INTERVIEW OF THE MONTH – MARKUS KRAJEWSKI: demanding environmental protection and respect to human rights is not protectionism

Specialist in European Economic Policy, Markus Krajewski analyzes the requirements for Brazilian products to respect the environment and human rights and the opposition that this arouses in economic segments, under the allegation that it is only a trade barrier to harm Brazilian exports

By Instituto Escolhas

Deforestation, slave labor, subsidies and the Mercosur-European Union Agreement are some of the topics of our April interview. To comment on these issues, Escolhas brought in Markus Krajewski, Professor of Public and International Law at the University of Erlangen-Nürnberg (Germany) and Specialist in International Economic Law, Human Rights and External Relations in the European Union (EU).

During the conversation, Krajewski commented on the controversies surrounding Europe’s commercial requirements so that Brazilian production does not harm the environment, seen by many as trade barriers and a form of disguised protectionism – earlier that week the Minister of Agriculture of the Brazil, Tereza Cristina, defended that environmental concerns cannot become barriers to trade between countries.

The professor also spoke about the difficulties related to the tracking of goods and services to guarantee the origin of the products, criticized the way in which Europe has been granting agricultural subsidies for decades and defended the need for a global review of these benefits, so that the support be made fairly, benefiting small farmers, both in Brazil and in Europe.

See the full interview below.

 

ESCOLHAS – How do you see the world scenario for the adoption of new regulations to prevent the importation of products associated with deforestation and human rights violations in global trade?

MARKUS KRAJEWSKI – New regulations are an important and a pressing issue and there are debates in different forums. There are debates in the European Union, within the context of the EU-Mercosur Trade Negotiations, and there are also in the World Trade Organization and in another regional context. But we should acknowledge that trade sanctions or import bans can only be one element of a global strategy in which we’re not just relying on one sort of model.

For example, we know that if Europe only imports certain products, countries may export them to China or to other places in the world. So it would be very important to have a holistic strategy in which trade import bans can be one element and it’s very important that’s not something done just on the bilateral or regional wing, but something that would be taken up at the global stage. Of course, it may take some time and I find it difficult to predict when something like that will actually come up, but it is certainly an issue that has gained prominence in recent years.

 

ESCOLHAS – Germany and the European Union are discussing rules to implement environmental and human rights standards for the purchase of products. Can you explain how they should work?

MARKUS KRAJEWSKI – That’s a broad question. There are many different sort of subfields of topics. What is discussed currently are so called carbon border tax adjustments. So basically you’re saying that because there are certain duties and certain fees to be paid, and based on energy projects in, you try to get the carbon footprint into a product in Germany or in Europe. So, there is an argument saying then we need to adjust the price of products that would come from other places where you don’t have those kinds of regulation. Then, what is currently discussed, and it’s probably more important, is actually the implementation of human rights or other forms of due diligence regulations for companies.

 

ESCOLHAS – Do these policies provide mechanisms for tracking these products to ensure that they are free from environmental impacts and human rights violations? If not, what is still missing?

MARKUS KRAJEWSKI – That’s a key practical question: how can we be sure about the origin of a product? We cannot see whether it was made in a sweatshop or whether it was made with slave labor, or whether it was made by workers who were not wearing protective gear or something like that. So, there are basically two broad answers: the first is the traditional answer and the other is the more modern answer. The traditional answer is that you have to go through labeling basically. We have labels when it comes to rules of origin, we have labels when it comes to other quality standards, we have labels when we want to label the contents of alcohol and for products. Of course you can always open a bottle of wine and see if it’s actually wine and not grape juice or something like that. But I would nevertheless think that if one has functioning institutions and companies who are also interested in protecting the value of a label and I see possibilities for that.

Now, the more modern answer, everybody says “blockchain technology”. Somehow, with the sort of blockchain and a modern form of Internet communications and computers, you can track where certain products come from. I have to admit I don’t actually know how it works and I have some colleagues who say that maybe it actually technically is difficult to implement because, at the end of the day, even if you have blockchain, I think you still need someone to say this comes from a factory where there are safe labor conditions or no children working or if  this comes from a mine that was not on an indigenous land or something like that. So, you need people who certify and who ensure that certain standards have been met.

 

ESCOLHAS – How do you assess the speech of Brazilian producers that the regulations refer to disguised protectionism, designed to protect European producers and that they harm Brazil’s interests?

