CETA; Dead, alive or somewhere in-between?

Briana Chui // 27.10.2016

The Comprehensive Economic and Trade Agreement (CETA), a prospective trade deal between Canada and the EU, came to a screeching halt in the last second before the EU-Canada summit that was proposed for today. Belgium’s southern, Francophone region of Wallonia has initially withheld support, although recently its stance seems to have changed, yet it is yet to been seen whether the Belgium can sign the deal. However, the European Union cannot afford to allow the downfall of CETA and other free trade agreements, which matter a great deal for Europe’s future. Therefore, great efforts are expected to be made in order to keep negotiations alive and reach and positive outcome.


The opposition around CETA

Originally, concerns were voiced by the Minister-President of Wallonia, Paul Magnette over CETA’s social and environmental implications. The ostensible fear is that freer trade with Canada will increase economic inequality, threaten domestic jobs, undermine labour laws, encourage corporate greed, and risk environmental damage. Opponents of CETA argue that, by increasing competition, it will lower earnings for the average worker and eliminate domestic jobs. Further, the competition would reduce labour costs at the expense of environmental protection and the health and safety of workers.


At the end of last week, Canadian Trade Minister Chrystia Freeland returned home from Belgium, despairing over the difficulty of securing an international trade agreement with the EU despite seven years of negotiation. The EU provided Wallonia with an ultimatum to approve CETA last week on Friday, but Magnette firmly claimed that an ultimatum ignores the democratic procedure. However, the more pressing democratic issue is the apparent fact that Wallonia’s population of 3.6 million can negatively affect the 500 million people in the rest of the European Union and the 35 million people in Canada. Magnette also noted that the Walloons’ concerns could be addressed by “interpretative declarations” which would be attached to the trade agreement.


Possible outcomes for CETA

Using the interpretative declarations as a heuristic in reading the text may legally bind the parties to uphold the social and environmental policies of concern instead of allowing for unintended interpretations of the text such as those feared by its opponents. Yet, parts of the agreement explicitly cover environmental protection laws, regulatory cooperation, and labor laws, so such interpretative declarations would be superfluous.


Each party’s government remains responsible for domestic environmental protection regulations, and CETA explicitly discourages trade and investments that do not abide by domestic environmental policies. Further, CETA’s enactment is anticipated to stimulate economic growth and create jobs in the European Union, at an estimated clip of 14,000 jobs for every billion euro in exports. The increase in exports expected from CETA would better support those jobs and would likely create new ones. Additionally, the creation of a Regulatory Cooperation Forum would decrease costs of examining products while maintaining product quality for the protection of consumers and maintaining a high level of health and safety protection.


However, those explicitly protective clauses of CETA and the overall benefit of free trade agreements to the EU’s sluggish economy were insufficient for Belgium Prime Minister Charles Michel to guarantee, on Monday, Belgium’s approval at Thursday’s summit between the EU and Canada, though European Council President Donald Tusk and Canadian Prime Minister Justin Trudeau have held onto hope for success up until yesterday.


After seven years in the making, CETA’s fate may predict the future of trade agreements for the European Union, including the Transatlantic Trade and Investment Partnership (TTIP) with the United States, which has been in negotiations since July 2013. CETA’s results also have implications for the anticipated negotiations with the United Kingdom in light of Brexit. Until officially separated from the EU, the UK will continue to abide by the EU’s international treaties, and the negotiations could follow, with similar difficulty, the path of CETA. The EU’s inability to agree free trade agreements with the same speed as individual countries would likely limit growth in production and exports, as well as job creation and foreign investment.


Much of the concern over the course of CETA and its implications for future trade agreements brings into question the prospects for the EU’s ambitious international trade agenda in light of the difficulty to bring together twenty-eight member-states to sign a single agreement with a like-minded partner such as Canada. With globalisation and free trade under attack throughout the Western world, Belgium’s Deputy Prime Minister Alexander De Croo disapproved of Walloons’ protest efforts as contributing to “the slow crumbling of the European project.” If the complications in passing CETA can predict the future of EU trade agreements, then the outlook for cohesion within the historically pioneering union is grim. To remain a leader in expanding free trade and connecting the global economy, it is essential for CETA to come to a successful conclusion, if not this week, then hopefully in the foreseeable future.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).


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