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Canada-EU trade deal has hit a hurdle, not a wall

First, Germany expressed reservations about parts of the Canada-Europe free trade deal.

Now, European Union lawmakers are threatening to block the agreement outright.

The Greens and other left-wing parties are objecting to any trade deal that contains so-called Investor-State Dispute Settlement (ISDS) provisions. ISDS allows companies to sue governments when they believe their trade rights have been violated. But critics say the system gives multinationals too much power – a concern that would magnified if the Canadian agreement becomes a model for the EU-U.S. free trade agreement, which is also being negotiated.

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So what does this mean for the fate of the deal?

Prime Minister Stephen Harper and European Commission President Jose Manuel Barroso are slated to sign the 1,500-page completed text of the trade agreement in late September, formally marking that a final deal has been reached.

The agreement still has a long way to go before implementation – perhaps another two years.

But the European Parliament – even one where Euroskeptic nationalist parties and the Left now hold outsized sway – is unlikely to kill the trade agreement.

Traditionally, the real power in the EU rests with the EU council, which is made up of the 28 EU heads of government. The Parliament, which is aligned by parties rather than countries, must also ratify the trade agreements with Canada.

Experts doubt the Parliament would defy the will of the council. Doing so would effectively take the "union" out of the EU.

"It would be quite a coup for the European Parliament to go against what has been carefully negotiated collectively, and agreed to, by the 28 EU governments," agreed Daniel Schwanen, vice-president of research at the C.D. Howe Institute in Toronto.

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"So far, all governments are on board, in Canada and Europe. For anyone now to play spoiler, they would bear a heavy economic and political responsibility."

But Jason Langrish, executive director of the Canada Europe Roundtable for Business, says the EU Parliament remains an unpredictable wild card.

"The Parliament has the power and they can stop this agreement from going through," Mr. Langrish acknowledged. "This is a reaction to the United States, primarily."

In the past, the Parliament was often a rubber stamp for EU laws. But that's not always the case any more. In 2012, for example, the Parliament voted down a global anti-counterfeiting trade agreement.

Mr. Langrish said he still believes the EU Parliament will ultimately approve the agreement. But even if it does approve the deal, the vote might not be the last hurdle for the trade agreement.

Under EU rules, member states delegate to Brussels the sole responsibility for negotiating international trade agreements. The EU Council signs the final agreement and puts it to a yes-or-no vote in Parliament.

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Toronto trade lawyer Lawrence Herman pointed out that some European officials are making the argument that the Canada-EU trade deal is a "mixed" agreement that strays into the legal realms of EU member nations.

If that's the case, the agreement would have to be ratified by the legislatures in all 28 EU countries – a process that could delay and complicate implementation, Mr. Herman explained. "It is something to watch carefully," he said.

But before any deal is put to ratification, the agreement must also undergo legal "scrubbing" – making sure the text accurately reflects the intent of the two sides – and translation into 23 EU languages.

So it may be a bit too soon for Mr. Harper and Mr. Barroso to take a victory lap when they meet in Ottawa next month.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More


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