CETA Explained: How the Canadian-EU Trade Deal is Stirring Up Controversy

On Thursday, October 27 2016, the Belgian government finally agreed to the joint Euro-Canadian ‘Comprehensive Economic and Trade Agreement’ (CETA). The news comes as a relief for Canadian and European trade dealers, who were left frustrated after talks came to a deadlock last Friday.

“Canada has worked, and I personally have worked very hard, but it is now evident to me, evident to Canada, that the European Union is incapable of reaching an agreement,” stated Chrystia Freeland, International Trade Minister of Canada.

Although the vast majority of European states agreed to sign the trade deal, the Belgian region of Wallonia continued to use its veto power to oppose the agreement. While trade negotiators on both sides affirmed that CETA remained on the table, the EU-Canada summit scheduled to conclude the agreement was nonetheless cancelled.

Now many Canadian and European officials are expressing their eagerness to finalize the deal, and rightfully so.

According to the Canadian government, CETA is “by far Canada’s most ambitious trade initiative” to date, with its scope, reach, and breadth surpassing any other of its kind, including the historic North American Free Trade Agreement (NAFTA). The deal would effectively eliminate 98% of all tariffs between Canada and the EU, increasing trade between the two by over 20%. Considering that in FY2013, Canada exported $49.2 billion to, and imported $62.5 billion from, the EU, the elimination of trade barriers would generate considerable returns for both parties. In fact, as Canada’s second-largest trading partner after the US, CETA is predicted to boost the EU’s GDP by $17 billion a year, and Canada by $12 billion a year.

In addition to eliminating most tariffs on goods, CETA would also facilitate trade in services such as energy, transport, telecommunications, and financial services. Moreover, CETA would enable Canadian suppliers to access EU government procurement ventures, which is the largest procurement market in the world.

Certain clauses outlined in CETA have evidently been points of contention. The trade agreement would, for example, remove nearly 94% of EU agricultural tariffs, which would give Canadian exporters preferential access to European markets. While many were concerned that an increase in trade would lead to a decrease in regulatory standards surrounding certain commodities like meat and fresh produce, others were equally concerned that cheap Canadian goods would outcompete local farms and producers. Wallonia has been the strongest voice opposing the agricultural aspect of CETA, despite numerous changes having been made in regards to governmental regulation, and sustainable development.

Another controversial feature of CETA is the mandate for a new Investment Court System (ICS). ICS is a judicial system separate from domestic law through which private corporations can sue states for discriminatory practices. Companies would thus have the opportunity to bypass traditional legal mechanisms and use a private court system in order to seek justice or compensation for practices that harm their business. Many, including Wallonian officials, believe that the establishment of such a court goes too far in terms of reducing government involvement in business. With changes having been made to the ICS feature, including enshrined government rights to regulation, the majority of EU nations have now agreed to the inclusion of the clause.

According to Belgian officials, CETA now includes the necessary revisions, including guarantees for local farming and changes to the ICS proposal, for Wallonia to agree to the trade deal. After seven years of rigorous negotiation and revision, CETA is now ready to be enacted.

Many are still unsure why such a profitable deal is so difficult to achieve. It could have to do with protectionism in Europe as markets slow and economic growth remains mediocre. In the case of Belgium, however, one should not discount the historic cultural, political, and linguistic divisions.

 

Politics as an Impediment to Economic Negotiations

An understanding of Wallonia’s opposition to CETA begins with some knowledge of Belgium’s bicultural social structure. Since its official establishment in 1830, Belgium has been historically divided by its Dutch-speaking Flemish population in the north, and French-speaking Walloons in the south.

Even though Belgium has not necessarily seen any major violent sectarian episodes between these two regions, this division continues to be very real in the lives of average Belgians (it should be stated that there is also a German-speaking population, but it accounts for less than 1% of Belgium’s total population).

Wallonia was traditionally a coal-producer and agricultural region, hence it has been a stronghold for socialist governments. Today, it is still Belgium’s main agricultural region, which is one of the main reasons why it remains opposed to CETA. The north Flemish region is very much a service-economy based on technology and access to ports; it has enjoyed economic precedence since the 1960s as changing economic trends in the West began to favour service-delivery rather than heavy industry. An example of this decline is the city of Charleroi in Wallonia. It is often dubbed the “ugliest city in Europe” and is home to Paul Magnette, the leader of the Socialist Party and the main agitator against CETA. After 50 years, there are still many decaying factories which stand as symbols of a prosperous time in earlier Walloon history.

This messy social division has translated into political instability. Belgium has three levels of government which are “equal from the legal viewpoint”: Federal (fédérale), Regional (régionale), Community (communauté). Each level has jurisdiction over specific matters. So even though Belgium has technically only one Federal legislature in Brussels, it governs the country along with three regional legislatures: Flanders, Wallonia, and Brussels-Capital. It is due to the powers afforded to the Regions over economic matters by the Belgian constitution that Wallonia is able to mount opposition to CETA.

The Federal government cannot override the laws enacted by regional parliaments. Certain responsibilities can also be shared; for example, the Federal government is charged with maintaining foreign relations, but the Regions also have the right to establish foreign relations. It simply goes to show how chaotic the situation is.

Even though CETA has passed this hurdle, it is still far from guaranteed. The opposition toward CETA still remains strong in Wallonia, and, seemingly, throughout much of Europe. It would be in the interest of Western leaders to prove that they can balance a liberal economic agenda with the rights and well-being of workers.

This article is the product of a joint collaboration between authors Michele Di Leo & Charlotte Provost.

 

Photo: CETA Protest “foodwatch, STOP TTIP CETA 10.10.2015 Belin” (2015), by Foodwatch via WikiCommons. Licensed under CC 2.0.


Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada.

About Charlotte Provost

Charlotte Provost recently graduated from Western University with a Honours Specialization Degree in International Relations. Following high school, Charlotte attended Neuchâtel Junior College in Switzerland, where she competed in Model United Nations competitions across Europe, and volunteered in humanitarian trips to Kenya and China. During her time at Western, Charlotte served for two consecutive terms as the President of the Association of International Relations, as well as a political risk analyst with the Western Freedom and Democracy Research Lab. Her research interests include international organizations, conflict management, women’s issues, political risk assessment, and global innovation. You can contact Charlotte at charlotteprovos@gmail.com.