Canada-Europe Trade Agreement and the Walloons

By | October 24, 2016

There was a most unfortunate development in October 2016 preventing the European side from approving the Canada-EU trade agreement, formally known as the Comprehensive Economic and Trade Agreement (CETA).

On 24 October, tiny Wallonia refused to allow Belgium to agree to the CETA, resulting in a cancellation of the planned treaty signature the same week between Canada’s Prime Minister and the President of the European Commission.

The CETA had actually been negotiated by the previous Canadian Conservative government and those negotiations ended in 2014 with an agreed text. Since then, the text has been legally “scrubbed” and translated into all the official EU languages. However, while the text has been agreed, the treaty has never been officially signed by either Canada or the EU, let alone ratified to bring it into force legally.

While the CETA was a Conservative initiative, it’s been fully supported by the Liberal government under Mr. Trudeau. His team, led by Chrystia Freeland, Canada’s trade minister, have been bending over backwards to assuage elements of opposition to the CETA in Europe.

Earlier in 2016, Canada agreed to changes to the CETA text to significantly modify the provisions on investor-State dispute settlement (ISDS), moving away from the traditional approach and creating an independent and impartial investment Tribunal or “court” (as opposed to the usual ad hoc panels) and establishing an appeal mechanism to review investment panel decisions. 

As well as these treaty amendments, Canada and the EU also hammered out a Joint Interpretative Declaration in October 2016, setting out how the two sides will apply the CETA and clarifying the meaning of certain of its more controversial provisions.

Critically, the Declaration makes it clear that the CETA does not limit the right of governments to provide public services and to regulate for the public interest, including changes those laws even if it impacts on a foreign investment.

Even with these changes and solemn commitments, it wasnt enough to satisfy tiny Wallonia, which under Belgium’s constitution, prevents that country from agreeing to the CETA and, as a result of the EU’s internal arrangements, prevents the EU from signing the deal and from applying it even on a provisional basis.

Whether the CETA is dead remains to be seen. It certainly seems to be in the emergency ward. Some initial comments from the European side have indicated that it may still be possible for this debacle to be turned around.

We’ll have to await developments. In the meantime, you can read my commentary in the 24 October 2016 Globe and Mail Report on Business here.