CETA at risk again: Italy says it won’t ratify EU-Canada trade deal over product protection fears

Parmesan cheese on shelves in Italy (Copyright: European Union, 2014 / Source: EC – Audiovisual Service / Photo: Daniela Giusti)

The Comprehensive Economic and Trade Agreement, simply known as CETA, may be under threat again. The shocking news came out last Friday, when Italian Deputy Prime Minister Luigi Di Maio said Italy will not ratify the European Union’s free trade agreement with Canada, which mostly took effect last year. The EU-Canada FTA, which is EU’s biggest accord to date, indeed came provisionally into effect since last September, after 9 years of negotiations in total and many remarkable turns of events, but still needs formal approval by all 28 EU member states to take full effect. Now Italy’s anti-establishment government has promised to take a hard line to defend Italian speciality foods, and could represent the worst nightmares for all FTA backers in Europe.

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.

After two more years of controversies, amid the rise of anti-globalisation protests and local veto threats, the two parties could then formally sign the deal in October 2016. Right before the scheduled signature of CETA in October 2016, then, one of the most significative happening of the whole question exploded, the so-called “Walloon question”.

Local vetoes

Indeed, just a few days before the signature date, 27 October 2016, Belgium announced it was unable to go ahead, as one of its regional governments, Wallonia, rejected the signature. According to the Belgian constitution, the three autonomous regions – the Brussels-Capital Region, the Flemish Region (Flanders) and Walloon Region (Wallonia) – must all approve trade agreements. With Wallonia rejecting CETA, Belgium could not concede, as reported by the Sting back then.

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. In February last year, with a vote of 408 in favour, 254 against and 33 abstentions, the European Parliament could formally ratify the CETA, making the EU-Canada pact real, which eventually came into force last September.

Italy’s threat

However, after last week’s shocking announcement, music may change again for the controversial EU-Canada pact. Italian government has made it clear last Friday it apparently fears piracy of protected foods such as Parmigiano-Reggiano and that Rome will not ratify the EU’s free trade agreement with Canada. “Soon CETA will arrive in parliament and this majority will reject it and it will not ratify it,” Di Maio said at a Coldiretti assembly gathering in Rome.

Mr. Di Maio, who is also Italy’s labour and industry minister, said that if Italian “functionaries” try to defend the free-trade deal they “will be removed from their posts”. “If so much as one Italian official … continues to defend treaties like CETA, they will be removed,” said Di Maio, who leads the anti-establishment 5-Star Movement, which governs the country with the right-wing, anti-immigrant League since a few months.

Local specialities and conservative views

The populist government that is running the Belpaese since June 1 has indeed promised to take a hard line and to adopt conservative measures to defend Italian speciality foods. The first alarm bell rang last month when, on June 14, agriculture minister, Gian Marco Centinaio, attacked the proposed FTA with Canada in a newspaper interview. The base of the disagreement with Brussels on the CETA and, possibly with all Free Trade Agreements, is that Italy fears CETA doesn’t protect the same number of Italian products the EU classifies as Protected Designation of Origin (PDO) and Protected Geographical Indication (PGI). These labels are actually established to protect the unicity of products which are often imitated without following the original guidelines or using the right ingredients.

Italy is the leading European country for the number of food products with protected designation of origin and protected geographical indication labels: there are almost 300 and those include Parmigiano Reggiano cheese, Mortadella Bologna and Prosciutto Crudo di Parma ham. Under CETA, Canada has recognised around 40 Italian PDO and PGI labels “only”, which is what Italy’s ruling 5 Star-League majority is now attacking.

Wider concerns

Some other farm associations and critics in European states have expressed concerns about the threat of rapidly rising pork and beef imports from Canada, as reported by most of Europe’s media outlets. Coldiretti, the association of Italian agricultural companies Di Maio was meeting with last week, has called CETA “wrong and risky” for Italy. It says Italian food exports equivalent to €41bn last year could triple with a serious fight against international food counterfeiting.

Huge opportunity

On the other hand, CETA backers are convinced number speak clearly on the huge opportunity Europe may be missing if the Brussels-Ottawa accord does not see the light. 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 reported that CETA will be worth $1.6bn a year to Britain alone, in the period before the UK withdraws from the EU.

The trade between the two sides amounts to more than € 60 billion (€63.5bn, or $ 67bn, or £54bn in 2015), and CETA would 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.

Challenges ahead

Reuters has reported that Hosuk Lee-Makiyama, director of trade think-tank ECIPE, said Italy did pose a significant threat to CETA, but the Commission could ultimately take the matter to court. According to Mr. Lee-Makiyama, the EU could continue to apply all parts of the agreement aside from investment dispute settlement, partially or entirely saving the EU-Canada accord. Italy has by all means put some serious issue ahead of CETA’s ratification as it did already with other important trade deals such as the deal with South Korea, over concerns it would affect Italy’s motor industry. The southern European country has anyway backed last week a planned EU trade deal with Japan, which is something free-trade supporters are now hoping to be a good sign to revive an exhausted CETA.