Canada, EU Sign Free-Trade Deal Delayed by Small Belgian Region

(Bloomberg) -- Canadian Prime Minister Justin Trudeau signed a free-trade pact with the European Union, finally overcoming objections from a small region in Belgium that threatened to derail the entire accord.

The Comprehensive Economic and Trade Agreement, which has been on the negotiation table since 2009, will cut tariffs for EU manufacturers by 500 million euros ($549 million) a year and facilitate trade between the two markets. It was signed Sunday in Brussels.

The Francophone region of Wallonia, which accounts for less than 1 percent of the population of the EU, nearly scuppered the pact when it prevented Belgium, the sole holdout, from endorsing the agreement earlier this month. The complications compelled Canada's trade minister to walk out of the talks a week ago and Trudeau to scrap a planned Oct. 27 visit to Brussels. Negotiators finally overcame their differences before the weekend.

“This agreement reaches far beyond trade context,” European Council President Donald Tusk told reporters after signing the accord. “Today's decisions demonstrate that disintegration of the Western community does not need to become a lasting trend, that we still possess enough strength and determination -- at least some of us -- to counter the fatalism of the decay of our political world.”

Dispute Settlement

Belgium's federal government had been unable to persuade Wallonia's regional parliament in the country's south to sign up to the proposed pact, known as CETA. The delay in concluding the agreement raised concern that the bloc would have difficulty concluding other deals now under negotiation between the EU and the U.S. and Japan, as well as an accord with the U.K. over its future relationship with the bloc.

“The credibility of the EU has been restored,” EU Trade Commissioner Cecilia Malmstrom said on her way into the meeting.

The Walloons' list of concerns about the deal range from the possible impact on employment to its affect on regional values. They fear large multinational companies will have greater powers to sue EU governments in investment disputes, and that a deal could lead to a decline in labor rights and undermine standards in environmental protections and agriculture.

‘Cautious Optimism'

“Canadians and Europeans share the understanding that in order for real and meaningful economic growth, we need to create good, well-paying jobs for our citizens,” Trudeau said. “Progressive trade agreements like the one signed today will do just that.”

The EU says the pact would boost its economic output by about 12 billion euros a year and expand EU-Canada trade by about a quarter. It ends 98 percent of tariffs on goods traded from the outset and 99 percent after seven years. Each side would dismantle all industrial tariffs and more than 90 percent of agricultural duties.

But this may not be the last Canada has heard from the Walloons. While the deal will take on provisional effect once it's passed by the European Parliament, EU law demands national ratification. That means Wallonia will have the power of veto again.

“I have no doubt that the provisional implementation will be the best form of education,” Tusk said. “This is the main ground for our cautious optimism. Very cautious optimism.”

To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net. To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Richard Bravo, Flavia Krause-Jackson