MARKUS KRAJEWSKI – As in all debates, there are always two sides of the same coin. There are of course those who may use that those debates for some form of disguised protectionism but at the end of the day, unless we demand something from countries that they certain cannot deliver I don’t think that it’s protectionism. I mean, we know that there are products from Brazil and from all over the world which meet the standards that we would expect these products to meet – and also the production. Of course, companies in Brazil, as companies all over the world, have to change and have to maybe adjust their production methods, but as long as that’s possible and as long as that doesn’t lead to Brazilian companies or companies from other places to lose their competitive advantage, I would argue it is not disguise protection.

I think it’s quite possible that maybe a Brazilian producer will say “well, if that’s what European consumers want, then I’d rather export to China because Chinese export consumers don’t care [about deforestation and slave labor]”, but that’s a business decision. I would argue we talking about protectionism only if markets are being closed in such a way that producers from other countries cannot access them.

 

ESCOLHAS – How do you evaluate the questions that have been made regarding Europe’s ratification of the Mercosur-European Union Agreement due to the weakening of environmental governance in Brazil? Do you think that, even with all the extremely negative disclosure, the agreement will be ratified by the parliament of the European Union?

MARKUS KRAJEWSKI – That’s very difficult to predict. What I’ve heard so far is currently that the European Commission or European Council do not expect a ratification this year and there is strong opposition in certain parties of the European Parliament and in other governments. Now we must distinguish a number of things. The first is there are always governments or political parties who are against free trade agreements because they are against it anyway and there are others who are against free trade agreements with governments where we say they do things we don’t like. Then, there are of course those who are saying certain free trade agreements are also problematic because, regardless of which government is actually in power, they may send the wrong incentives.

I think that’s what we see from the EU-Mercosur Free Trade Agreement draft so far: it’s very clear that it’s deficient from a sustainable development perspective, regardless of what the current Brazilian government’s policy towards deforestation is. So, I would argue that the agreement needs to be improved, there needs to be changes in what is on the table right now and there are political actors who are demanding these changes. Now, whether that is something that the current governments of the Mercosur countries are willing to agree is a completely different story.

 

ESCOLHAS – What do you think about the claim of Brazilian producers that if Europe wants more correct products from the point of view of production, they should pay a premium, since producing better is more expensive?

MARKUS KRAJEWSKI -This point is a very crucial one, because the very logic of trade agreements is not well or the structure of trade agreements cannot really address those problems. A trade agreement could only say “we grant you zero tariff if you export the product that meets certain standards, and if it doesn’t meet those standards will lend you 5% tariffs”, but if the products already have zero tariffs anyway, which is often the case, specifically when it comes also to agricultural products, then of course that’s not an option. So, we would actually have to think about completely new innovative elements in trade agreements which would require close cooperation, not just between the governments but also between companies between importers and exporters. One would need to start building up certain value chains, in which sort of there is also support from both sides, from both governments, as well to empower basically producers in Brazil to meet the standards and at the same time also be very transparent about the fact that these products will be more expensive.

The problem is European consumers often do not know the real price of products. It’s the same also with agricultural products, even within the European Union. We go to a supermarket, we buy a liter of milk and the average consumer has no idea whether that praise the price for a farmer or not. Then there are farmers in in the European Union were saying agricultural products and foodstuffs even in the European Union of way too cheap for our farmers to make a sustainable living. We actually also would need a lot more conversation, explanation, education of people, what the real value of products are.

 

ESCOLHAS – Do environmental and human rights standards and the responsible consumption movement itself also apply to other products, such as gold?

MARKUS KRAJEWSKI – I think they should be. People who are familiar with the way how minerals are being produced know that mining often creates huge environmental problems, huge problems for human rights, rights of indigenous peoples and everything. But that’s very difficult or much more difficult to sell this idea to the European consumer. We see that the rainforest is burning and we have all these images of that and it’s immediately clear what that means, we can see a connection there. But if you buy a golden ring in a jeweler shop somewhere in Europe, you have no idea where the gold comes from – and not just the ring. Even with the mobile phone or electronic products. I think there it’s much more complicated.

But, again, I think if people know more about the production context and also the human voice and an environmental degradation that are associated with those kinds of product, I don’t see why one could not make similar cases. In modern times it’s often also a question of images. If you can create an image that in order to produce tuna fish, you kill dolphins or, if in order to have a shrimp, you kill these beautiful turtles, those are powerful images, and everybody understands them immediately. So, we need to think creatively how we can create other images that sort of average people understand the connections.

