IDEAS home Printed from https://ideas.repec.org/p/ags/aaea25/361018.html

Costly Regulation, Minimal Results: The EU Deforestation Regulation Effect on Global Soy Trade

Author

Listed:
  • Sharma, Manoj
  • Villoria, Nelson B.

Abstract

The European Union Deforestation Regulation (EUDR) seeks to reduce deforestation in tropical countries by restricting imports of soy products. The main concern is that trade restrictions can shift deforestation-embodied trade to unregulated markets. To shed light on this issue, we employ a standard gravity model focused on the soy sector, treating the EUDR compliance costs as trade costs for exports to the EU. Our findings reveal that the stricter trade restrictions on tropical soy producers lead to a significant reallocation of trade flows toward China and other Asian countries. If tropical countries do not comply with the EUDR, the EU consumer prices rise even more, while tropical countries see minimal terms-of-trade losses. Our analysis indicates that the EUDR is likely to be ineffective in reducing deforestation directly linked to soy production.

Suggested Citation

  • Sharma, Manoj & Villoria, Nelson B., 2025. "Costly Regulation, Minimal Results: The EU Deforestation Regulation Effect on Global Soy Trade," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361018, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361018
    DOI: 10.22004/ag.econ.361018
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/361018/files/75277_94279_105300_EUDR_soy_AAEA_June_17_2025_MS_NV.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.361018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Joseph S Shapiro, 2021. "The Environmental Bias of Trade Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 831-886.
    2. Xiao-Peng Song & Matthew C. Hansen & Peter Potapov & Bernard Adusei & Jeffrey Pickering & Marcos Adami & Andre Lima & Viviana Zalles & Stephen V. Stehman & Carlos M. Bella & Maria C. Conde & Esteban J, 2021. "Massive soybean expansion in South America since 2000 and implications for conservation," Nature Sustainability, Nature, vol. 4(9), pages 784-792, September.
    3. Nelson Villoria & Rachael Garrett & Florian Gollnow & Kimberly Carlson, 2022. "Leakage does not fully offset soy supply-chain efforts to reduce deforestation in Brazil," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    4. Larch, Mario & Wanner, Joschka, 2017. "Carbon tariffs: An analysis of the trade, welfare, and emission effects," Journal of International Economics, Elsevier, vol. 109(C), pages 195-213.
    5. Böhringer, Christoph & Rosendahl, Knut Einar & Storrøsten, Halvor Briseid, 2017. "Robust policies to mitigate carbon leakage," Journal of Public Economics, Elsevier, vol. 149(C), pages 35-46.
    6. Kenneth G. Cassman & Patricio Grassini, 2020. "A global perspective on sustainable intensification research," Nature Sustainability, Nature, vol. 3(4), pages 262-268, April.
    7. Robert C. Feenstra, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, November.
    8. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    9. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    10. Branger, Frédéric & Quirion, Philippe, 2014. "Would border carbon adjustments prevent carbon leakage and heavy industry competitiveness losses? Insights from a meta-analysis of recent economic studies," Ecological Economics, Elsevier, vol. 99(C), pages 29-39.
    11. Muradian, Roldan & Cahyafitri, Raras & Ferrando, Tomaso & Grottera, Carolina & Jardim-Wanderley, Luiz & Krause, Torsten & Kurniawan, Nanang I. & Loft, Lasse & Nurshafira, Tadzkia & Prabawati-Suwito, D, 2025. "Will the EU deforestation-free products regulation (EUDR) reduce tropical forest loss? Insights from three producer countries," Ecological Economics, Elsevier, vol. 227(C).
    12. Felbermayr, Gabriel & Peterson, Sonja & Wanner, Joschka, 2024. "Trade and the environment, trade policies and environmental policies—How do they interact?," Open Access Publications from Kiel Institute for the World Economy 302108, Kiel Institute for the World Economy (IfW Kiel).
    13. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    14. Cesar de Oliveira, Susan E.M. & Nakagawa, Louise & Lopes, Gabriela Russo & Visentin, Jaqueline C. & Couto, Matheus & Silva, Daniel E. & d'Albertas, Francisco & Pavani, Bruna F. & Loyola, Rafael & West, 2024. "The European Union and United Kingdom's deforestation-free supply chains regulations: Implications for Brazil," Ecological Economics, Elsevier, vol. 217(C).
