Insights into Editorial: A challenge called Wallonia
After seven years of negotiations, a trade partnership between the European Union and Canada is in danger of never seeing the light of day.
- A small Belgian region is currently blocking the so-called Comprehensive Economic and Trade Agreement (CETA) agreement, fearing its impact on the agricultural sector and welfare standards.
- This is preventing Belgium and the other 27 EU member states from giving a final green light to the deal.
- More broadly, freezing the approval of the trade deal is also questioning the EU’s ability to carry out any commercial partnerships, including with the U.S.
The EU and Canada started negotiating a trade agreement in 2009 and concluded the text in 2014. The accord aims to cut 98% of custom duties since day one of its application, and save EU exporters nearly $550 million.
The European Commission, which is the EU body responsible for negotiating trade deals on behalf of the 28 member states, says CETA is the most modern agreement conducted until now. It includes a new “investment court system”, dissipating some public fears that such a deal would favor multinationals over small businesses.
What are the benefits to CETA?
- Remove customs duties.
- Expand the services market.
- End restrictions on access to public contracts.
- Offer predictable conditions for investors.
- Prevent illegal copying of EU innovations, trademarks and products (e.g., food).
- Boost growth and jobs across Europe.
- Increase trade and investment across Europe.
- Strengthen cooperation between the EU and Canada.
Existing trade between the two regions:
Canada is the EU’s 12th most important trading partner. The EU is Canada’s second biggest trading partner after the US and accounts for nearly 10% of its external trade. Trade in goods between the EU and Canada is worth almost €60 billion a year.
Machinery, transport equipment and chemicals are the EU’s main exports to Canada. Commercial services – mostly transport, travel, insurance and communication services – exceed €27 billion.
Under CETA, the EU and Canada have also agreed to:
- Step up regulatory cooperation: The EU and Canada will operate a method to exchange experiences and information among regulators.
- Protect European innovations, artists and products: CETA will level the playing field in intellectual property rights between the EU and Canada. The intent is to bring its copyright protection in line with the World Intellectual Property Organization rules.
- Open up trade in services: Half of the rise in the EU’s economy from CETA is expected to come from opening up trade services such as financial, telecommunications, energy and maritime transport.
- Promote investment: This will be done by removing barriers, providing a solid legal system and resolve investment disputes quickly, fairly and in a transparent manner.
- Ensure good cooperation in the future: If all else fails and things go south, the CETA has created a framework from which to ask for a panel of independent legal experts to be set up with the goal to efficiently tackle any dispute that hinders trade and investment between the EU and Canada.
- Protect democracy, consumers and the environment: CETA has been set up to serve the people, rather than ever undermine for the sake of commercial gain.
Why is it being opposed?
- Politicians in Wallonia, a small Belgian region, believe CETA would threaten their farming and industrial sectors, because they won’t be able to compete with cheaper Canadian exports. The concern comes in the wake of complaints by environmental activists and trade unions that this deal and others will erode standards for food, work and industry.
- The deal aims to bring the Investor-state dispute settlement courts, designed to provide a route for foreign investors to protect their interests in the region. The agreement has safeguards built in in recognition of the concerns including a code of conduct and increased transparency, but its proponents have failed to answer the fundamental question of why in the EU and Canada, with well-functioning judicial systems, such a separate court system was needed at all.
- The deal is also being opposed on the ground that it was prepared and negotiated in secret, excluding key stakeholders such as labour unions, consumer associations and others. Therefore it had zero democratic legitimacy.
- But Wallonia was far from being the only detractor of CETA. Recently, the deal faced another major challenge when three organisations — Campact, foodwatch and Mehr Demokratie — challenged CETA’s legitimacy in Germany’s Constitutional Court, arguing that it would create powerful committees with “no democratic legitimacy”, and investment courts that would discriminate against European investors.
- Earlier in the process, the Austrian government had raised objections, sparking concerns about the future of the deal.
Implications for India:
The near collapse of the CETA deal will have implications for India too, and the stalled negotiations on the India-EU Free Trade Agreement, which commenced in 2007 and continues to be held up by a lack of consensus on issues such as Mode 4 access for services professionals on the EU side, and FDI liberalisation on the Indian side.
It could also hit, indirectly, hopes for a fruitful India-U.K. Free Trade Agreement: observers in Britain have pointed out that the struggles over CETA don’t bode well for Britain’s ability to negotiate favourable terms with the EU as it attempts to extract itself from the union, which could have a serious impact on the 800 Indian businesses in the U.K., many of which sell their products and services in the EU.
This breakdown is not the end of the line for CETA. The European Council has encouraged continued negotiations with a view to finding a solution to the outstanding issues as soon as possible. The Wallonian problem may well be resolved, and CETA saved, but the challenge it throws up about the legitimacy of trade deals for the EU and the world more widely must be countered with reform, dialogue and greater transparency rather than derision.