Canada’s wrong strategy in negotiating with EU

Canada’s ongoing negotiations with the European Union on the Comprehensive Economic and Trade Agreement (CETA) are once again making headlines. And, once again, they are not positive.

Last Friday, Wallonia, one of three Belgian regional governments, voted against proceeding with the ratification of the agreement, citing concerns over protecting its pork and beef market. With the unanimous agreement of all three subnational regions needed for a Belgian “yes” to CETA, this “no” vote could be fatal. Unfortunately for Canadian negotiators, the bleeding doesn’t stop, or start, in Wallonia.

Austria has been back and forth on its support for the CETA. Germany’s highest court effectively held the fate of the agreement in its hands, and ultimately rejected an injunction on CETA levelled by social justice advocates. Romania and Bulgaria are tying the future of the CETA to visa-free travel between Canada and their countries. Prime Minister Justin Trudeau, in an hour-long phone call with his Bulgarian counterpart, acquiesced. We can reasonably assume the same will happen with Romania. In 2013, Canada was strong-armed into lifting a similar visa regime on the Czech Republic, which threatened to shut down negotiations altogether. In negotiating with the EU, history tends to repeat itself.

Canada’s biggest mistake has been in viewing these negotiations as a CanadaEU trade deal and should have instead approached it as a series of 28 bilateral agreements. If trade negotiators have any hope of salvaging this agreement, this approach needs to be adopted now.

Negotiating with the EU is no easy feat, though Canada is not the first country to experience this. The U.S. has been negotiating with the EU for years and the prospect of a formalized agreement is a long shot at this point. The CETA negotiations cannot be seen as boilerplate, copy-andpaste agreements that can be modelled on our recent agreements with South Korea, Honduras and Panama, to name a few.

With Trudeau suggesting CETA is a test of the EU’s “usefulness,” it is unfortunate- ly clear that Ottawa sees the EU as just another partner to add to the roster of free traders.

The problem is that the EU is unlike any other trading partner, and Canada never fully digested this truth.

The EU is a collection of 28 member states, each of whom have surrendered certain powers and responsibility to EU institutions, mostly based in Brussels. This has been a long process in the postwar period, but it has evolved into the most robust integration project today.

Despite the institutions of the EU wielding considerable power, the true balance of power still rests at the member-state level. Many areas of legislation can only be passed with unanimity, and most areas require a qualified majority. Veto opportunities abound, and member states are not afraid to remind us of this.

One of these areas just happens to be free-trade agreements with third-party countries.

If the CETA has any chance of survival — and, for the economic future of Canada, we should hope it does — then Canada needs to reconfigure its strategy. Continuing to win the approval of the EU leadership in Brussels is certainly necessary for a smooth(er) ratification process from here. But it is far from sufficient.

The EU does not function in a topdown, command dynamic. What EU leaders say is often vehemently opposed and challenged by member states. With 28 hugely diverse economies (though soon to be 27), any EU activity is all but guaranteed to benefit some more than others. What’s good for Germany or France might not be all that great for Slovenia or Hungary.

We should not be surprised, then, that not all EU member states are crazy about blindly signing off its most comprehensive trade agreement to date.

The troubling reality is this could have been avoided. The negotiations for CETA have been almost exclusively conducted between trade negotiators from Canada and the EU’s institutions. The EU member-state governments have been treated as rubber stamps by both parties. But, given an opportunity to threaten a veto and extract some concession or policy change from Canada, we can’t blame them.

If Canada began from a bottom-up approach to CETA, starting with the member governments and their own bilateral issues with Canada, we could be enjoying the sizable economic benefits that come from free trade with the world’s largest trading bloc. In many ways, CETA negotiations are a lesson for both Canada and the EU. Let’s hope Canada does not become a case study in the wrong way to negotiate with the EU.