Forget Donald Trump: Global Trade Just Got a Hammer Blow from…Belgium

October 24, 2016, 5:06 PM UTC
Protesters hold up a placard reading '3,4 million Europeans count on Wallonia - stop CETA' as a meeting on CETA (EU-Canada Comprehensive Economic and Trade Agreement) takes place at the Walloon parliament in Namur, Belgium, on October 18, 2016. The European Union gave Belgium until a leaders' summit on October 21, 2016 to approve a troubled free trade pact with Canada which has been blocked by its small French-speaking region of Wallonia. The parliament of the region of Wallonia last week voted to block the deal, known as CETA -- meaning that Belgium cannot sign up to the pact and leaving the deal in limbo after seven years of negotiations. / AFP / Belga / NICOLAS LAMBERT / Belgium OUT (Photo credit should read NICOLAS LAMBERT/AFP/Getty Images)

Three and a half million Belgians may just have killed the hopes of U.S. companies trying to break down the barriers to lucrative European markets from healthcare to music streaming.

A deal between the EU and Canada that many hoped would be the prototype for an epoch-making EU-U.S. free trade agreement has been scuppered by a veto from the Belgian region of Wallonia.

It’s an unprecedented setback for the Brussels mandarins who have ruled supreme over European trade policy for the last few decades, and puts a huge question mark over the ability of the EU to agree any other trade deals in future-—even with the newly-estranged U.K. on its doorstep.

Paul Magnette’s Socialist administration, under pressure locally from parties further to the left due to chronic high unemployment, blocked the deal for being too favorable to big business, notably in the freedom it gave companies to sue governments in independent tribunals. Concerns about the sanctity of European labor and environmental standards being violated also played a part (this for a deal with Canada, remember, not a Far-Eastern country notorious for its sweatshops).

The EU Commission, whose technocrats had put together the so-called Comprehensive Economic and Trade Agreement, made some last-minute concessions, but to no avail.

Iana Dreyer, founder of the website that specializes in EU trade affairs, says it’s possible that the deal might yet be salvaged, but only after a discreet interval.

“With the EU, there’s nothing really final. There will be ample opportunity to do something about it and fudge it,” Dreyer said.

But it’s a stark example of the mess that the EU got itself into a decade ago when it decided to allow national and regional parliaments to vote on trade deals—an ill-considered concession to those who were critical of the bloc’s “democratic deficit.”

“Once you let the genie out of the bottle, then you depend on the constitutional details of the member states,” Dreyer said, adding that Belgium’s–with its traditional rivalries between French and Flemish speakers, and between its various tiers of government–is a particularly tricky minefield.

CETA would have been the first trade agreement between the EU and a major world economy, abolishing nearly all tariffs on trade between the two sides worth over $90 billion a year. It would also have allowed companies in, for example, France and Germany to have equal access to Canada’s public procurement sector, and vice versa. As such, it was strongly supported by Europe’s most powerful business interests—and, for that matter, by Paris and Berlin.

But it ran into determined opposition among Europe’s left, in particular, due to fears that the precedents it set on things like investment protection (i.e. companies’ ability to sue governments in independent tribunals) would be exploited by more aggressive U.S. companies in President Obama’s mooted “Transatlantic Trade and Investment Partnership.”

Sven Giegold, a Green Party member of the EU Parliament, summed up the bittersweet feelings of Euro-federalists in bringing down what he called an “anti-democratic” agreement.

“Victory for #CETA-Critics! Agreement blocked. But the manner of it is a defeat for Europe’s ability to function,” he tweeted.