Sri Lanka faces the risk of losing approximately US$ 24.4 million in annual rubber exports to the European Union (EU) if it implements the bloc’s new deforestation-free trade rules, the Institute of Policy Studies (IPS) has warned.
The European Union Deforestation Regulation (EUDR), effective for large companies from 31st of December 2025, targets seven commodities—cattle, cocoa, coffee, palm oil, soy, wood, and natural rubber—and their derivative products, including tyres, chocolate, and wooden furniture.
IPS researchers said that compliance with the regulation could reduce Sri Lanka’s rubber exports to the EU by 7.6%, equivalent to around US$ 24.4 million annually. Non-compliance could halt exports entirely, potentially shrinking the country’s GDP by 0.07%, with additional losses arising from tariff shocks due to US trade measures.
“In 2024, Sri Lanka exported 27 rubber and rubber-based products to the EU, worth US$ 337.79 million. These include solid or cushion tyres, gloves, mittens, new pneumatic tyres, and vulcanised rubber articles,” the IPS researchers noted. They emphasized that the EU is a key market for value-added rubber exports, highlighting the importance of meeting EUDR standards.
Under the regulation, all products entering the EU must be deforestation-free, legally produced, and traceable to the specific plot of land of origin. Small and medium enterprises (SMEs) have been given an extra six months to comply.
Although Sri Lanka is expected to be classified as a low-risk country under the EUDR, exporters must still provide geolocation data and proof of legal land ownership. While large plantations are unlikely to face major challenges, smallholders—who account for nearly 69% of the country’s 98,393 hectares of rubber cultivation—may struggle due to limited technological capacity to digitize records and submit required land ownership data.
