LONDON — Even in this moment of fierce reassessment of the merits of free trade, the deal promoting commerce between the European Union and Canada seemed like a safe bet to secure political blessing on both sides of the Atlantic.
So
as the agreement appeared dead on Friday — collapsing in the face of
unrelenting opposition from Wallonia, the French-speaking portion of
Belgium, where dairy cows have run of the land — it underscored the
extent to which trade has become politically radioactive around much of
the globe.
Liberalized trade has amplified economic growth, but the spoils have been largely monopolized by wealthy and corporate interests.
Recriminations over the resulting economic inequalities are now so
ferocious that modern history has been altered: The phase of
globalization that began with the ending of World War II is essentially
over.
In
the seven decades since that conflagration, world leaders have forged a
series of increasingly large and complex trade deals, pinning hopes for
peace and prosperity on the value of turning wartime adversaries into
commercial partners.
But
if a deal negotiated at the highest level between two large and
advanced economies like Canada and Europe can be upended by narrow
interest groups — like the dairy industry in a relatively minor
participating nation — forget about every other large and complex deal
under discussion.
One
may presumably close the books on the Trans-Pacific Partnership, the
enormous trade and investment pact championed by the Obama
administration and encompassing a dozen nations around the Pacific Rim.
One may reasonably perform last rites on the Transatlantic Trade and
Investment Partnership, the similarly gargantuan deal between the
European Union and the United States.
As
for anyone still nursing fantastical notions that Europe and Britain
will set aside domestic politics in negotiating what may be the most
complicated divorce in history, Friday delivered a sobering development.
The
British government has insisted that it will find a way to leave the
European Union while maintaining access to the European single market —
the buyer of almost half of Britain’s exports. But any deal resulting
from tortuous negotiations must win the assent of the 27 other members
of the European Union. Any one of those countries seeking to protect the
concerns of a single affected industry can essentially stop any deal
from proceeding.
On
Friday, that is precisely what happened when Chrystia Freeland,
Canada’s international trade minister, left the talks and went home to
Ottawa.
“It is evident to me — evident to Canada — that the European Union is incapable of reaching an agreement,” she told reporters.
Under
Belgium’s complicated federal system, Charles Michel, the country’s
prime minister, can give his approval to the deal only once all of the
country’s regions assent.
The
Wallonia region of Belgium is home to 3.5 million of the country’s 11.2
million people. Yet in single-handedly blocking a trade deal produced
over seven years between the European Union and Canada, it effectively
determined the terms of commerce applying for 500 million Europeans.
The
Walloons did not relish the idea of having to compete against imported
dairy products from Canada. Britain makes cars, medical devices and
sophisticated parts for airplanes. It is a global leader in financial
services. Somewhere in the European Union must surely lurk some other
Wallonia that will seize the opportunity to slap tariffs on British
goods even at the cost of broader economic interests.
That
was already apparent to anyone paying attention to European politics.
After Friday, London’s ministers will need spirits to maintain delusions
of an amicable divorce. (And if those spirits come from the other side
of the English Channel, they are likely to cost more.)
There
is now “a huge question over whether the common European trade policy
can survive,” said Hosuk Lee-Makiyama, the director of the European
Center for International Political Economy, a research organization
based in Brussels.
It
is now beyond argument that liberalized trade between wealthy countries
and developing countries exposes vulnerable workers to substantial
perils. When cheaper imports arrive from low-wage countries, people
making more expensive domestic goods can find themselves looking for new
jobs.
When
the North American Free Trade Agreement took effect in the mid-1990s,
enabling goods to flow across Canada, Mexico and the United States with
minimal impediments, factory workers in American industrial communities
became vulnerable to job losses as production flowed south. When China
entered the World Trade Organization in 2001, gaining the right to
export its wares around the globe, factory workers in every industrial
nation were rendered vulnerable.
Trade
economists will say with justification that the inclusion of China and
Mexico in the global trading system promoted economic growth, increased
consumer choice, lowered prices on a variety of goods and allowed
companies in wealthy countries to export more of their own wares.
Yet
if the gains of trade were broad, the pain befalling communities
directly in the path of China’s export juggernaut proved intense and
poorly cushioned by government policies. A voluminous body of economic
literature has in recent years brought home just how intense and
damaging the China shock has been in the United States alone.
The
distrust left after that shock, and anger over the broader workings of
trade, have transformed politics in many major economies. Rage over
factory closures in the American heartland propelled the rise of Donald
J. Trump. Such sentiments fueled Britain’s vote to leave the European
Union. Here is part of the explanation for the growth of right-wing
populist parties in France, Germany, Hungary and elsewhere.
Now, even a deal between Europe and Canada looks unachievable.
Trade
theory teaches that exchange across borders is ultimately beneficial to
both countries. Some groups will win and some will lose, but society as
a whole benefits, provided the terms of trade are fair and regulated by
legitimate governments operating transparently.
Here
is what is most extraordinary about the demise of the Canada-Europe
pact: It did not involve wealthy countries and poor countries with
different labor and environmental standards. It spanned two of the most
affluent, democratic and regulated societies on earth.
If
the people in these two regions cannot trust one another to deliver
policies that will make the unimpeded exchange of goods and services a
desirable deal for both, then the merits of trade are effectively
defunct in the political realm.
Most
of the resistance to this deal and the larger trans-Atlantic and
trans-Pacific agreements has centered not on the elimination of tariffs
but on the so-called investment provisions that standardize — or
harmonize, in the argot of trade negotiators — applicable rules.
To
voters in myriad countries increasingly suspicious of large
institutions — those of the European Union and those like the World
Trade Organization — this translates as an erosion of sovereignty. All
of these negotiations have been accompanied by accusations that they
will effectively elevate the interests of multinational corporations
above national laws.
But
the Europe-Canada deal did not succumb to such grandiose fears. Rather,
it was done in by old-school parochial interests trumping larger
concerns. The dairy industry in Wallonia was among those interests that
prevailed over European trade policy writ large.
Here was unmistakable proof that the politics of the moment were more local than ever.
And here is a moral that applies to more than this story alone.
Peter S. Goodman reported from London and James Kanter from Brussels. Ian Austen contributed reporting from Ottawa.