EU Parliament approves CETA: the EU-Canada free trade deal sees the light in Trump’s gloomy era

Jean-Claude Juncker, President of the EC, Federica Mogherini, High Representative of the Union for Foreign Affairs and Security Policy and Vice-President of the EC, and Cecilia Malmström, Member of the EC in charge of Trade, participated in the 16th EU/Canada Summit together with Justin Trudeau, Canadian Prime Minister, Donald Tusk, President of the European Council, and Martin Schulz, President of the EP. Greeting between Donald Tusk, Justin Trudeau and Jean-Claude Juncker (from left to right). © European Union , 2016 / Source: EC – Audiovisual Service / Photo: Jennifer Jacquemart.

After seven years of talks and remarkable twists, the EU-Canada Comprehensive Economic and Trade Agreement (CETA) was approved by the European Parliament last week. The EU lawmakers formally backed last Wednesday the landmark free trade deal which aims to eliminate up to 99% of tariffs on exported goods with Canada, by a vote of 408 to 254.

Despite crowds of protesters staging a sit-in right in front of the institutional building in Strasbourg, France, last week’s move has already been celebrated by many as a victory for a free-exchange market in the face of growing populist and protectionist calls by US President Donald Trump.

The background

The European Union and Canada started conversations on a possible bilateral trade agreement in late 2008, when the joint study “Assessing the Costs and Benefits of a Closer EU-Canada Economic Partnership” was released. They then officially launched negotiations over a formal free trade pact on 6 May 2009 at the Canada-EU Summit in Prague. An agreement in principle was signed by the Canadian Prime Minister Stephen Harper and European Commission President José Manuel Barroso on 18 October 2013, while negotiations were concluded on 1 August 2014.

It took another full two-year period before the two parties could formally sign the deal in October 2016, after months of controversies, amid the rise of anti-globalisation protests and local veto threats. Indeed right before the scheduled signature of CETA on 27 October 2016, the “Walloon question” exploded, when Belgium announced it was unable to go ahead, as one of its regional governments, Wallonia, rejected the signature.

It took days to solve the intra-Belgian controversy, but then Belgium paved the way to CETA as the last member state of the bloc, and Canadian Prime Minister Justin Trudeau and the highest representatives of the European Union could finally seal the agreement.

The deal in figures

Now that roughly 58 per cent of the members of the European Parliament have formally ratified the CETA, with a vote of 408 in favour, 254 against and 33 abstentions, the EU-Canada pact is real. The trade between the two sides amounts to more than € 60 billion (€63.5bn, or $ 67bn, or £54bn in 2015), and CETA will see a gradual removal of 99% of non-farm duties between the EU’s market of 500 million people and Canada’s 35 million.

Other than slashing tariffs on farm products and general goods, CETA aims also to create common rules covering a broad range of trade activities, including services and intellectual property.

The EU expects the deal with Ottawa to boost bilateral trade by 20% by removing 98 percent of tariffs on goods from the outset and 99 percent after seven years. Supporters claim that the pact will boost the EU economy by 12 billion euros ($12.7 billion) a year and Canada’s by C$12 billion ($9.18 billion) annually, as well as expand two-way trade by about a quarter. The Guardian reports that CETA will be worth $1.6bn a year to Britain alone, in the period before the UK withdraws from the EU.

Open markets and free trade

The agreement has been welcomed by many as a success for an open markets policy, in the face of protectionist actions by US President Donald Trump, who withdrew from the Trans-Pacific Partnership (TPP) and wants to reshape the North American Free Trade Agreement (NAFTA).

Jean-Claude Juncker, President of the European Commission, welcomed the agreement and said it represents “an important milestone in the democratic process of ratification of the agreement”. “This progressive agreement is an opportunity to shape globalisation together and influence the setting of global trade rules”, he added.

Guy Verhofstadt, the leader of the ALDE liberal group, openly mentioned Mr. Trump and said: “President Trump has given us another good reason to intensify our links with Canada”. “While Trump introduces tariffs, we are not only tearing them down but also setting the highest progressive standards”, he also said last week.

Trade Commissioner Cecilia Malmström also commented the move and said: “This vote is the start of a new era in EU-Canada relations – together we are sending a strong signal today. By building bridges rather than walls, we can face the challenges that confront our societies together”. “In these uncertain times, with rising protectionism around the world, CETA underlines our strong commitment to sustainable trade”, she highlighted in an official EU press release.

Hot topics and open complaints

However, the deal is still extremely divisive, especially in the Old Continent. As it happens for the TTIP, European trade unions and environmental groups believe the pact will ultimately lower European standards in a broad range of goods, especially in food and environmental questions, and that will also allow multinational corporations to dictate public policy.

The hottest point of discussion through the years has been the so-called Investor-State Dispute Settlement, a clause that would allow multinational companies to sue local governments if found guilty of impeding their interests.

The European Union has repeatedly said that such a clause would never be part of an agreement, and finally announced last week that an “improved Investment Court System” has totally “replaced” the clause in the final CETA text. Despite this, hundreds of protesters gathered at the gates of the European Parliament building in Strasbourg ahead of the vote, protesting against a deal that, according to them, will only benefit large multinational firms.

The EU as a model

Canadian Prime Minister Justin Trudeau last week praised the European Union as an “unprecedented model for peaceful cooperation”. Speaking to the European Parliament on Thursday, Mr. Trudeau said the 28-nation bloc had a crucial global role to play, Reuters reported. “You are a vital player in addressing the challenges that we collectively face as an international community. Indeed the whole world benefits from a strong EU,” Trudeau stressed.

While commenting the freshly-sealed CETA, Mr. Trudeau said that, in the current times, the EU and Canada “must choose to lead the international economy”, and not “simply be subject to its whims”. “If we are successful, CETA will become the blueprint for all ambitious, future trade deals. If we are not, this could very well be the last. So make no mistake, this is an important moment for us”, he added.

Despite the conclusive vote, CETA will be fully implemented only once the parliaments in all Member States ratify the deal according to their respective domestic constitutional requirements, the European Commission said. According to the European Commission, the EU is Canada’s second largest trade partner after the US, and Canada is the EU’s 12th-biggest.