SL risks US$ 24mn rubber exports under EU deforestation rules: IPS

Sri Lanka risks losing around US$24.4 million in annual rubber exports to the European Union (EU) if it complies with the bloc’s new deforestation-free trade rules, the Institute of Policy Studies (IPS) cautioned.

The European Union Deforestation Regulation (EUDR), which takes effect for large companies on 31 December 2025, aims to curb deforestation linked to seven commodities, cattle, cocoa, coffee, palm oil, soy, wood, and natural rubber, and their derivative products such as tyres, chocolate, and wooden furniture.

The think tank said Sri Lanka’s compliance with the regulation could result in a 7.6 percent reduction in rubber exports to the EU, equivalent to about US$ 24.4 million a year. If the country fails to comply, its rubber exports to the bloc could be shut down entirely, shrinking gross domestic product (GDP) by 0.07 percent, IPS researchers Dr. Asanka Wijesinghe, Rashmi Anupama and Chaya Dissanayake said in a recent paper.

They added that the GDP loss from non-compliance would be significant, particularly due to the substantial tariff shocks caused by US trade measures. The impact would be amplified by the high domestic value addition in the rubber sector, as most raw materials are sourced from local farmers.

“In 2024, Sri Lanka exported 27 different rubber and rubber-based products at Harmonised System six-digit (HS-6-digit) level to the EU worth US$ 337.79 million. These products include solid or cushion tyres, gloves, mittens and mitts, new pneumatic tyres, and articles of vulcanised rubber,” the researchers said, adding that the EU remains a key destination for value-added rubber exports, underscoring the need to meet EUDR requirements.

Under the regulation, all products entering the EU market must be deforestation-free, legally produced according to the laws of the country of origin, and traceable to the specific plot of land from which they were sourced. Small and medium enterprises (SMEs) have been granted an additional six months to comply, according to Oritain, a service provider that offers product origin verification and raw material assessment through forensic science and data analysis.

Although Sri Lanka is expected to be classified as a low-risk country under the EUDR, exporters will still be required to submit detailed geolocation data and proof of legal land ownership.

While large plantations are unlikely to face major difficulties, smallholders, who account for nearly 69 percent of the country’s total 98,393 hectares of rubber cultivation, could encounter significant challenges. Many lack the technological capacity to digitise records or provide land ownership data in the required digital format, the researchers cautioned.

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