Tears over the collapse of the EU-Canada trade deal

THE drab Justus Lipsius building in Brussels, where the European Union’s heads of government meet for their regular summits, is no stranger to drama, from 5am agreements on Greek debt to blazing rows over refugees. But on October 20th-21st, as the 28 leaders chewed over the finer points of EU migration and foreign policy, the real action was unfolding 40 miles away in Namur, capital of Belgium’s French-speaking Walloon region. Beneath the image of a strutting cockerel that looms over their parliamentary chamber, Wallonia’s deputies debated the latest attempt by Europe’s leaders to draw up a protocol to CETA, an EU-Canada trade and investment deal, that would satisfy their objections to some of its provisions. Under Belgium’s baroque constitutional arrangements all five regional parliaments must provide their assent for the federal government, which supports CETA, to give its backing.

But the Walloons would not be moved. (The sticking point appears to be a provision in the deal to provide legal protections for investors.) After flying in for emergency talks Chrystia Freeland, Canada’s trade minister, left Namur this afternoon in tears, declaring the EU “incapable of reaching an agreement”. A planned visit to Brussels by Justin Trudeau, Canada’s prime minister, to sign CETA on October 27th now looks unlikely. The EU’s leaders left Brussels warning that the EU’s credibility—and its ability to sign future trade deals—was on the line.

Thus can a region of 3.5m souls hold up a deal backed by governments representing 545m. Add sub-regional parliaments to a long cast of spoilers holding up regular EU business. Indeed, the summit provided ample evidence of the EU’s difficulty in managing its members’ current mania for referendums. Mark Rutte, the Dutch prime minister, struggled to explain to his 27 counterparts how his government would ratify the EU-Ukraine association agreement, a free-trade and political deal signed two years ago but rejected by Dutch voters in April. Like CETA, the deal needs unanimous backing from EU governments before it can be fully implemented. Viktor Orban, Hungary’s prime minister, held up a discussion on migration by insisting on a flexible interpretation of the EU’s quotas on refugee redistribution, an issue on which his government called and won a recent domestic referendum (although low turnout rendered the result invalid).

That delay meant that Theresa May, Britain’s prime minister, was not able to address the summit on her plans for Britain’s departure from the EU, the outcome of a referendum in June, until around 1am. She spoke for five minutes, largely on procedural matters, and there was no debate on Brexit. Fellow leaders will thus have learned little from Mrs May’s first appearance at a European Council. Nor did the other summit discussions provide many headlines.

But beneath the surface there were signs of shifting sands. While the Walloons debated investor courts and agricultural protection in CETA, for example, the EU’s leaders were mulling their own protective measures in a broader discussion on trade strategy. The European Commission, which conducts trade talks on behalf of governments, reckons the EU needs to bolster its defences against subsidised steel and other products, particularly from China.

Talks on updating the EU’s “trade defence instruments” (TDIs), such as countervailing duties, have been held up for three years by a group of free-traders, including Britain and Nordic states, which detect a whiff of protectionism. But officials worried by Europe’s growing anti-trade mood are running out of patience. The EU had to step up its defences against dumping, said Jean-Claude Juncker, president of the commission, in order “to fight against stupid populists”. He reeled off figures to prove that the EU is seeking no more protection han the Americans permit themselves (and which the WTO allows). The leaders took no decisions, but the summit declaration calls for a decision on TDIs by the end of the year.

A similar temper hovered over discussions on migration. The EU’s deal with Turkey earlier this year drastically reduced the numbers of refugees crossing into Greece. Now the Europeans are seeking “migration compacts” with five sub-Saharan African countries to stem the flow from Libya to Italy, and to increase the pace of deportation of
those deemed economic migrants, who do not qualify for asylum and now make up most of the numbers. Similar schemes have stalled before, and large questions loom over the current plans, not least over who will pay for them. But the thrust of the discussion—border protection, returns, security—highlights the EU’s grumpy, insular mood.

A separate shift may be discerned in the discussion on Russia, which dominated the leaders’ dinner last night. Matteo Renzi, Italy’s prime minister, had sought a “strategic discussion” about the EU’s Russia policy that, he hoped, would extend beyond sanctions. But his plan backfired: Russia’s brutal air campaign in Syria emboldened
the EU’s hawks to press for fresh measures beyond those already imposed in response to Russia’s incursions into Ukraine. Angela Merkel, Germany’s chancellor, spoke forcefully of the need to hold the Kremlin to account. France, which has sometimes wavered on Russia, is now also firmly in the hawkish camp. No fresh sanctions were imposed, and Mr Renzi succeeded in removing some of the tougher language from the summit communique. But those European governments that seek accommodation with a Russia bent on confrontation are running out of arguments.

Update (October 22nd): This piece has been amended to include a mention of low turnout in Hungary’s referendum.