Briefing highlights
- Fallout from EU-Canada trade flop
Canada vs. Wallonia
The “embarrassment” playing out in Europe threatens to go far beyond the proposed EU-Canada trade deal.
The stalemate in Belgium speaks volumes about protectionism and comes amid a backdrop of weak global trade.
Where Canada is concerned, it’s a crucial issue for an economy struggling to shift to a stronger export base from its reliance on consumers and housing.
For the rest of the world, it’s yet another sign of protectionist fever. Just look to the United States, where Hillary Clinton is voicing concern over the Trans Pacific Partnership (TPP) and Donald Trump is positively ranting about China, Mexico and the North American Free Trade Agreement.
“Notwithstanding one or two more positive signs, world trade remains in the doldrums,” said Andrew Kenningham, senior global economist at Capital Economics in London.
“And the fact that the EU-Canada trade agreement may be scuppered by a regional Belgian government does not bode well for the future.”
As The Globe and Mail’s Steven Chase and Paul Waldie report, the stalemate could not be broken in time for a planned signing summit, though fresh reports suggest Belgian policy makers are making progress.
Known as the Comprehensive Economic and Trade Agreement, the deal has been years in the making. It’s the most comprehensive such deal ever for the European Union, though analysts say it obviously means more to Canada than to Europe, where we ship 8 per cent of our exports.
This is not to suggest that the concerns of the Walloons aren’t valid, only that there will be ramifications.
“The Comprehensive Economic and Trade Agreement (CETA) appeared close to fruition until it was unexpectedly held up in a little corner of Belgium,” said Alvin Tan of Société Générale.
“The surrealist development had the Canadian trade minister reportedly on the verge of tears and hinted at the pitfalls ahead of the Brexit negotiations,” he added.
“More than that, CETA’s plight and the opposition to the TPP and TTIP highlight the growing backlash against globalization.”
Wallonia and Brussels have hung up the CETA deal, citing concerns over the Investor Court System, agriculture and the industrial base.
The stalemate, said Mr. Kenningham’s colleagues at Capital Economics, chief European economist Jennifer McKeown and assistant economist Daniel Christen, “bodes ill for future EU trade agreements which could have been more beneficial and suggests that the pace of EU reform will remain slow.”
The EU’s ability to strike deals with other countries, such as the Transatlantic Trade and Investment Partnership between the EU and the United States, is now in doubt, they said in a recent report.
“TTIP negotiations with the U.S. are unlikely to be renewed any time soon,” they added.
“And trade deals with fast-growing emerging economies, with which cultural differences are more pronounced, seem even less likely. This will hinder economic growth and perhaps vindicate those who want to escape EU protectionism.”
There’s also the threat to the EU’s reputation, already muddied by Brexit.
“The ability of 3.5 million Walloons to jeopardize the deal is a source of embarrassment for the EU and shows how difficult it is to enact comprehensive EU reform,” said Ms. McKeown and Mr. Christen “As a result, there is little hope for fiscal and banking union that would improve growth and financial stability in the euro zone, which will ultimately heighten the disillusionment with the EU, and increase the risk of future exits.”