EU-Canada Trade Deal Signed, Overcoming Hurdles in Belgium

3 November 2016

Leaders from the EU and Canada signed the Comprehensive Economic and Trade Agreement (CETA) on Sunday, following several weeks of talks to win the required backing of all 28 EU member states.

The bilateral agreement aims to strengthen the economic relationship between the two transatlantic trading powers, such as by reducing barriers to trade and investment; improving public procurement market access; establishing transparent, predictable conditions for cooperation; and protecting commonly held values.

European Council President Donald Tusk, Slovakian Prime Minister Robert Fico, currently holding the rotating EU Council presidency, and European Commission President Jean-Claude Juncker joined Canadian Prime Minister Justin Trudeau in signing the pact at the 16th EU-Canada Summit, held 30 October in Brussels.

The summit had initially been scheduled for earlier in the week, but the initial failure to reach consensus among Belgian regional authorities meant that the Canadian premier’s flight was postponed. (See Bridges Weekly, 27 October 2016)

On Thursday, Belgian approval was eventually confirmed after a compromise was reached addressing concerns raised by the region of Wallonia, a region of 3.6 million people which had led the opposition to signing on to the agreement.

Walloon officials had reportedly hesitated to make their agricultural sector more open to Canadian competition and expressed doubts over the proposed Investment Court System that would be enacted in CETA, which would replace the previous investor-state dispute settlement system that has become an increasingly common feature in free trade deals and bilateral investment treaties since the 1960s.

Belgium pledged to put the new arbitration system in front of the European Court of Justice to ensure that it is in line with EU law.

A joint interpretive instrument was issued to further assuage Walloon concerns, providing a binding interpretation of certain CETA provisions, including on investment protections and the right to regulate, as well as on labour and environmental protection.

Shaping globalisation

The agreement, which was preceded by a five-year negotiation process that concluded in 2014, temporarily stumbled as it approached the final stages, where the need to win over Wallonia was all that stood between advancing a pact affecting a wider 550 million inhabitants bridging the Atlantic.

The delay may have cast shadows on the viability of the EU as a trading partner for potential future arrangements – with some pointing to the upcoming “Brexit” talks with the UK and ongoing trade talks with the US – while also intensifying concerns over popular anti-trade pressures, pointing to globalisation as aggravating inequality both between and within countries.

In response to such concerns, European Commissioner for Trade Cecilia Malmström urged the international community to embrace trade agreements as an opportunity to positively mould these forces.

"This is how we can shape globalisation – through progressive, state-of-the-art trade agreements that uphold our values and set new standards for global commerce,” she said in a press statement.

In a related blog post, Malmström championed CETA as an example to be followed in this respect, serving to “clearly demonstrate the improvements we have made to our trade policy.”

In particular, proponents say that CETA includes some of the most far-reaching chapters on labour, environment, and sustainable development ever negotiated in a bilateral trade agreement, setting out decisive commitments on social and environmental issues.

“Our Comprehensive Economic and Trade Agreement promotes all the things that Canadians and Europeans care about: decency in the workplace, our health and safety, our cultural diversity, the quality of the land, sea, and air that surround us,” said Juncker.

CETA promises to eliminate 99 percent of tariffs, and the majority of them immediately after the deal enters into force. Upon implementation, Canada is set to remove duties amounting to up to €400 million (US$440 million) for EU goods, which is slated to increase to more than €500 million (US$550 million) annually following the transitional period.

Officials say that CETA seeks to move beyond trade liberalisation and strengthened economic activity.

“Ours is a relationship that is already very close. It is built on 40 years of good cooperation. But our foundations go much deeper, based on the values we share,” stated Juncker.

While assembled at last week’s EU-Canada Summit, officials signed on to the Strategic Partnership Agreement, for which negotiations were launched in 2011. This transatlantic deal specifically targets and institutionalises cooperation on common issue areas, outlining shared principles on human rights; international security, from combating terrorism to tackling the nuclear arms threat; effective multilateralism; fighting climate change; and promoting development.    

Challenges ahead

As the next step, the European Parliament will have to approve the pact in order for it to be provisionally applied.

CETA was submitted as a mixed agreement, which involves a deal where some subjects are deemed to fall under the EU’s exclusive competence, while others fall under the national competences of member states. This will mean that at least 38 national and regional parliaments will have to ratify the deal for it to fully enter into force, including Wallonia.

The scope of CETA’s provisional application will not cover some of the more contested issues, including investment protection, which means that the Investment Court System will have to pass through ratification by all member states.

In the meantime, the EU Commission says it will coordinate with Canada to work out the finer points of the proposed system, delineating the selection and appointment of judges, defining the appeal mechanism, and facilitating access by small and medium-sized enterprises.

ICTSD reporting; “Belgian politicians drop opposition to EU-Canada trade deal,” THE GUARDIAN, 27 October 2016; “Canada and E.U. Sign Trade Deal, Bucking Resistance to Globalization,” THE NEW YORK TIMES, 30 October 2016.

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