Dutch Prime Minister Mark Rutte's reputation as Europe's liberal champion risks being torn to shreds in an unexpected quarter: trade.

Against all expectations, Rutte is struggling to win support in parliament for a vote on Tuesday to ratify an EU trade pact with Canada, a supposedly unthreatening ally.

If the Dutch parliament fails to ratify the deal, it would not only be the first EU country to do so, but the Dutch could even be responsible for killing off the Ottawa-Brussels trade accord, known as CETA, just as the EU wants to promote free trade in the teeth of rising protectionism and state capitalism.

Even if Rutte convinces his coalition partner to support approval in the lower house of parliament on Tuesday, the Dutch Senate will prove even harder to win round in the coming months, as his government doesn’t hold a majority there.

In a sign EU officials are already starting to worry about a big setback in the Netherlands, EU trade chief Phil Hogan last week wrote to Dutch Trade Minister Sigrid Kaag to push for parliamentary approval.

“If you look at the numbers, it’s clear that the Netherlands benefits from free trade” — Liesje Schreinemacher, Renew Europe MEP

The symbolism of a potential Dutch "Nee" cannot be exaggerated. Support for free trade in the Netherlands dates back to the Hanseatic cities and the Golden Age in the 17th century, when the Dutch held the largest merchant fleet in Europe. Dutch support for international trade outpaces the EU average, according to the latest Eurobarometer survey, as 78 percent of Dutch respondents say they benefit "somewhat" or "a lot" from international trade.

The deal between the EU and Canada provisionally entered into force in 2017. Since it has to be ratified by almost 40 regional and national parliaments, there was always a chance that the process would run into trouble. It just wasn't meant to be the Dutch that threw up an obstacle.

Changing course

In recent years, the Dutch pro-trade consensus has shifted. Criticism of free-trade agreements is no longer the monopoly of green and far-left parties. It’s Rutte's coalition partner, the center-right Christian Union, that threatens to torpedo the trade deal in the lower house, as CETA has become increasingly controversial.

Proponents of the deal try to make their case with numbers. Since the trade deal provisionally entered into force, trade between Canada and the Netherlands has rapidly increased. Dutch exports in goods in 2018 increased 12 percent to €3.4 billion, according to the Dutch government. “If you look at the numbers, it’s clear that the Netherlands benefits from free trade,” said Liesje Schreinemacher, a member of the European Parliament for the liberal Renew Europe grouping, who specializes in trade. “If we can’t close a free-trade deal with Canada, who is left?”

But Dutch companies fear unfair competition, said Hans Wiegersma, who represents Dutch dairy farmers and is one of the fiercest opponents of the deal. “Canadian standards in food safety are different from ours,” he said. “The safety checks that we have to perform outweigh those of Canada, which leads to unfair competition. It’s also bad news for consumers as our food standards are much higher.”

Farmers are pressuring the Christian Union, which traditionally defends their interests, to turn down the deal. The Christian Union was always critical of CETA but it has only been part of the coalition since the end of 2017, when the fragmented political landscape obliged Rutte to form a four-party coalition. Since then, the government has seen its fair share of internal conflicts.

The CETA votes are different, however, as they could also leave Rutte exposed in Brussels. In the ongoing EU budget talks, Rutte is leading the frugal camp, which also includes Austria, Denmark and Sweden. It was telling for the Dutch leadership of this group that when Austrian Chancellor Sebastian Kurz was in Berlin and had to dial in for a video-conference of the frugal group, he did so in the Dutch embassy in the German capital. But the prudent and free-trading approach that Rutte is preaching in Brussels and once characterized 17th-century Dutch regents is less credible when it’s imploding back home.

Left-wing U-turn

That implosion is not the fault of the current coalition, Dutch government parties say. The liberals are pointing fingers at the Labor Party (PdvA). They were the ones that made a U-turn on CETA last fall when they were no longer part of Rutte's government, even though it was a Labor minister, Lilianne Ploumen, who was in charge of trade when the Canada deal was discussed at the European level.

PvdA says it has always been critical of the investor court system that’s included in CETA, seeing it as being too favorable to corporate interests.

The party’s U-turn also puts Dutch Commission Vice President Frans Timmermans in a difficult spot. Until now, Timmermans (who's a PvdA member) has managed to keep out of the debate. But some are trying to pull him in.

“The Netherlands have always been known as a trading nation, and that’s no longer self-evident,” Schreinemacher said. “A social democrat minister of trade from the party of Frans Timmermans negotiated this agreement on behalf of the Netherlands and this party is now making a U-turn, which could severely harm our trading position.”

In Brussels, the difficult Dutch ratification process brings back bad memories of 2016, when the Dutch government suffered an embarrassing defeat as voters overwhelmingly rejected an association agreement with Ukraine. Eventually, Rutte secured a hard-won compromise in Brussels and wrestled it through the Dutch parliament.

To get the Canada deal through the lower house, Trade Minister Kaag promised to look into several concerns raised by the Christian Union, and said she would discuss an increase in food safety checks on Canadian farmers who export meat to the Netherlands with the European Commission.

Uncharted territory

If The Hague ultimately torpedoes the deal, it would mean more than losing street cred in Brussels. The Canada pact could cease to apply for the whole EU.

In order to prevent that scenario, the EU built in some safeguards.

First, a rejection in the Dutch parliament doesn’t have any immediate consequences in Brussels. It’s up to the Dutch government to officially notify the Council that the failure to ratify is “permanent and definitive.” That step leaves some possibility for an intra-Dutch solution before it is escalated to Brussels.

"It has never happened that a bilateral mixed agreement is not ratified by an EU country. This is uncharted territory" — Guillaume Van der Loo, analyst

If Rutte doesn’t find a solution and formally notifies Brussels that the Netherlands won’t ratify, the Council states that “provisional application must be and will be terminated” and that “the necessary steps will be taken in accordance with EU procedures.”

That last sentence is another safeguard built in by Brussels’ legal teams, as the EU procedures referred to mean that the Commission has to draft a proposal to terminate the provisional application of the deal and that proposal has to be adopted by the Council by a qualified majority.

“Since the provisional application applies to EU competences, it’s up to the EU to terminate this application,” said Guillaume Van der Loo from the Centre for European Policy Studies. “That would mean that one country is not enough to end the provisional application. But it’s not really clear what would happen if no majority can be found in the Council to terminate the provisional application. It has never happened that a bilateral mixed agreement is not ratified by an EU country. This is uncharted territory."

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