The scuppering of the European Union-Canada trade agreement has demonstrated the power individual member states or regions can wield

It’s easy to sneer at Wallonia, the francophone Belgian region whose regional legislature’s objections just scuppered the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada. Indeed, the potential end of the deal, which has been seven years in the making and which was set to bring the Canadian Prime Minister to Brussels this Thursday for a final signing, was met with widespread derision. The deal had been touted as one that could add around €11.6 billion to the EU economy and around €8.2 billion to Canada’s economy through the removal of some 98 per cent of tariffs on all goods between the two, and cooperation in numerous areas ranging from regulations, to financial services, and telecoms. Launched in 2009, discussions were formally concluded in 2014, and have been awaiting ratification since. To its critics, the developments are a clear example of the failures of a clunky EU system and its capacity to enable a region of a mere 3.6 million people fell a deal among just under 550 million people.

Other detractors

But Wallonia was far from being the only detractor of CETA. Earlier this month, the deal faced another major challenge when three organisations — Campact, foodwatch and Mehr Demokratie — challenged CETA’s legitimacy in Germany’s Constitutional Court, arguing that it would create powerful committees with “no democratic legitimacy”, and investment courts that would discriminate against European investors. To the great relief of the German government, that challenge was rejected by the court. Earlier in the process, back in August, the Austrian government had raised objections, sparking concerns about the future of the deal.

Though not as controversial as the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the U.S., discussions on which have stalled because of fierce opposition on the continent, CETA has attracted a fair amount of concern from civil society and beyond. A petition against CETA and TTIP attracted over three million signatures. In June, Alfred-Maurice de Zayas, an UN human rights expert, warned, pointing to CETA, that “trade deals prepared and negotiated in secret, excluding key stakeholders such as labour unions, consumer associations”, and others had “zero democratic legitimacy”, and should be carried out via open discussions in national parliaments.

Pressures such as this had led the European Commission (EC) to take the unusual step in July of requiring that the trade deal, contrary to any in the past, would have to be ratified by all 28 member states, including Belgium which needed the ratification from its five regional assemblies. It was the EC’s attempts to inject democratic legitimacy, albeit at a late stage in the process, that proved to be the trade deal’s undoing.

Why the alarm bells rang

While the deal pledged to bring multibillion euro benefits to both the EU and Canada, there were many components that had alarm bells ringing: in particular, the Investor-state dispute settlement courts that the deal would have brought in, designed to provide a route for foreign investors to protect their interests in the region. These opaque systems, often ensconced in bilateral and other investment treaties, have for many years been criticised for not only providing foreign firms with advantages not accorded to domestic ones, but also with providing firms the ability to trample on legislation brought in by democratic parliaments (such arbitration has been used to challenge everything from plain cigarette packaging to legislation in South Africa designed to rectify the abuses of apartheid). The EU-Canada agreement had safeguards built in in recognition of the concerns (including a code of conduct and increased transparency), but its proponents failed to answer the fundamental question of why in the EU and Canada, with well-functioning judicial systems, such a separate court system was needed at all.

Though Canada and the EU have signalled they still hope the deal can be saved, despite Belgian declarations at the time of writing that they would be unable to sign, the debacle raises fundamental questions for the EU and beyond, and in particular the often opaque way that such negotiations are conducted, at a time of heightened public concern about the impact of globalisation on their industries and communities (this was certainly one of the many factors that played into the shock referendum result in the U.K. earlier this year). Certainly, a part of the answer would be involving civil society at a far earlier point in a much clearer process: CETA ended up having the worst of both worlds by providing opportunities to participate when the deal was pretty much concluded, making opposition one of the only possible ways of influencing it in any major shape or form.

Implications for India

The near collapse of the CETA deal will have implications for India too, and the stalled negotiations on the India-EU Free Trade Agreement, which commenced in 2007 and continues to be held up by a lack of consensus on issues such as Mode 4 access for services professionals on the EU side, and FDI liberalisation on the Indian side.

CETA and TTIP have both stoked a strong anti-globalisation movement across Europe that shows no signs of subsiding, and the CETA developments have demonstrated the power individual member states or regions can have to block a sensitive deal. It could also hit, indirectly, hopes for a fruitful India-U.K. Free Trade Agreement: observers in Britain have pointed out that the struggles over CETA don’t bode well for Britain’s ability to negotiate favourable terms with the EU as it attempts to extract itself from the union, which could have a serious impact on the 800 Indian businesses in the U.K., many of which sell their products and services in the EU. The Wallonian problem may well be resolved, and CETA saved, but the challenge it throws up about the legitimacy of trade deals for the EU and the world more widely must be countered with reform, dialogue and greater transparency rather than derision.

vidya.ram@thehindu.co.in

The challenge the Wallonian problem throws up about the legitimacy of trade deals must be countered with reform rather than derision