Not a ‘done deal’ yet

The Comprehensive Economic and Trade Agreement (“CETA”) between the EU and Canada had to jump through quite some hoops before finally being signed on Sunday 30 October 2016.

It is clear that the Transatlantic Trade and Investment Partnership (“TTIP”) between the EU and the U.S. is facing increased resistance, at first from activists across the continent, but now also from several EU Member States. In addition, on the U.S.’s side, Trump’s victory means TTIP’s survival is now in Trump’s hands and it will be up to the new American administration to decide whether they want to continue the free trade negotiations.

CETA however, after 7 years of diplomatic negotiations and intended to remove all tariffs on industrial products and to introduce a substantial liberalisation of trade in agricultural products and procurement contracts, seemed in the clear and to be reaching the finish line. After having overcome the hurdle in Germany’s Social Democrats party, the path seemed open for EU Member States to approve CETA, and for EU ministers to sign it at a planned EU-Canada Summit on Thursday 27 October 2016.

It was therefore a surprising turn of events when the Walloon region of Belgium suddenly vetoed the trade deal, only days before the Canadian Prime Minister’s planned visit. Paul Magnette, Wallonia’s minister-president who led the opposition to the agreement, argued that Wallonia was worried about exposing its agricultural sector to competition from Canadian farmers and he also raised objections to a proposed court system for settling disputes between foreign investors and governments, providing U.S. companies with a platform to sue European governments. After days of talks and negotiations, a four-page compromise was reached, thus finally enabling the EU and Canada to sign the landmark trade deal with a few days delay.

But CETA is not out of the woods yet. Although the trade deal is expected to enter into force on a provisional basis in the beginning of next year after ratification by the European Parliament, 38 national and regional parliaments will still need to approve it before it receives its final approval. As such, in theory, CETA can again be vetoed at this point, by Wallonia or any other national parliament (or even regional, only in Belgium's particular case). However, even if technically so, this is most highly improbable since it is the governments who are based on parliament majorities that have committed to the deal. Therefore, any negative vote would be almost as a motion against that country's government. An exception could be the Netherlands, where activists have already gathered almost two-thirds of the signatures required to initiate a referendum on CETA once the Dutch parliament ratifies it. If voters reject the bill and turnout tops 30%, the Dutch government would require the consent of parliament to proceed and it would have to offer concessions or amendments to the bill to reflect the popular vote.

Member States to be involved in Brexit talks too?

The CETA ‘saga’ is an indication of how difficult the trade negotiations could be with the United Kingdom (“UK”), following ‘Brexit’. The UK will need to meet the concerns of all EU countries, since Member States seem no longer reluctant to put their foot down and veto an agreement in order to obtain what they want.

Some clarity from the ECJ?

The European Court of Justice (“ECJ”) may partly change the situation, in its ruling on a similar trade deal with Singapore (expected in the course of next spring) on whether that deal falls within the ‘exclusive competence’ of the EU or rather is a ‘mixed competence agreement’, thus needing approval in national and regional governments.