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Trade Deal Between Canada and E.U. Appears to Have Collapsed With Europe-Canada Deal Near Collapse, Globalization’s Latest Chapter Is History
(about 3 hours later)
BRUSSELS — A planned trade deal between Canada and the European Union appeared to have collapsed on Friday after Ottawa’s representative walked out of talks aimed at clearing last-minute objections raised by a region in Belgium. LONDON — Even in this moment of fierce reassessment of the merits of free trade, the deal promoting commerce between the European Union and Canada seemed like a safe bet to secure political blessing on both sides of the Atlantic.
The fate of the trade pact with Canada — the Comprehensive Economic and Trade Agreement, or CETA — has become a symbol of how the European Union’s ability to act decisively on the world stage is losing out to parochial concerns and rising discontent with globalization. So as the agreement appeared dead on Friday — collapsing in the face of unrelenting opposition from Wallonia, the French-speaking portion of Belgium, where dairy cows have run of the land — it underscored the extent to which trade has become politically radioactive around much of the globe.
Chrystia Freeland, Canada’s international trade minister, left the talks on Friday just as a meeting of European Union leaders broke up without the completion of a deal with Canada because of brinkmanship led by Wallonia, the French-speaking southern part of Belgium. Liberalized trade has amplified economic growth, but the spoils have been largely monopolized by wealthy and corporate interests. Recriminations over the resulting economic inequalities are now so ferocious that modern history has been altered: The phase of globalization that began with the ending of World War II is essentially over.
“I personally have worked very hard, but it is now evident to me — evident to Canada — that the European Union is incapable of reaching an agreement, even with a country with European values such as Canada, even with a country as nice and as patient as Canada,” Ms. Freeland said in a statement reported by The Associated Press. In the seven decades since that conflagration, world leaders have forged a series of increasingly large and complex trade deals, pinning hopes for peace and prosperity on the value of turning wartime adversaries into commercial partners.
“Canada is disappointed and I personally am disappointed, but I think it’s impossible. We are returning home. At least I will see my three children tomorrow at our home.” But if a deal negotiated at the highest level between two large and advanced economies like Canada and Europe can be upended by narrow interest groups — like the dairy industry in a relatively minor participating nation — forget about every other large and complex deal under discussion.
The European Commission, the bloc’s executive arm, said the talks had reached a standstill, but it maintained that the deal could still be saved. One may presumably close the books on the Trans-Pacific Partnership, the enormous trade and investment pact championed by the Obama administration and encompassing a dozen nations around the Pacific Rim. One may reasonably perform last rites on the Transatlantic Trade and Investment Partnership, the similarly gargantuan deal between the European Union and the United States.
Under Belgium’s complicated federal system, Charles Michel, the country’s prime minister, can give his approval to the deal only once Wallonia approves. As for anyone still nursing fantastical notions that Europe and Britain will set aside domestic politics in negotiating what may be the most complicated divorce in history, Friday delivered a sobering development.
Paul Magnette, the prime minister of Wallonia, has opposed his region’s signing the deal on the grounds that the accord could undermine public services and industries like farming. Mr. Magnette’s Socialist Party is also in a bitter rivalry with the conservative government of Mr. Michel. The British government has insisted that it will find a way to leave the European Union while maintaining access to the European single market — the buyer of almost half of Britain’s exports. But any deal resulting from tortuous negotiations must win the assent of the 27 other members of the European Union. Any one of those countries seeking to protect the concerns of a single affected industry can essentially stop any deal from proceeding.
Mr. Magnette told RTL radio on Friday that Canada had seven years to negotiate with the European Union but that his region had only 15 days to consider the implications of the agreement. “I simply called for a bit of time,” Mr. Magnette said. On Friday, that is precisely what happened when Chrystia Freeland, Canada’s international trade minister, left the talks and went home to Ottawa.
“This was clearly not possible for our Canadian partners,” Mr. Magnette said. “I regret this, but I truly welcome the fact that we worked in an extremely cordial and constructive manner, and perhaps one day that will allow us to take up the discussion again.” “It is evident to me — evident to Canada — that the European Union is incapable of reaching an agreement,” she told reporters.
