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Debates

External Action

CETA provides a foretaste of things to come for EU trade policy, TTIP and Brexit

James Appleyard / Nov 2016

Photo: European Union

 

Although Brussels stands on the cusp of increasing market access for European goods and services to Canada, the torturous talks to salvage the Comprehensive Economic and Trade Agreement (CETA) over the last fortnight have underscored the fact that EU trade policy finds itself at an inflection point. Negative publicity linked to the regional government of Wallonia stonewalling the bloc’s free trade agreement with Canada has illustrated that the heft the EU carries in the global trade arena has taken a firm hit in recent weeks.

Trade policy, an area in which the EU has previously exercised considerable authority, now appears to be creeping back under the purview of national governments, diminishing Brussels’ role as a global actor. This trend bodes ill for other ambitious trade deals, such as the Transatlantic Trade and Investment Partnership (TTIP) or any post-Brexit trade deal between the UK and EU.

Welcome reprieve for Europe’s embattled exporters

With growth in the Eurozone expected to reach only a meagre 0.2-0.5% in 2017 according to European Commission forecasts, the signing of CETA between the EU and Canada on 30 October 2016 is welcome news for the bloc’s embattled exporters. Following 11th-hour talks held to avert the potential derailment of this landmark accord, CETA is now expected to provisionally enter into force following ratification by both the European Parliament and also the national legislatures of each of the EU’s 28 member states.

Once rubber-stamped, the trade deal – which has been 7 years in the making – is expected to increase bilateral trade in goods and services between the EU and Canada by 22.9% or €25.7 billion (US$28.1 billion), potentially leading to GDP gains for the EU of up to €11.6 billion (US$12.7 billion) per annum.

CETA’s travails signify difficulties ahead for EU trade policy

However, despite the signing of CETA, the arduous path the EU has trodden in sealing this agreement has undoubtedly dented the bloc’s reputation as a global trade negotiator. At a time of heightened political risk in Europe, Brussels’ decision to make CETA a ‘mixed competency agreement’ – meaning that it has to be ratified not only by the EU institutions, but also be each of the bloc’s 28 member states – should be firmly called into question.

The EU’s trade policy, long considered to be one of the bloc’s strategic strengths, now finds itself held hostage by continental politics and protectionism, setting a dangerous precedent for future agreements that Brussels is seeking to negotiate.

Indeed, as anti-globalization sentiment reaches new heights, Brussels is arguably guilty of underestimating the level of opposition to controversial elements of CETA, including investor protection mechanisms and contentious provisions on the mutual recognition of standards. Likewise, at a time of rising euro-scepticism, both the European Commission and member state leaders have equally struggled to articulate to the bloc’s 500 million citizens the positive case for free trade.

If the Belgian region of Wallonia’s stubborn opposition to CETA has taught us anything, it is that this is arguably the end of EU trade policy as we know it. Future trade deals are likely to be held hostage by not only consumer affairs champions and environmental and farming activists, but also both fringe and mainstream political movements who will use such negotiations as a means to extract concessions and settle long-standing grievances.

CETA relief will be short lived – up next TTIP and Brexit

Despite a palpable sense of relief sweeping through Brussels following the signing of CETA, a fresh minefield of obstacles now lays in wait for the bloc’s trade negotiators as they attempt to push through TTIP between the EU and US. The blowback and collateral damage inflicted by CETA is likely to result in the removal of certain provisions from TTIP, potentially in relation to agriculture, trade in services and access to government procurement.

This would represent a marked turnaround in the fortunes of TTIP, seen in many European capitals only a couple of years ago as a ‘game-changing’ critical measure to put Western economies back into primary global positions. Even if EU and US trade negotiators manage to salvage a TTIP deal in 2017, it would face the additional obstacle of being put before national governments for final sign off, as well as the European Parliament.

Elsewhere, the near collapse of CETA poses the additional question of whether the UK will be able to strike a comparable free trade deal with the EU once it formally completes Brexit. Hurdles in the CETA negotiating process have set an alarming precedent for future trade talks between London and Brussels. Any potential future free trade agreement between the UK and EU is likely to be closely monitored and potentially vetoed by not only the bloc’s member states, but also regional parliaments who hold a high stake in this debate. Those most likely to oppose a deal are likely to have been the most negatively affected by Brexit due to their exposure to the UK through direct economic and trade links.

EU trade policy finds itself at an inflection point

In an effort to re-assert its credentials, Brussels is likely to respond in the short-term by attempting to inject as much transparency and openness as possible into other trade negotiations currently underway with not only the US, but also the likes of Japan, Indonesia and the Philippines. What is apparent, however, from events over the last fortnight, is that the EU’s current trade playbook is under strain, and is likely to receive a strategic overhaul in the near future. The EU as a global trade actor will continue to remain on the back foot for the foreseeable future, suggesting that the complexion of future deals that it attempts to negotiate will be much leaner in nature with provisions confined to the low-hanging fruit of non-sensitive sectors or the reduction of tariffs.

 

James Appleyard

James Appleyard

November 2016

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