Photographer: John MacDougall/AFP via Getty Images

EU Populism Puts $13 Billion Trade Deal at Risk: Brussels Beat

  • A Belgian region could stymie hard-fought EU-Canada trade pact
  • Rush for compromise before two key EU meetings this week

It’s not often that Belgium makes its voice heard on the international stage. This week promises to be an exception as the country’s ruling coalition attempts to sort out a domestic political problem with global economic ramifications.

Belgium’s French-speaking southern region of Wallonia opposes the European Union’s draft free-trade agreement with Canada and wants it reopened -- again -- to add safeguards. The stance threatens to derail the EU’s first trade deal with a fellow member of the Group of Seven leading industrialized countries by tying the hands of the Belgian government, whose support is needed for the accord to survive.

Belgian bickering is the first of three developments to watch this week for a gauge of populism’s impact on the 28-nation EU as it grapples with Brexit. The second is a meeting of EU commerce ministers and the third a gathering of the bloc’s 28 national leaders including British Prime Minister Theresa May, attending her first European summit.

At stake for European governments is an accord known as the Comprehensive Economic and Trade Agreement, or CETA, that the EU says would boost its economic output by about 12 billion euros ($13 billion) a year and increase EU-Canada trade by about a quarter. More than that, any collapse of CETA, which took five years to negotiate, would take the steam out of a series of separate free-trade talks that the bloc is pursuing with the U.S., Japan and other countries.

Belgian Wrangling

Conscious of the potential fallout, Belgian Foreign Affairs Minister Didier Reynders said last week that the federal government would consult with the country’s regions about the matter on Monday. In a strong-arm gesture, Reynders also said the government would have the authority to sign off on the pact even if a regional parliament votes to block it.

The Belgian wrangling risks spilling over into a meeting of EU trade ministers the following day in Luxembourg. The ministers are supposed to endorse the accord, which needs the unanimous backing of the bloc’s governments. Reservations have been aired by others including Austria, whose worries about protection for foreign investors have already forced the EU to scale back the agreement in a bid to ease jitters in Europe about limits on governments’ ability to regulate in the public interest.

Brexit will hover over the Luxembourg meeting because trade is a core European policy and the EU’s push over many years to use its economic weight to open markets worldwide has been a central argument for the merits of membership. Should the EU falter in ratifying the deal with Canada, the bloc risks losing credibility both with global partners and with a host of its own free-trade member nations long allied on commercial matters with Britain.

“If ‎Europe is incapable of signing a progressive trade deal with a country like Canada, this will send a clear and unfortunate signal,” Alex Lawrence, spokesman of Canadian Trade Minister Chrystia Freeland, said on Oct. 14.

‘Globalized World’

Increasingly aware that free-trade deals also create domestic losers, EU leaders plan at their Oct. 20-21 meeting in Brussels to mix a traditional message about the benefits of open markets with pledges to uphold European social standards, according to a draft of the summit conclusions seen by Bloomberg News. They’ll also commit to take account of citizens’ concerns and help member nations adjust to “changes that come with a fast-moving globalized world.”

The extent to which the EU-Canada accord preoccupies the summit -- at which Russian involvement in the Syrian war may be the most contentious issue -- will depend on the developments in Brussels and Luxembourg earlier in the week. The bloc is tentatively planning to host an Oct. 27 summit with Canada to celebrate CETA.

Wallonia, which accounts for less than 1 percent of the EU’s population, wouldn’t lose its leverage by backing down this week. That’s because the European Commission, which negotiated the EU-Canada pact, decided in July that national and even some regional parliaments in Europe should be involved in the approval process amid warnings by some countries against bypassing their lawmakers. That hands any one of those legislatures direct veto power at a later stage.

Should the deal clear its two EU-level hurdles -- the bloc’s trade ministers and the European Parliament -- the slow road to ratification will still make its way back through Wallonia.

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