Wallonia, a new global power in trade policy?

CETA, the Canada-EU Trade Agreement seven years in the making, appears to have fallen at the final hurdle, ultimately brought down by the politics of Wallonia, a tiny Belgian region that accounts for a mere 0.45 percent of EU-Canada trade and a population of 3.5 million out of Europe’s 508 million.   

Concerns from Wallonia – but also reflecting those of broader European lobbies – include fears about competitive agriculture imports, anxiety about legal protections for investors and unease over greater coherence in regulatory standards (which would significantly reduce costs for business).   Last-minute crisis talks have been unable to resolve the concerns; the Canadian Prime Minister Justin Trudeau had been scheduled to sign the final agreement on 27 October in Brussels.

The vote to reject CETA comes after the European Commission, under pressure from Member States, moved away from its earlier fast track-style approval for FTAs, instead giving 38 regional and national parliaments a ratification role.   CETA aside, the broader strategic worry about this new approach is whether the EU is still able to conclude modern comprehensive trade agreements.  The Commission has a full FTA dance card, with the United States (the current “TTIP” negotiation was already in deep water), New Zealand and others, all likely to be seeking even more ambitious FTAs than CETA, and in effect the Commission must also renegotiate existing FTAs and current WTO commitments post-UK withdrawal.   (For our EU-NZ FTA discussion paper, click here.)

The UK’s FTA prospects are now likewise all the more daunting.  Resolving the terms of the British exit from the EU and negotiating a new bilateral arrangement were always likely to be difficult, but recent signals seem to be moving the dial towards a “hard Brexit”, meaning exit and new access negotiations may be more bruising and lengthy than expected, even before taking into account CETA implications.   (This also raises some important questions in respect of New Zealand trade, including over the allocation of our existing EU agriculture market access as between the EU27 and the UK.)  For prospective UK FTA partners, at a minimum the timelines for (necessarily post-Brexit) FTA negotiations are becoming even less certain.

This post was prepared by Stephanie Honey, NZIBF Associate Director