual policies. Such countries may include developing nations and least-developed countries (LDCs) that lack the infrastructure to collect and provide reliable data. Indeed, as of the time of writing, the list of high-risk countries includes Myanmar, while the list of standard-risk countries encompasses Indonesia, Malaysia, and Brazil.[99]

The categorization is crucial because, once implemented, the Regulation will adjust the stringency of due diligence obligations according to the country’s risk classification. Although the EUDR applies to all WTO Members, including the EU and its member States,[100] countries designated as standard- or high-risk will face more burdensome due diligence requirements than those classified as low-risk. Indeed, standard- and high-risk countries must collect extensive information, conduct risk assessments, and implement risk mitigation strategies to comply with these obligations and import products into the EU, with the degree of intensity varying according to the risk classification. Consequently, products originating from countries other than those classified as low-risk will face more extensive administrative and bureaucratic obligations, entailing higher compliance costs and potentially constituting barriers to trade. Therefore, a detrimental impact on imports from countries not classified as low-risk is likely to occur.[101]

Furthermore, requirements such as traceability and geolocation have the potential to exert a substantial impact on developing countries and small producers, many of which lack the technical expertise, infrastructure, and resources needed to comply.[102] This can result in delays in the placement or availability of products on the market, which may consequently lead to detrimental impact.[103]

Nonetheless, as noted above, establishing the existence of ‘less favourable treatment’ requires determining that the detrimental impact does not result from a ‘legitimate regulatory distinction.’[104] This passage constitutes a balancing exercise aimed at determining, in accordance with the logic underlying the chapeau of Article XX GATT, whether the differential treatment resulting from the technical regulation can be considered proportionate and justified in relation to the legitimate objective pursued, or whether it amounts to a form of arbitrary or unjustifiable discrimination that cannot be explained in light of that objective. The analysis, therefore, requires a careful assessment of the design, structure, functioning, and application of the technical regulation under review.[105]

To determine whether the detrimental impact on imported products is exclusively the result of a ‘bona fide’ regulatory distinction, it is necessary to examine the rationale of the differential treatment that gives rise to the detrimental impact.[106] This analysis starts with the identification of the ‘legitimate objective’ from which the regulatory distinction stems and the examination of the design and conditions of the measure to evaluate whether the measure is applied in an ‘even-handed’ manner.[107]

In the context of the EUDR, such an analysis should be undertaken with reference to its objective of reducing GHG emissions from deforestation and forest degradation. As this objective pertains to environmental protection,[108] it qualifies as a ‘legitimate objective,’ expressly recognized in the list of legitimate objectives set out in Article 2.2 of the TBT Agreement.

Regarding the ‘even-handedness’ of the measure, prior case law has emphasized the need to assess whether the adverse effects arising from regulatory distinctions are appropriately ‘calibrated’ to the risk the measure seeks to address.[109] In light of the analogies between the interpretation of the Article XX chapeau of the GATT and Article 2.1 of the TBT Agreement, and considering the language of the sixth recital of the TBT Preamble, it is possible[110] to draw on the case law developed under Article XX to guide this assessment. Central to this evaluation is the relationship between the discrimination and the objective of the measure.[111]Discrimination may be deemed arbitrary or unjustifiable where the justification lacks a rational connection to the measure’s objective or contradicts that objective. Against this backdrop, the imposition of more stringent obligations on countries identified as having a higher risk of deforestation appears prima facie proportionate.[112]

However, such a regulatory distinction is likely to raise concerns when developing countries and LDCs are affected. Precisely, the detrimental impact deriving from the classification of developing countries and LDCs as standard- or high-risk due to data limitations and their likely lack of technical expertise, infrastructure, and resources necessary to implement the Regulation, bears no substantive connection to the stated goal of climate mitigation. On the contrary, these distinctions impose rigid requirements, particularly on developing countries and LDCs and appear to be at odds with the CBDR-RC principle, which may acquire relevance in the ‘even-handedness’ analysis. 

This author argues that the principle should inform the interpretation of the Article XX chapeau of GATT, specifically the phrase ‘between countries where the same conditions prevail,’ which defines the scope of arbitrary discrimination in trade-related measures aimed at climate mitigation.[113] Such an approach would indeed help balance trade and climate mitigation interests: a measure that fails to respect the fundamental principles of the climate change framework is unlikely to be genuinely adopted for climate mitigation purposes. In this regard, it should be considered as lacking a genuine connection to its stated objective and, consequently, as arbitrary and unjustifiable in its application.

In conclusion, while the EUDR could be considered legitimate in principle, its classification of countries based on risk and the imposition of differing due diligence obligations, together with its adverse impact on developing countries, may be viewed as contravening the non-discrimination obligations under Article 2.1 of the TBT Agreement. This is primarily attributable to shortcomings in its implementation, particularly its inflexible treatment of developing countries and LDCs.

