A preview of the Brexit battle

by | Nov 7, 2016 | Business, Europe |

An announcement by the Belgian Prime Minister Charles Michel of a compromise on the free trade agreement between the European Union and Canada revived hopes that ratification of the deal will go through. The bloc’s final approval of the deal was derailed by the regional parliament in Wallonia, which objected to some of its provisions.

Though the agreement with the reluctant region may have saved the EU-Canada deal, the drama surrounding it in recent weeks highlights the contradictions that the European Union must face and raises questions about the bloc’s ability to make coherent policy decisions.

Besides the complexity inherent in negotiating wide-ranging trade deals, the process of developing the Comprehensive Economic and Trade Agreement (CETA) was complicated by its ratification process. CETA is the most comprehensive free trade agreement that the European Union has ever negotiated. It includes the liberalization of trade for around 98 percent of goods, plus a long list of services.

The deal submitted for ratification was the result of almost a decade of wrangling by Canadian and European officials. It has generated criticism on topics as diverse as its effects on Europe’s agricultural sector and the setting of tribunals that would allow foreign corporations to sue states.

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Failure to ratify it would raise questions about the European Union’s ability to finalize similar deals, including the Transatlantic Trade and Investment Partnership with the United States, which is still in the negotiation stages.

The snag in the CETA process elevates the tricky issue of the balance of power within the European Union. According to the EU treaty, the European Commission (an independent body of technocrats that is supposed to represent the bloc as a whole rather than its member states) has the power to negotiate agreements with third countries.

But in those cases where the agreement involves competences that the commission shares with the member states (commonly known as “mixed agreements”), ratification from each country is necessary before the deal can enter force.

To a large extent, the decision of whether an agreement is a mixed one is a matter of legal and political dispute. The commission’s initial decision was to treat CETA as an EU-only agreement and limit its ratification to the Council of the European Union and the European Parliament.

But some EU members objected to that classification, which prompted the commission to reverse course and put the future of CETA in the hands of national parliaments. In Belgium’s case, the deal’s approval was contingent on the approval of both its national and regional parliaments, which gave lawmakers in Wallonia, a region of about 3.5 million people, the power to block a deal that would affect 500 million Europeans.

Timeline tracing Britain’s referendum to leave the European Union

The CETA process offers a preview of what the negotiations over the United Kingdom’s departure from the European Union could look like, especially if London decides to request a free trade agreement with the bloc. Considering the complexity of the issues at stake, it is almost certain that the final deal will require approval not only by the British Parliament but also by those in each of the bloc’s member states.

An EU-British agreement would be different from CETA in the sense that there is already free trade between the two, which would make it difficult for member states or interest groups to argue against any deal on economic grounds. But giving EU members a say in the ratification also means giving them the opportunity to make demands in exchange for their support.

Some of the demands might not even be directly linked to the deal, as governments could take advantage of the situation to seek concessions on tangential issues.

The problems surrounding CETA crystalize an ongoing debate about how the European Union should function. Those who defend a deepening of the process of European integration argue that the bloc needs a centralized government. From this perspective, a regional parliament in a member state (in this case, Wallonia) should not be allowed to stop an agreement that affects 28 countries.

Similar arguments were made in the early 2000s when the population of Ireland rejected the Treaty of Nice in a referendum, temporarily freezing its implementation (the Irish held a second referendum at the European Union’s urging and ratified it).

Interactive image: The CETA deal between the European Union and Canada

The counterargument to this position is that EU countries cannot leave crucial decisions such as the liberalization of trade in the hands of unelected technocrats in Brussels.

From this perspective, there is a serious lack of democratic accountability in the union that needs to be remedied. National parliaments, the argument goes, should have the chance to halt or modify agreements that would affect significant portions of their population.

There is some truth to both arguments. On the one hand, the European Union’s decision-making is complex, cumbersome and slow, which significantly undermines the bloc’s effectiveness. This is particularly true when it comes to foreign policy, where unanimity is required to make decisions.

On the other hand, the Brexit referendum and the rise of Euroskeptic political parties confirm that there are a growing number of EU citizens who see the institutions in Brussels as too distant and unaccountable. Globalization opponents in Europe are critical not only of foreign governments and corporations but also of bureaucrats in Brussels.

The nature of this dispute means that there is no solution to it. The debate hinges in part on ideology, which means there is not an answer that everyone involved will accept. But more important, these disputes are the result of the fundamental structure upon which the European Union was built. It is neither a federation nor a pact among fully sovereign nation-states.

EU treaties give attributions to supranational institutions while ensuring that national governments still have a seat at the negotiating table. At a time when nationalism is on the rise in Europe, it seems unlikely that member states will quietly allow Brussels to take control of the policy process. No matter the outcome of the CETA agreement, this will not be the last time the European Union finds itself in such a conundrum.

Credits –

This article was originally published by Stratfor

Featured image: Wikipedia/Creative Commons/Eigen Werk

Interactive Image: Flickr/Creative Commons/Kees Torn

Video: YouTube/European Parliament

Disclaimer: The opinions expressed within this article are the personal opinions of the author and StratScope does not resume any responsibility or liability for the same.

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