Canada-EU trade deal faces new challenge

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The trade deal between Canada and the European Union is facing a new challenge from the Belgium region of Wallonia which is threatening to block final ratification of the agreement.

Wallonia First Minister Paul Magnette said in an interview that his government will not support the CETA trade deal when it comes up for ratification unless changes are made to how disputes are resolved. Mr. Magnette also said his government is challenging the legality of the dispute resolution mechanism in the European Court of Justice, which could take at least two years to rule. "It's certainly far from being over," Mr. Magnette told The Globe and Mail this week. "We've said very clearly to the European Commission that we will not ratify as long as we don't get all the aspects that we've asked for during the negotiations."

When asked what he would say to those in Canada who thought the trade pact was essentially a done deal, he replied: "It's not a finished product, certainly not."

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The First Minister also isn't happy about how Canadian officials, including Foreign Affairs Minister Chrystia Freeland, who was trade minister at the time, tried to pressure Wallonia into backing the deal last October.

In a new book about the frantic negotiations at the time, Mr. Magnette said Ms. Freeland and others used a heavy-handed approach that was long on emotional arm-twisting and light on rational problem-solving.

Canada has long viewed the EU deal, known as the Comprehensive Economic and Trade Agreement, as an important step in the diversification of the country's economy, particularly given the challenges facing the North American free-trade agreement under the new Trump administration in the United States. It has also been hailed by Prime Minister Justin Trudeau and others as an example to the world of a new, ambitious type of trade deal.

But Mr. Magnette's comments make it clear that even after seven years of negotiation, CETA remains a work in progress.

Canada and the EU signed the deal last October and most of it is about to come into force on a provisional basis, including the removal of tariffs on hundreds of goods. However, the entire agreement must still be ratified by all 28 EU countries and 10 regional legislatures. That process is expected to begin soon and it could take a couple of years. And by requiring unanimity, the EU has handed a veto to any single legislature, including French-speaking Wallonia, which has about 3 1/2 million inhabitants.

Last fall, Wallonia refused to give consent to allow Belgium to sign CETA, sending Canadian and EU officials scrambling to Wallonia's capital, Namur, to salvage the deal.

In his book, titled CETA: When Europe Derails, Mr. Magnette offers a candid assessment of how Canadian and EU officials tried to pressure Wallonia, using emotional pitches and blunt threats. One ambassador to an EU country told Mr. Magnette's cabinet that a major company would reconsider a big investment in Wallonia if it failed to back CETA.

Canadian officials come in for particular attention in the book for failing to understand Wallonia's point of view. "What struck me was also the very emotional strategy that they opted for," he said in the interview. "They very rarely put strong rational arguments on the table but very, very often insisted on the links between Europe and Canada, between French-speaking Wallonia and Quebec, and that kind of thing. So it was more kind of a very emotional discussion, more than a diplomatic or political negotiation."

In the book, Mr. Magnette recalled his first meeting with Pierre Pettigrew, a former minister of foreign affairs whom Mr. Trudeau appointed as CETA envoy. Mr. Pettigrew started by playing up Mr. Trudeau, citing his many talents and portraying him as an upcoming global leader. Then he told Mr. Magnette in "direct, almost brutal" language that Wallonia's refusal to back CETA would be a punch in the stomach for Mr. Trudeau and that there would "inevitably be heavy repercussions for relations between Wallonia and Canada."

He also took aim at Ms. Freeland, saying she badly misread the situation. During their first meeting, Ms. Freeland zeroed in on his standing as a prominent socialist in Belgium and asked if he was aspiring to "become leader of the left in Europe" by holding out on CETA. That caught Mr. Magnette off guard and he insisted he had no personal agenda.

She also dangled the prospect of flying Mr. Magnette to Ottawa to meet Mr. Trudeau as a kind of publicity stunt. After the two met, she explained that Mr. Magnette could emerge triumphantly and hold up a copy a "Canada-Wallonia statement of principles" that they would draft. He could then declare victory at a press conference before heading back to Belgium. "I was amazed" by the idea, Mr. Magnette wrote.

"I think probably they thought I was trying to play the game for myself and this was just a pure personal strategy and I very kindly explained to Mrs. Freeland this was not a personal strategy," he said in the interview.

However, sources close to the talks say Mr. Magnette welcomed the chance to meet Mr. Trudeau and the trip didn't happen only because of a lack of time.

Mr. Magnette also questioned Ms. Freeland's decision to abruptly walk out of the negotiations, shortly before the deal was to be signed, and return to Canada, telling reporters, nearly in tears, that she was extremely disappointed that the talks had failed and that she wanted to get back to her children. Mr. Magnette said he still can't understand what happened and can only assume she and others in the Canadian delegation felt humiliated at being outfoxed by a small regional government. "It did not give a very flattering image for a country asserting itself as a world leader," he wrote.

A spokesman for Ms. Freeland declined to comment on Mr. Magnette's version of events but said: "CETA is the most progressive concluded trade agreement." The spokesman added: "When we entered office, our government chose to make it more progressive, and the changes were critical to European support for the deal, including by socialists across Europe."

Wallonia's main concerns centred on how disputes are handled in CETA, particularly between businesses and governments. The treaty outlines the rules for adjudicating disputes and sets up a tribunal, or Investment Court System, known as ICS. Proponents say the ICS modernizes how trade disputes are settled and moves toward the creation of an international trade court. But critics, like Mr. Magnette, say the ICS takes away power from domestic courts and local governments.

Under Belgium's constitutions the country's five regional and linguistic legislatures have power to approve international treaties, and that meant Wallonia's concerns about the ICS had to be addressed. In the end, Canadian and EU officials struck an agreement with Wallonia which meant the ICS would take not effect until after CETA was ratified. The deal with Wallonia cleared the way for Mr. Trudeau and EU officials to hold a signing ceremony in Brussels on Oct. 30. Mr. Magnette was quick to point out that Wallonia's concerns have not gone away and that the agreement reached last fall merely delays the key issues until ratification.

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