3.3.  Analysis pursuant to Article 2.2 of the TBT Agreement

As evidenced by the statements in various WTO TBT Committee meetings, numerous WTO Members further contend that the EUDR creates unnecessary obstacles to international trade.[114]

In accordance with the first sentence of Article 2.2, WTO Members must ensure that the preparation, adoption, and application of technical regulations is not undertaken ‘with a view to or with the effect of creating unnecessary obstacles to international trade.’[115] Furthermore, according to the second sentence, WTO Members must ensure that their technical regulations are not ‘more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.’[116]The conjunction ‘for this purpose,’ which links the two sentences contained in Article 2.2, indicates that the second sentence provides further clarification on the scope and meaning of the obligation delineated in the first sentence.[117] Both sentences reflect the notion of necessity, respectively through a reference to ‘unnecessary obstacle’ and ‘more trade restrictive than necessary.’[118]   

Assuming that the EUDR is a technical regulation,[119] this sub-section considers whether it should be considered more trade restrictive than necessary to fulfil the legitimate objective of climate mitigation.[120]

This passage entails a ‘relational analysis,’[121] also known as the ‘necessity test,’ which requires the ‘weighting and balancing’ of three factors, namely (i) the trade-restrictiveness of the measure; (ii) the risk that non-fulfilment of the objective would create; and (iii) the degree of contribution made by the measure to the objective.[122]

If the measure is ‘preliminary’[123] considered necessary, a panel would need, whether required,[124] to conduct a ‘comparative analysis,’[125] whereby the measure examined is evaluated against potential alternative measures.

The first step in the proposed analysis is to ascertain the existence of a ‘legitimate objective.’[126] In identifying the measure’s objective, a panel must undertake an independent and objective assessment, considering the principal issues raised by the parties in their respective submissions.[127]

In the case of the EUDR, as noted above, the main objective of the EUDR is to combat deforestation and forest degradation as a means of addressing climate change,[128] and it falls within the scope of policies related to the conservation of exhaustible natural resources (forests) and the environment more generally, explicitly listed in Article 2.2.[129]

Moving to the assessment of the ‘trade-restrictiveness’ character of a measure, a panel should determine whether it limits trade by altering market conditions[130] either quantitatively or qualitatively, depending on the circumstances of the case.[131]

Pursuant to Article 3 of the EUDR, the placing or making available on the market, or export, of relevant commodities and products that fail to meet the specified requirements is expressly prohibited. It may therefore be reasonably assumed that a ban on imported products failing to meet these conditions will have a significant trade-restrictive effect. 

However, such an effect does not, in itself, render the measure inconsistent with Article 2.2. To constitute a violation, the measure must create ‘unnecessary obstacles to international trade’ and thus be ‘more trade-restrictive than necessary.’[132] In this context, the risk of non-fulfillment that the objective would create must be taken into consideration.[133] Depending on the circumstances, the nature of the risk and the gravity of the potential consequences of non-fulfillment may be addressed separately or jointly.[134]

In the case of the EUDR, it is reasonable to expect that the risk arising from non-fulfillment of the objective would be evaluated similarly to the approach taken in EU – Palm Oil (Malaysia), given the similarities in the purpose of the measures. 

In that case, the Panel considered that the assessment required a quantification[135] of the risk and found that the ‘“risks that non-fulfilment [of the objective] would create” were that GHG emissions savings resulting from the promotion of conventional biofuels through RED II are partially undermined, or even completely negated, by their ILUC-related GHG emissions.’[136]

In the same vein, a panel would likely conclude that the ‘risks that non-fulfilment [of the objective] would create’ in the context of the EUDR are that GHG emissions savings resulting from the placing on the market, making available, or export of deforestation-free products may be partially undermined – or even entirely offset – by deforestation-related GHG emissions. 

Given the critical role of GHG mitigation in addressing the global climate crisis, the level of risk is therefore likely to be regarded as particularly high.[137]

The third and final factor to be weighed is the degree to which a measure contributes to achieving a legitimate objective, referring to the extent to which the technical regulation effectively advances that objective.[138] This contribution can be assessed by considering the regulation’s design, structure, and operation, alongside evidence from its practical application,[139] with the analysis focusing on ‘actual’[140] impact of the regulation, rather than its intended effect.[141]

Given the complex nature of the issue, which requires a comprehensive policy approach involving multiple, interacting measures, in the case of the EUDR, it can be challenging to isolate the specific impact of a measure on climate change from the effects of other measures adopted within EU climate policy or by other WTO Members.[142]

Nonetheless, previous WTO case law suggests that, to meet this requirement, it is sufficient to determine whether a measure is ‘apt to make a material contribution’ to its objective.[143] In this regard, a substantial body of empirical evidence demonstrates that deforestation and forest degradation contribute significantly to GHG emissions.[144] Therefore, prohibiting the placing on the market, making available, or exporting relevant commodities and products originating from deforested or degraded lands would reasonably reduce such emissions. Accordingly, the measure can be considered capable of reducing GHG emissions and thus constitutes an appropriate means of making a material contribution to climate mitigation.

