[author: Saud Aldawsari]

On October 30, the European Union (EU) and Canada signed the Comprehensive Economic and Trade Agreement (CETA). The final draft of the agreement was concluded in February after seven years of negotiations. Many EU officials view the agreement as a model for future agreements between the block and other large trading partners including the Transatlantic Trade and Investment Partnership (TTIP) with the United States and an agreement with the United Kingdom.

Contentious Signing

The signing of CETA formally ended a contentious process that threatened to derail the EU’s trade agenda. CETA met harsh opposition from Wallonia, a French-speaking region in Belgium, who took an anti-globalization stance that put the fate of the deal into serious question.

The region raised concerns that the deal will weaken labor, environmental and health standards, its farmers will be priced out of the market due to cheap Canadian produce, and the agreement will give multinationals too much power to sue governments.

Wallonia’s opposition caused panic among EU officials because the agreement needed the backing of all of the EU’s member states, and Belgium was not able to give its consent to CETA when the regional parliament of Wallonia voted to block the agreement. Under Belgium’s complex constitution, all five regional governments must approve the trade deal before the federal government can give its final consent.

EU negotiators finally reached a compromise with the region and the agreement was finally signed at the eleventh hour. Wallonia’s regional parliament voted to approve the deal after the EU and Belgian politicians agreed to an addendum addressing Wallonia’s concerns. The addendum provides a safeguard clause to farmers and allows the Belgian government to assess the economic impact of the deal and challenge the validity of the investor-state court proposed by CETA at the European Court of Justice. Minister-President of Wallonia Paul Magnette said: “The amended and corrected CETA is more just than the old CETA. It offers more guarantees and it is what I will defend[.]”

Implication of TTIP and Future EU Trade Deals

CETA’s negotiation history raises serious concerns about the EU’s ability to negotiate future trade deals. Peter Mandelson, former EU trade commissioner said that the CETA “experience will make future trade negotiation harder because Europe’s counterparts will wonder who they are negotiating with.” Donald Tusk, the European Council president, said that “[i]f 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.”

The troubled talks also raises questions on for the proposed TTIP agreement between the EU and United States. CETA is seen as a prelude to the larger TTIP agreement between the EU and United States. However, the fate of TTIP is also uncertain in light of the new American political climate.

The agreement has been already the target of protests of labor unions and environmentalists. Disapproval of TTIP crossed the political spectrum. And the future of the agreement is not promising in light of President-Elect Donald Trump’s promise to withdraw from the Transpacific Trade Agreement (TPP) on his first day in office.

From the EU’s side, Wallonia’s opposition to CETA raises doubts on the block’s ability to negotiate similar accords in the future. But Wallonia’s opposition was not the only concern. Activists in Germany strongly opposed the deal. Three public interest groups delivered a complaint to Germany’s Constitutional Court arguing that CETA breaches Germany’s Constitution and wanted the Court to stop the deal.

Impact on U.S. Exporters

CETA will have an impact on U.S. exporters. CETA is expected to lead to an almost 25 percent increase in two-way trade in goods and services between Canada and the EU. Some of this increase will come at the expense of U.S. exporters, although some will also be the result of new business. For instance, U.S. cars will face 10% tariff in Europe while Canadian cars will enter duty-free. Moreover, U.S. exporters may also be affected by the agreement on technical regulations in CETA. Under the technical agreement, Canada will recognize a list of EU standards on automobiles, which will make EU exporters more competitive in the Canadian market.