Europe Letter: Delay in Canada trade deal could embarrass EU

It was supposed to be the easy one. EU ministers were due to ratify an EU-Canada trade deal this week, seven years after negotiations began. But following a series of setbacks, it now appears that the deal – known as Ceta – may not be ready for ratification at next week's EU-Canada summit.

Instead, the issue has been pushed on to an already packed agenda for the two-day EU leaders' summit which starts today in Brussels. The issue now threatens to embarrass the EU, raising serious questions about its credibility as a trade partner. As Canada's trade minister Chrystia Freeland put it: "If the EU cannot do a deal with Canada . . . who the heck can it do a deal with?"

Ceta’s troubles began this summer after the European Commission decided that the deal needed to be ratified by national parliaments as it was deemed to fall under national as well as EU competence.

The need for sign-off by up to 40 national and regional parliaments was bound to throw up challenges. It did. Though Germany's parliamentary backing for the deal was a boost, last Friday the regional parliament of Wallonia, which represents 3.5 million French-speaking Belgians, voted against the deal. (Ireland signed off on the provisional application of the deal at last week's cabinet meeting).

Lingering concerns

Legally,

Belgium

cannot proceed without the support of all five regional parliaments. Other countries have now jumped into the fray, with

Romania

and

Bulgaria

demanding visa-free access for its citizens to Canada, while lingering concerns remain about a German constitutional court judgment on the deal which suggests a potential opt-out for

Germany

.

Diplomatic efforts last weekend failed to break the impasse, with the result that EU ministers arriving in Luxembourg on Tuesday for a specially-convened trade council had nothing to sign.

EU leaders, who had been scheduled to discuss trade on Friday morning, will now consider the Canadian conundrum. While ambassadors can technically sign off on the agreement before Canada's prime minister Justin Trudeau leaves for Europe next Wednesday, Monday seems to be the last possible date for ratification.

In the meantime, Wallonia has indicated it is not for turning. The region's president, Paul Magnette, on Wednesday called for a "few months" to reopen the negotiation. The small Belgian province has now become an unlikely champion of anti-trade campaigners across the globe.

The European Union is a master of compromise and an inventive solution may be found in the coming days to hide Europe's blushes amid signs that Canada's patience wears thin. But even if the agreement is salvaged, the Ceta controversy raises deeper questions about the future of EU trade policy. The disagreements over Ceta are part of a broader public unease about free trade shaping political debate from Berlin to Washington.

They have implications for TTIP, the transatlantic trade and investment partnership between the EU and the US, which is at a much less advanced stage. The bid to secure agreement by the end of US president Barack Obama’s tenure has essentially been abandoned. The German and French leaders are reluctant to back a deal that faces significant public opposition ahead of next year’s elections in those countries, while both US presidential candidates oppose TTIP in its present form. As one EU diplomat put it, the objective now is to “ensure a soft parking of TTIP before the end of the year”.

Investor protection

For critics of TTIP, the relatively late public mobilisation around Ceta shines an important light on issues that are common to both the US and Canadian trade deals. This includes the controversial investor protection proposals that allow foreign companies to sue countries.

"Both the EU and Canada are advanced democracies with highly developed court systems," says Scott Sinclair, senior research fellow at the Canadian Centre for Policy Alternatives, "so why set up this parallel system of private justice which is only available to foreign investors?"

But supporters of the deal, who believe it will lead to lower prices and better access for consumers and businesses, fear that Europe's current trade woes will damage the bloc's competitiveness in the long term. Ireland was among the countries that welcomed the focus on trade at this week's European Council, particularly given the imminent departure from the EU of Britain, one ofits strongest liberal economic voices.

Perhaps of most concern, however, are the implications of the Ceta controversy for Britain. The prospect of up to 40 parliaments having a veto on any future trade agreement between the EU and Britain does not bode well for Britain's exit negotiations. As EU trade commissioner Cecilia Malmstrom put it this week: "If we can't make it with Canada, I don't think we can make it with the UK."

It seems that a small regional parliament in Belgium may have given Theresa May a fresh headache.