Having considered all the factors analyzed above, a panel must ‘weigh and balance’ these factors to reach a ‘preliminary conclusion’ on the necessity of the measure. Such an exercise must be flexible and does not require taking in consideration any pre-determined thresholds in respect of any particular factor.[145]

In EU – Palm Oil (Malaysia), the Panel noted that whenever a measure was found capable of making a material contribution to its objective, the preliminary conclusion in the context of the ‘weighing and balancing’ exercise has been that the measure was necessary.[146]

Assuming that a panel were to adopt the same stance in the context of the EUDR, it would first establish that the measure is necessary, and would then be required to conduct a comparative analysis between the EUDR and less trade-restrictive alternative measures.[147] These measures would need to be (i) reasonably available; to (ii) make an equivalent contribution to the relevant legitimate objective, taking into account the risks non-fulfilment would create;[148] and (iii) to be less trade restrictive than the challenged measure.[149] This analysis must be conducted with respect to reasonably available alternative measures proposed by the potential complainant(s). In this context, the scope and depth of the assessment may vary depending on the specific alternative identified. 

It is important to underscore that a ban constitutes one of the most trade-restrictive measures; however, this stringency may be justified by the significance of the climate crisis, which is currently having severe global impacts.

In conclusion, depending on this latter part of the analysis, a panel could determine that the EUDR either breaches or complies with Article 2.2 of the TBT Agreement. Nonetheless, given the critical importance of climate mitigation in addressing the global climate crisis, the ability of WTO Members to choose their level of protection,[150] and the political sensitivity surrounding the discontinuation of such climate policies, it is reasonable to expect – particularly in light of the proximity to EU – Palm Oil (Malaysia) – that the measure would be found necessary and therefore compliant with Article 2.2.

4.   Conclusion

Despite the limits of the analysis conducted above, there appear to be compliance issues that could arise from the full implementation of the EUDR. It is evident that certain components of the measure in question – particularly those linked to its unilateral benchmarking and the differentiation of obligations on that basis – bear a resemblance to features employed in other trade-related climate mitigation measures adopted by the EU, most notably the CBAM, which has already been legally challenged.[151]

Both measures, together with a range of other EU initiatives, are designed to address climate change and, more specifically, to achieve climate mitigation objectives. However, they have been criticized as not being genuinely adopted for such purposes, given their potential to result in negative discrimination against developing countries and LDCs, thereby contravening the core principle of the climate change framework, namely CBDR-RC. This trend has led to accusations of ‘green protectionism’ directed at the EU.

Moreover, these measures have been heavily criticized for their alleged ‘extraterritorial character’, with claims that they infringe upon the jurisdiction of other WTO Members. Nonetheless, it should be emphasized that, although they may produce extraterritorial effects, they cannot be considered truly ‘extraterritorial’,[152] as their regulatory reach is limited to access to the EU market. In addition, it emerges that interpreting Article 2.1 in light of Article XX GATT would trigger the applicability of the considerations under that provision, which do not impose jurisdictional limitations.[153]

In conclusion, it becomes clear that what is at stake is not merely the compliance of a specific trade provision but the broader legitimacy of these measures in advancing climate mitigation. In this regard, in EU – Palm Oil (Malaysia), the Panel appeared to recognize the sensitivity of the matter and acknowledged the importance of ensuring that the measure respects the balancing test established under WTO agreements, which can also take into account and weigh multiple factors, including the extraterritorial effects of the measure.

Should a future panel adopt reasoning similar to that applied in EU – Palm Oil (Malaysia), it is likely that the EUDR will be considered a legitimate measure and compliant with Article 2.2. However, if the features outlined above remain unchanged, they could be considered to be applied in an arbitrary or unjustifiable manner, and the measure could nonetheless be found in breach of Article 2.1 of the TBT Agreement. 

It is important to note that even if the measure were found to be inconsistent with the TBT Agreement, the EU would still have the option to bring it into compliance, appeal ‘into the void’ or to submit an appeal to the Multi-Party Interim Appeal Arbitration Arrangement, provided that the other party involved participates in this mechanism, thereby allowing the EU to continue pursuing its climate objectives.