What Does CETA Tell Us About The Prospects for World Trade?

While there may be much eye-rolling and tutting, observers of Europe’s prevarications over ratification of the CETA, the European and Canadian Comprehensive Economic and Trade Agreement, the reality is the E.U.’s deep divide over the merits of this agreement are but the tip of a much larger iceberg.

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Within any free trade agreement there are always winners and losers. When the government to government FTAs are negotiated and agreed, a balanced judgement is made as to whether the agreement has overall benefits for each party. But, when the right to pick agreements apart and focus on the detail is given to interest groups down to a granular level of interested parties, there are bound to be those that find one or two issues unacceptable.

How One Region is Killing an EU-Wide Deal

In the case of CETA, Wallonia (a German-speaking region of Belgium) has taken exception to the rights of major corporations to take legal action against governments in the event of subsequent legislation which goes against the terms of the agreement.

They also dislike some of the changes to agricultural trade. Both the E.U. and Canada are making last-ditch attempts to secure agreement prior to the intended signing on Thursday, but after all these years of negotiation even if matters cannot be resolved this week no doubt both sides will continue to try and find solutions.

The problem, though, is not really one of minor vested interests, rather it is a rise in anti-globalization among mature economies who see their standard of living, their manufacturing base and their very future threatened by the rise of global competition.

The Implications for TPP and TTIP

Where CETA leads TTIP — the Transatlantic Trade and Investment Partnership — follows. If Europe does not ratify CETA, TTIP is almost certainly dead in the water. Maybe more significance for U.S. foreign policy is the fortune of TPP, the Trans-Pacific Partnership.

Andrew Hammond an Associate at the Centre for International Affairs, Diplomacy and Strategy at the London School of Economics, writing in the Telegraph, says that TPP represents a major plank of U.S. policy to pivot towards Asia and is said to contain elements to counter the economic threat of a rising China not playing by the same rules.

The Obama administration was seeking, with TPP, to set standards of trade for the 21st century. And not just of trade but investment, data flows and intellectual property. TPP has an important rules-setting component, Hammond said, perhaps more so than any other previous trade deal.

The agreement sets rules to limit subsidies to state-owned companies which could become very important should China eventually join TPP. With the bill languishing in the U.S. Congress and a rising tide of populist sentiment against globalization, championed by both Republican and Democratic candidates, serious questions are being asked about whether TPP will see the light of day.

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Other parties such as Canada, Australia, Japan, and New Zealand, including Southeast Asian members would collectively account about 40% of world GDP.  Yes, there would be winners and losers on both sides, that is the nature of free trade agreements, the job of government is to judge whether any agreement is on balance in their country’s best interests. The US conceived of and largely set the agenda for TPP. It is not in agreement that is being forced on the US by some foreign power, quite the contrary.  Failure to enact the agreement will have repercussions for US foreign economic policy for decades to come and the failure of CETA, TTIP and TPP would set the tone for a more introverted, protectionist and isolationist World to come.

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