 

ESCOLHAS – Do you know if there is also a concern about these standards by the Chinese government and, anyway, what is the risk that the stricter criteria in the European Union will promote a change in trade flows instead of a change in production?

MARKUS KRAJEWSKI – This is the real danger and a real concern and everybody says everything is about China now and it actually is. Everybody realizes that China is the most important new player in the last 10, 20 years in global governance and global policy. It is not just because China is so economically or militarily powerful, but because it’s such a huge growing consumer market: it’s 1 billion people and most of them have been lifted out of poverty, which is of course tremendous success if you wish from the perspective of internal Chinese policy, we know that this lifting out of poverty also comes with a lot of problems, social problems, environmental problems, human rights problems.

The simple matter of the fact is that there is a huge consumer market and you know these people want to consume. We can fairly assume that maybe they’re not so much concerned about certain issues than other consumers, but if history tells us anything, then I think it just will be a matter of time until Chinese consumers also start becoming more responsible. They already realize that there’s problems with the environment. Maybe the average Chinese community consumer is not so much interested in the violation of Indigenous people rights in Brazil but Chinese people are intelligent and they know that we need the Amazon forests. Now there is a huge demand in the Chinese market, and yes, this is definitely something that changes the picture and we need to be aware that of course it’s possible the European Union says we only want certain products and there’s going to be a trade diversion and then certain products go into the Chinese markets. But, what’s the alternative? I mean, if the alternative is that you can import these products also into the European market, then you don’t create much change either.

 

ESCOLHAS – A study from Instituto Escolhas shows the subsidies correspond to 79% of what was collected in taxes in the beef chain and the municipalities that emit the most greenhouse gases in Brazil are precisely the cattle producers, due to deforestation. What can be done to direct Brazil’s and Europe’s subsidies  to demand good agricultural practices or to pay more for those who produce better?

MARKUS KRAJEWSKI – In the field of Agriculture, subsidies play maybe even a higher role than tariffs or trade barriers and it’s not a new observation. Agricultural subsidies have been an issue in global trade for certainly the last 30, 40 years and I believe countries like Brazil and others have always rightfully criticized the European Union for their subsidies, and for the fact that of course subsidies also have a trade distorting effect. Now, as Brazil develops and as the Brazilian government learns from the European government and as the Brazilian government has more money, they pay that now also too big agricultural companies.

It’s good to say that you support small farmers and you support diversion and you support environmentally safe productions. The problem of course is that most of the subsidies do not go to the small farmers, go to the big farmers. When the United Kingdom was still part of the European Union, I’ve once heard that in the UK, the largest portion of agricultural subsidies went to Queen of England (to the Royal family’s farms) . That just shows you that the same is also true with agricultural subsidies in other parts of the world. At the end of the day, we need to study the impact of these subsidies and so I congratulate Instituto Escolhas for doing this study, for making that connection. In the context of these trade negotiations, countries like Brazil and others rightly points to the fact that there are still these subsidies in the European Union, and it needs to be fair and countries need to demand that the European Union adjusts its subsidies in such a way that they would not protect the markets in an unfair manner.

 

ESCOLHAS – What can we expect for the next few years? Do you imagine that the regulations that are being developed will be sufficient to curb deforestation and the violation of human rights in commodity producing regions?

MARKUS KRAJEWSKI – I’m an optimist. We don’t know what’s going to happen but we know that if everyone is a pessimist, nothing is going to happen. So we need to be optimistic. When all the countries come out of the Covid crisis, despite a lot of people will just be relieved and start partying again, I hope that there will be enough people who start reflecting on certain aspects of our ways of lives. And I’m hopeful that people will realize that even more closely how fragile life is and how fragile the environment can be.

Last year many of us were completely sort of devastated, but by looking at what happened in the US and then you know there was an election and now at least, it seems to me that the majority of the country in the US is coming back to normality and these things changed. I think people realize that something needs to be done about deforestation. Whether that comes too late, I think that’s the wrong question, because of course it’s always late ad then the human brain works too slow for the dangers that the human brain can actually produce, but there’s no alternative. We need to work on these issues, and if the measures come in the next five years, it would be great if they only come in the next 10 years. It’s better than they come in 10 years than never. So I’m optimistic that these measures will come and they will have an impact and I just hope and pray that it will be enough.