24 October 2016

Financial Times: Wallonia’s stand on trade spells trouble for Brexit

[...] On Friday, Canada’s trade minister walked away from emergency talks to salvage the deal, leaving EU and Belgian officials still tussling to overcome the resistance of the regional parliament of Wallonia.

In Brussels, some are still optimistic that a compromise will emerge, but the damage has already been done. The EU’s embarrassment over Ceta has dealt a huge blow to its credibility as a trade negotiator. If European governments cannot win backing for a deal of relatively modest scale with prosperous, socially progressive Canada, there is little hope of their framing an effective response to the threat of dumping by China, or of making progress on a far more contentious trade and investment deal with the US.

Yet the EU’s detractors should not dismiss the episode as just an illustration of Brussels dysfunctionality. The Walloons’ ability to spike an agreement covering some 550m people may seem absurd. However, their concerns, while they ought not to outweigh the merits of the deal, are real — and they reflect a broader political reality.

Ceta has become a focus of anti-globalisation protesters across the EU — even if Wallonia is appeased, it will remain subject to a challenge in Germany’s constitutional court. The EU-US Transatlantic Trade and Investment Partnership faces far tougher opposition in Europe, and has in effect stalled as a result of the protectionist tone of the US presidential campaign. [...]

The commission’s “exclusive competence” to negotiate on trade has never been in question. But trade deals now go well beyond the traditional focus on cutting tariffs: Ceta would co-ordinate regulatory standards, align rules on intellectual property and lower barriers to investment. The pressure for parliamentary ratification arose over a controversial mechanism to settle disputes between investors and host countries — an issue previously dealt with by national governments.

It now seems likely that unless the UK limits itself to the most basic form of trade deal with the EU — covering little more than tariffs on trade in goods — it will have to undergo the same process to settle the terms of Brexit. Politicians around Europe are already blanching at the prospect, with one former trade commissioner describing any repeat of the Ceta procedure as a “very serious problem for Brexit”.

It would be wise for David Davis, the Brexit minister, to temper his blithe optimism that the UK can secure smooth access to EU markets. A threat to slap tariffs on German car imports is unlikely to prove persuasive with the long list of national and regional parliaments who may have a veto. Mr Davis once described the EU-Canada agreement as a good starting-point for talks with Brussels. Following this logic, any such deal will need to be both good for Britain and good for Wallonia.

Full article on Financial Times (subscription required)

Business Insider: A single region of Belgium just made Brexit much harder for the UK by rejecting an 'ultimatum' over a landmark EU deal

[...] on Monday it again rejected the EU's "ultimatum" on changing its mind, according to the news agency AFP.

"It won't be possible to respect this ultimatum," the head of Wallonia's Parliament, Andre Antoine, told RTL radio in Belgium, according to AFP, in reference to the deadline set by the European Council's president, Donald Tusk. [...]

Chrystia Freeland, Canada's minister of international trade, said in an official statement on Friday that the Canadian government was "disappointed" and that striking a deal would be "impossible."

"Canada has worked, and I personally have worked very hard, but it is now evident to me, that the European Union is incapable of reaching an agreement — even with a country with the European values such as Canada, even with a country as nice and patient as Canada," she said.

"Canada is disappointed and I personally am disappointed, but I think it's impossible. We are returning home. At least I will see my three children tomorrow at our home."

Tusk, the European Council president, said earlier last week that failure to complete the EU-Canada deal would make striking post-Brexit trade deals with Britain nearly impossible.

"If you are not able to convince people that trade agreements are in their interests ... we will have no chance to build public support for free trade, and I am afraid that means that CETA could be our last free-trade agreement," he said.

Tusk's remarks were echoed by Cecilia Malmstrom, the EU's trade commissioner. If the EU "can't make it with Canada," the Swede said earlier this week, "I'm not sure we can make it with UK." [...]

Full article on Business Insider

© Financial Times