Lawrence Herman, a former Canadian diplomat, practises international trade law and is a senior fellow of the C.D. Howe Institute in Toronto.
The fate of the Canada-EU trade deal remained unclear on the weekend, thanks to the objections of Wallonia, a region in Belgium few Canadians had ever heard of before now.
After spending agonizingly frustrating days in Brussels trying to salvage the deal, Trade Minister Chrystia Freeland finally lost patience and walked out of talks on Friday, a totally appropriate response under the circumstances.
Given the amount of political capital the Trudeau government has invested in supporting this Conservative-negotiated agreement, criticisms of Ms. Freeland by Conservative politicians last week were puzzling to say the least. Even though the Comprehensive Economic and Trade Agreement (CETA) was concluded by the Harper government in 2014, it’s been consistently championed by the Liberals throughout, showing that Canada can approach key trade policy matters on a non-partisan basis.
In fact, the Trudeau government bent over backward to keep the Europeans onside over the past few months, a demanding process that in the end was almost wrecked by this small and economically unimportant region using Belgium’s byzantine internal approval processes.
Ms. Freeland’s stormy exit recalls what happened a generation ago in the Canada-U.S. free-trade negotiations. Faced with unreasonable and obdurate U.S. negotiators back in 1987, the Canadian team walked out and returned home. In the end, the Americans came around and a historic trade agreement was concluded.
It’s not yet clear if Canada’s actions will have a similar impact in this case, but recent developments in Brussels show some hope. As late as Sunday, senior EU officials indicated there may be a way to solve the Wallonia problem and possibly sign the deal this week, leading to its provisional implementation some time in 2017.
Even if EU internal approval gets back on the rails, Canada has good reason to be annoyed.
Before these negotiations even got started eight years ago, the EU said it wouldn’t talk if Canada couldn’t guaranty that all the provinces would be onside if a deal was done. To meet European demands, Canada set up a negotiating team bringing all 10 provinces and three territories to the table. This was a major departure from Canada’s long-standing approach to trade negotiations.
In spite of Canada’s efforts, it’s the EU that can’t get its act together.
It was only late in the game that Brussels admitted it couldn’t ratify or even provisionally apply the 1,600-page deal on its own because the EU’s so-called “mixed competency” requirements needed all 28 member governments to approve it.
There are other reasons for Canada to be miffed. To mollify opposition in Germany and some other areas over the investor-state dispute settlement provisions – allowing private investors to sue governments – Canada and the EU made major changes to the CETA text, creating a single transatlantic investment court and limiting the ability of private investors to challenge government regulations on the environment and other matters.
That was a ground-breaking and creative modification to the investment chapter and showed how, with political will, both sides can advance matters and adjust rules to produce a modern and progressive trade agreement.
This summer, Canada also agreed to hammer out clarifications to assuage concerns of many on the European centre-left, including social democrats in Germany and Austria. The result is a Joint Interpretative Declaration, providing “a clear and unambiguous statement” of the meaning of CETA’s provisions, including joint affirmation of the rights of governments to regulate in the public interest.
The future of CETA and the Joint Declaration will become clearer over the next few days. Assuming the Wallonia factor is overcome, it will then be possible for the treaty to be signed by Justin Trudeau and the President of the EU Commission, Jean-Claude Juncker. But signature is only the first of several steps.
After that, formal approval still must be secured from the internal organs of the EU to allow CETA to be applied a provisional basis. Final ratification and full implementation of the treaty will be down the road. But at least provisional application will show forward movement and take CETA out of diplomatic limbo where it has languished for more than two years.
As Ms. Freeland and the Canadian team return home, the warning signals surrounding this episode are evident. At its broadest, it shows the ability of small but well-organized opposition groups to take on governments, putting politicians on notice that trade liberalization efforts will face increasingly hostile headwinds. We see that in spades south of the border.
Similar anti-liberalized-trade interests opposing CETA are gathering forces here in Canada, a development full of contradictions given these typically left-leaning groups should actually be supportive of the treaty and its lessening of Canada’s overreliance on the United States. By strengthening trade, commercial and political relations with other countries and other regions, Canada can diversify that one-sided dependence.
In the broadest sense, that is the real strategic gain for Canada under this agreement. Let’s hope it succeeds.
Eds note: An earlier version of this column mistakenly referred to CETA as a 1,600-word deal.Report Typo/Error
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