Free trade can survive its Wallonian wobble

October 25, 2016

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.

Like Napoleon, free trade has taken a battering in Wallonia. But unlike the French emperor, who suffered his final defeat at Waterloo, trade will hobble on. Though the tiny Belgian region has blocked a giant pact between Canada and the European Union, such deals can and should still get done with time, patience and some creative thinking.

The apparent failure of the Comprehensive Economic and Trade Agreement (CETA) fits with two popular narratives – that globalisation is in retreat, and that the European Union is collapsing under the weight of its own bureaucracy. The parliament of Wallonia, which represents 3.6 million people, rejected the deal. It cited a variety of reasons including a provision that would let companies sue governments in limited circumstances.

What’s certainly true is that such pacts become fiendishly complex. A deal like CETA must be translated into 23 European languages, and “scrubbed” by lawyers to ensure each version is identical. Potential agreements with Singapore, Japan and India have also been years in the making – to say nothing of even larger deals like that with the United States.

There are three important lessons. First, that trade negotiations require internal as well as external haggling. At a push, the EU could split the deal into the bit that simply removes tariffs, which doesn’t require the approval of individual member states, from investment provisions, which currently do. More likely is that Belgium’s central government throws some economic sweeteners at relatively poor Wallonia.

Europe might also be less ambitious in the future. Newer trade pacts cover everything from environmental issues to human rights. Both are hugely important. But each additional issue diminishes the chances that the broad benefits of closer links – which in CETA’s case include a possible 20 percent increase in bilateral trade – get realized.

Finally, though, these deals are still worth doing. Imagine if Wallonia set out to strike a trade agreement with a country 10 times its size. It’s likely the smaller partner would come off worse. Despite the suggestions that globalisation leaves ordinary people in the cold, trading as part of the 500-million-strong EU gives Wallonia – just like any member of the bloc – more chance of getting what it wants, and less risk of getting what it doesn’t.

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