European trade policy has been thrown into disarray after Belgium’s government said it could not overcome regional objections to an EU-Canada trade deal despite weeks of talks to rescue the agreement.
The so-called Ceta pact is on the brink of collapse, raising serious doubts about the EU’s ability to strike future trade deals. It bodes badly for the UK, which will seek its own trade agreement with the EU following its exit from the bloc.
The Ceta was to be signed at a long-planned ceremony on Thursday at a summit meeting in Brussels. Justin Trudeau, Canadian prime minister, and Donald Tusk, president of the European Council, resolved during an emergency phone call to support a fresh effort to save the deal.
“We think Thursday’s summit still possible. We encourage all parties to find a solution. There’s yet time,” Mr Tusk said on Twitter.
The affair has humiliated EU leaders, who had hoped that the “new generation” Canadian deal would set a benchmark for the world and pave the way for an even bigger trade deal with the US.
Canada’s trade minister, Chrystia Freeland, told reporters in Ottawa on Monday that she remained convinced a solution could be salvaged by Thursday. “Ceta isn’t dead and we are working hard,” she said.
But she added: “The ball is in Europe’s court. Canada has done its work.”
John Clancy, senior adviser at FTI Consulting in Brussels, said the debacle had serious implications for the future of European trade policy, which is a core EU competency.
“Even if a solution is found in the coming weeks and months, the credibility of the EU as the world’s largest trading bloc has been damaged by the political grandstanding of the Walloon parliament,” Mr Clancy said.
“The potential negative impacts are huge, including of course for a future EU-UK trade deal post-Brexit. What you’ll find now is international trading partners to the EU will be incredibly cautious because there’s absolutely no guarantee that a trade deal won’t be taken hostage at any number of points.”
Charles Michel, Belgian premier, said on Monday he could not sign the pact because of political resistance in Wallonia, the French-speaking region whose local parliament has voted against the agreement.
“The clear answer, at this stage, is no,” said Mr Michel in response to European and Canadian leaders who asked Belgium to clarify its intentions on Monday.
Ceta must be signed off by all 28 member states before it can take effect. Even though Mr Michel’s administration strongly supports the deal, it cannot be approved in his country’s multi-layered political system without regional support. Wallonia’s stand prompted the local government in the Brussels region and another federal body to follow suit.
Each of the other 27 member states was ready to sign, meaning the deal has been blocked by representatives of 3.5m people in a trading bloc representing more than 500m. “I think everyone bent over backwards to try to suit the Walloons. But at this stage politics trumps trade,” said a senior trade official in another member state.
Two years after the EU and Canada reached agreement at the end of five years of negotiations, the breakdown presents serious complications for the EU authorities as they strive to inject new impetus into their trade policy at a time of rising anti-establishment sentiment around the world.
“EU trade policy won’t survive in a world where trade agreements have to be ‘democratised’ by every single national parliament and sub-legislature across the EU before they see the light of day,” said Peter Mandelson, former EU trade commissioner. “This is a dagger at the heart of European trade policy which must revert to an exclusive EU competence.”
With Ceta all but collapsing, officials said efforts to appease Walloon MPs continue in the hope that it can be salvaged away from the glare of the summit deadline.
But the European authorities have already made numerous attempts persuade Wallonia to back the deal, among them several revisions to a draft declaration clarifying the most contentious aspects of the pact. Walloon MPs, many of them motivated by anti-globalisation sentiment, have questioned a new system of investment courts that was to be established under the Ceta.
“Patience is of the essence,” said a spokesman for the European Commission.
“Belgium is still in the process of establishing its position through its relevant institutional procedures and in line with its constitutional order. We of course respect these.”
There was no immediate comment from Canada’s diplomatic mission to the EU on the Belgian decision.
Ms Freeland walked out of talks with Walloon leaders on Friday, bringing an abrupt halt to extraordinary talks between a G7 government and a regional administration in a European member state.