The developments on Friday made it far less likely that Justin Trudeau, the Canadian prime minister, would travel to Brussels for a planned signing ceremony on Thursday. Under Belgium’s complicated federal system, Charles Michel, the country’s prime minister, can give his approval to the deal only once all of the country’s regions assent.
The Wallonia region of Belgium is home to 3.5 million of the country’s 11.2 million people. Yet in single-handedly blocking a trade deal produced over seven years between the European Union and Canada, it effectively determined the terms of commerce applying for 500 million Europeans.
The Walloons did not relish the idea of having to compete against imported dairy products from Canada. Britain makes cars, medical devices and sophisticated parts for airplanes. It is a global leader in financial services. Somewhere in the European Union must surely lurk some other Wallonia that will seize the opportunity to slap tariffs on British goods even at the cost of broader economic interests.
That was already apparent to anyone paying attention to European politics. After Friday, London’s ministers will need spirits to maintain delusions of an amicable divorce. (And if those spirits come from the other side of the English Channel, they are likely to cost more.)
There is now “a huge question over whether the common European trade policy can survive,” said Hosuk Lee-Makiyama, the director of the European Center for International Political Economy, a research organization based in Brussels.
It is now beyond argument that liberalized trade between wealthy countries and developing countries exposes vulnerable workers to substantial perils. When cheaper imports arrive from low-wage countries, people making more expensive domestic goods can find themselves looking for new jobs.
When the North American Free Trade Agreement took effect in the mid-1990s, enabling goods to flow across Canada, Mexico and the United States with minimal impediments, factory workers in American industrial communities became vulnerable to job losses as production flowed south. When China entered the World Trade Organization in 2001, gaining the right to export its wares around the globe, factory workers in every industrial nation were rendered vulnerable.
Trade economists will say with justification that the inclusion of China and Mexico in the global trading system promoted economic growth, increased consumer choice, lowered prices on a variety of goods and allowed companies in wealthy countries to export more of their own wares.
Yet if the gains of trade were broad, the pain befalling communities directly in the path of China’s export juggernaut proved intense and poorly cushioned by government policies. A voluminous body of economic literature has in recent years brought home just how intense and damaging the China shock has been in the United States alone.
The distrust left after that shock, and anger over the broader workings of trade, have transformed politics in many major economies. Rage over factory closures in the American heartland propelled the rise of Donald J. Trump. Such sentiments fueled Britain’s vote to leave the European Union. Here is part of the explanation for the growth of right-wing populist parties in France, Germany, Hungary and elsewhere.
Now, even a deal between Europe and Canada looks unachievable.
Trade theory teaches that exchange across borders is ultimately beneficial to both countries. Some groups will win and some will lose, but society as a whole benefits, provided the terms of trade are fair and regulated by legitimate governments operating transparently.
Here is what is most extraordinary about the demise of the Canada-Europe pact: It did not involve wealthy countries and poor countries with different labor and environmental standards. It spanned two of the most affluent, democratic and regulated societies on earth.
If the people in these two regions cannot trust one another to deliver policies that will make the unimpeded exchange of goods and services a desirable deal for both, then the merits of trade are effectively defunct in the political realm.
Most of the resistance to this deal and the larger trans-Atlantic and trans-Pacific agreements has centered not on the elimination of tariffs but on the so-called investment provisions that standardize — or harmonize, in the argot of trade negotiators — applicable rules.
To voters in myriad countries increasingly suspicious of large institutions — those of the European Union and those like the World Trade Organization — this translates as an erosion of sovereignty. All of these negotiations have been accompanied by accusations that they will effectively elevate the interests of multinational corporations above national laws.
But the Europe-Canada deal did not succumb to such grandiose fears. Rather, it was done in by old-school parochial interests trumping larger concerns. The dairy industry in Wallonia was among those interests that prevailed over European trade policy writ large.
Here was unmistakable proof that the politics of the moment were more local than ever.
And here is a moral that applies to more than this story alone.