Why Could Wallonia Block the EU-Canada Trade Deal? And What Can Be Done to Prevent a Repeat?

Wallonia, a small French-speaking part of Belgium with a population of just about 3.5 million, has received a lot of media attention over the past few days for its initial opposition to the Comprehensive Economic and Trade Agreement (CETA), a trade agreement that the European Union and Canada have been negotiating for more than seven years. How could a parliament of a region that accounts for less than 1 percent of the 507 million Europeans the CETA would affect block a major trade deal?

In July, European Commission President Jean-Claude Juncker said CETA was to be considered a “mixed agreement,” which means that for the agreement to be ratified it needed the consent of the European Parliament, of the member states, and of all national parliaments.

The reasons for Juncker’s decision were largely political: CETA’s unprecedented scope, especially including chapters on investment, as well as the outcome of the British referendum to leave the EU in which voters criticized the EU’s supranational powers.

While Belgian leaders announced on October 27 that they had reached a solution with an addendum to the original agreement that takes into account the regional concerns put forward by Wallonia, the challenge posed by Wallonia raises the question: Is the EU capable of concluding ambitious trade deals of the scope and importance of CETA and the Transatlantic Trade and Investment Partnership (TTIP)?  Is Europe’s trade policy, one of its traditional linchpins to the rest of the world, at risk?


In its earlier years the European Commission had the exclusive competence to negotiate trade deals on behalf of its member states, as laid out by Article 3 of the Treaty on the Functioning of the EU. While one might think that CETA being a “mixed agreement” was the departure from procedures as we knew them, declaring trade agreements “mixed agreements,” is in fact not entirely new: In 2011, the EU ratified a free trade deal with South Korea which had been classified and ratified as a “mixed agreement” So mixed agreements are not new – what is new is that this time it created a problem.

Why did it create a problem? The underlying reasons are at least twofold: first, information (even misinformation) is dispersed broadly and rapidly via social media, and second, trade agreements have evolved rapidly over the past few years going way beyond their original scope of eliminating tariffs.

While it should be considered a positive development that trade agreements generate extensive public attention, on the other hand, social media is also often used to spread false and unverified information.

“Modern” trade deals like CETA and TTIP that include provisions on investment and seek to eliminate non-tariff barriers go beyond the scope of simply reducing tariffs between countries. That is why, before the Treaty of Lisbon in 2009, treaties on investment were concluded bilaterally. The Treaty of Lisbon extended the EU’s powers, empowering it to conclude investment treaties on behalf of its member states.

This is why the European Court of Justice (ECJ)is evaluating whether a 2014 trade deal between the European Union and Singapore is of exclusive EU competence before it can be ratified. The decision, which is expected to be announced early next year, will determine whether the Singapore deal (and hence future trade deals on par with it) is considered a “mixed agreement,” in which case it would need the approval of some forty national and regional parliaments. If it were to be found to be an exclusive agreement, it would mean that the EU could ratify the agreement by qualified majority, or by unanimity in some areas, as laid out in the Treaty of Lisbon.

While the economic implications of not ratifying CETA or other trade deals of equal scope are disastrous in and of themselves, the external view of the situation is at least equally important.  Although it seems as if CETA will be signed and ratified after all, the tumult of the past few days dealt a huge blow to the EU’s credibility to ratify trade deals in a timely fashion.

If the ECJ rules in favor of exclusive competence of the EU in the case of Singapore, it could be a decisive move to make trade agreements more efficient for external partners and hence help restore the confidence of third parties and investors that indeed the EU is the right forum to negotiate trade deals on behalf of its member states.

However, critics would argue that a decision in favor of European exclusive competence to negotiate trade deals comes at the expense of democratic legitimacy and accountability of the EU, which could create an even deeper rift between the public and the “elite.” Both the United States and the EU currently deal with a lot of anti-trade rhetoric and sentiment, which is oftentimes part of the larger sentiment that they do not feel heard, represented, or included.

How do you overcome the conundrum of being an effective negotiator to third parties while meeting the public’s concerns about the EU’s democratic legitimacy?

The solution, much like the challenge, is twofold: On the one hand, the European Commission needs to “democratize globalization”—empower the electorate through information, enhanced transparency, and open dialogue. While the Commission has already taken an important step forward through its “Trade for All” policy, there is a lot more that needs to be done. The EU needs to be able to convince publics that trade agreements are in their interest. On the other hand, the EU needs to go back to having exclusive powers in trade negotiations in order to ensure that a Wallonia-like situation never happens again. Member states should not forget that the EU has already successfully negotiated over fifty trade deals on their behalf – and that it is much more desirable for third parties to negotiate with the EU “en bloc” than on a country by country basis.

Both sides of the coin, the “internal” as well as the “external” view of EU trade deals, should be considered when restructuring EU trade policy and procedures—to make EU trade policy more democratic and to put it on a faster track.

Marie Kasperek is an assistant director in the Atlantic Council’s Global Business and Economics program.

Image: Demonstrators protested against the Comprehensive Economic and Trade Agreement (CETA), a free trade deal between the European Union and Canada, outside the European Commission headquarters in Brussels, Belgium, on October 27. (Reuters/Yves Herman)