CETA, Canada’s major free trade deal with the EU, is close to dead

Chrystia Freeland, Canada’s minister of international trade, walked out of eleventh-hour negotiations, calling the situation “impossible”

Canada’s International Trade Minister Chrystia Freeland

Canada’s International Trade Minister Chrystia Freeland. (David Rowland/SNPA/CP)

CETA—the Comprehensive Economic and Trade Agreement, a major free-trade deal between Canada and the European Union, appeared to be close to collapse as Canada’s international trade minister, Chrystia Freeland, walked out of last-ditch talks in Brussels.

“I personally have worked very hard, but it is now evident to me — evident to Canada — that the European Union is incapable of reaching an agreement, even with a country with European values such as Canada, even with a country as nice and as patient as Canada,” a statement from Freeland read. “Canada is disappointed and I personally am disappointed, but I think it’s impossible. We are returning home.”

European officials painted a slightly rosier picture. “Good progress had been made in most areas of concerns for Wallonia in talks on CETA,” Tweeted EU Trade Commissioner Cecilia Malmström. “I sincerely believe this is not the end of the process.”

The ultimate obstruction to signing CETA, which had been under negotiation since 2009, was put up by the Belgian region of Wallonia. Belgium’s constitution requires buy-in from its regional governments in order to approve such agreements under EU law; this effectively handed Wallonia a veto on the deal. The regional legislature voted on October 14 to oppose the deal, which means Belgium’s national government cannot approve it either.

Wallonia’s politicians believe CETA would threaten their farming and industrial sectors, because they won’t be able to compete with cheaper Canadian exports. The concern comes in the wake of complaints by environmental activists and trade unions that this deal and others will erode standards for food, work and industry.

The impasse reflects the political moment within Europe, where a rising national populism is pushing back against European institutions like the EU. The most visible such conflict has been Britain’s surprise decision to pull out of the union, but Wallonia’s resistance is another example of the ways ordinary Europeans are agitating against what they see as aloof bureaucrats in Brussels.

The European Council, the elite body made up of the 28 EU countries’ heads of state, issued a statement [PDF] urging a “swift decision” in favour of CETA, and encouraged “continued negotiations with a view to finding a solution to the outstanding issues as soon as possible.”

Professor Robert Wolfe, of the Queen’s University School of Policy Studies, says that Friday’s breakdown is not the end of the line for CETA.

“This has almost nothing to do with CETA,” says Wolfe. “It is internal politics in Wallonia and internal politics in Belgium. They’ve found a point of maximum leverage.” He says the EU ultimately has to find a way to get the deal done because not doing so would be a much bigger crisis. “The stakes here are enormous for Europe. Until they sort this out, they have zero credibility as an international negotiating partner.”

If passed, CETA would eliminate thousands of tariffs on goods traded between Canada and EU nations. The European Union enforces more than 9,000 different duties on imported goods; in its final proposed form, CETA was to have made 99% of them duty free for Canadian exporters. Canadian duties would similarly be dropped for EU exporters. Canadian officials placed the potential value of CETA to the Canadian economy at about $12 billion per year.

As Canadian Business commentators wrote last year, CETA’s aim was not just to reduce tariffs but to tackle other regulatory hurdles between Canada and the European Union:

For instance, the deal promises to reduce the impact of EU regulations. For some products, a Canadian regulator would be able to assess whether products meet EU specifications. A related Conference Board study on 9,000 Canadian companies that export to Europe suggests that many have found it difficult to adapt to EU norms that are different from those in North America. If CETA’s provisions manage to reduce the impact of EU regulations, they would lower a barrier to trade, which could make it easier to sell to Europe, particularly for smaller companies.

Wallonia’s brinksmanship  has not been negotiators’ first brush with an obstructive regional government; in 2014 it was the Canadian province of Newfoundland and Labrador that threatened to derail the negotiation:

When Canada and the EU first sat down to hammer out a trade deal in 2009, the Europeans insisted the provinces be at the table, since many of the topics up for debate—procurement, labour mobility, agriculture—lie within provincial jurisdiction. This new status gives the provinces unprecedented clout. One of the biggest sticking points in CETA was the EU demand that Newfoundland relax its rules requiring fish to be processed provincially. To get the province to give ground, Ottawa initially tried tying a billion-dollar federal loan guarantee for the Muskrat Falls hydro project to a change in the fish-processing rules. Former Newfoundland premier Kathy Dunderdale flat out rejected that threat. When continued pleading didn’t work, Ottawa then offered to share the cost of a $400-million fisheries fund.

With files from Joe Castaldo & Canadian Press.