    15. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    16. Rahel Aichele & Gabriel Felbermayr, 2015. "Kyoto and Carbon Leakage: An Empirical Analysis of the Carbon Content of Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 104-115, March.
    17. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter R. Herman, 2022. "Correction to: Modeling complex network patterns in international trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(2), pages 713-714, May.
    2. James E. Anderson & Mario Larch & Yoto V. Yotov, 2018. "GEPPML: General equilibrium analysis with PPML," The World Economy, Wiley Blackwell, vol. 41(10), pages 2750-2782, October.
    3. Rindler, Michael, 2021. "Changing Language Skills and Trade in Europe," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242449, Verein für Socialpolitik / German Economic Association.
    4. Wanner,Joschka & WATABE,Yuta, 2025. "Multinational Production, Trade, and Carbon Emissions," IDE Discussion Papers 965, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Habibi, Arash, 2025. "Analyzing the carbon pricing-leakage nexus through structural gravity estimation," Energy Policy, Elsevier, vol. 198(C).
    6. Weidner, Martin & Zylkin, Thomas, 2021. "Bias and consistency in three-way gravity models," Journal of International Economics, Elsevier, vol. 132(C).
    7. Dimitrios Dadakas & Stavroula Tatsi, 2021. "Global agricultural trade impact of the 2011 triple disaster in Japan: A gravity approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(4), pages 937-972, October.
    8. Sébastien Jean & Jean-Christophe Bureau, 2015. "Do Regional Trade Agreements Really Boost Trade? Estimates for Agricultural Products," Working Papers 2015-09, CEPII research center.
    9. Melitz, Jacques & Toubal, Farid, 2014. "Native language, spoken language, translation and trade," Journal of International Economics, Elsevier, vol. 93(2), pages 351-363.
    10. Jordi Paniagua & Jesús Peiró-Palomino & Andrés J. Picazo-Tadeo, 2021. "Asylum Migration in OECD Countries: In Search of Lost Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 153(3), pages 1109-1137, February.
    11. Marie M Stack & Rob Ackrill & Martin Bliss, 2019. "Sugar trade and the role of historical colonial linkages," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 46(1), pages 79-108.
    12. Maria Cipollina & Luca De Benedictis & Luca Salvatici & Claudio Vicarelli, 2016. "Policy Measurement And Multilateral Resistance In Gravity Models," Working Papers LuissLab 16130, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    13. repec:era:eriabk:2021-impact-of-the-atiga-on-intra-asean-trade is not listed on IDEAS
    14. Céline Carrère & Monika Mrázová & J Peter Neary, 2020. "Gravity Without Apology: the Science of Elasticities, Distance and Trade," The Economic Journal, Royal Economic Society, vol. 130(628), pages 880-910.
    15. Steven Buigut, 2016. "Trade Effects of the East African Community Customs Union: Hype Versus Reality," South African Journal of Economics, Economic Society of South Africa, vol. 84(3), pages 422-439, September.
    16. Wang, Junbo & Ma, Zhenyu & Fan, Xiayang, 2023. "We are all in the same boat: The welfare and carbon abatement effects of the EU carbon border adjustment mechanism," MPRA Paper 118978, University Library of Munich, Germany.
    17. Dang Hai Luu & Craig R. Parsons, 2022. "Non‐tariff measures and Vietnam's export performance," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 36(1), pages 88-104, May.
    18. Christian Elleby & Wusheng Yu & Qian Yu, 2018. "The Chinese Export Displacement Effect Revisited," IFRO Working Paper 2018/02, University of Copenhagen, Department of Food and Resource Economics.
    19. Mario Larch & Yoto V. Yotov, 2016. "General Equilibrium Trade Policy Analysis with Structural Gravity," CESifo Working Paper Series 6020, CESifo.
    20. Doyoung Park & William Ridley, 2025. "Thirsty for Trade: How Globalization Shapes Virtual Water Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(2), pages 279-338, February.
    21. Yoto V. Yotov, 2024. "The evolution of structural gravity: The workhorse model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 578-603, October.

    More about this item

    Keywords

    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea25:361018. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.