Court may help EU sidestep lone-wolf resistance to trade deals

By Philip Blenkinsop

BRUSSELS (Reuters) - A court ruling early next year may help the European Union out of the kind of embarrassing situation it has just landed in, where a regional assembly in Belgium is blocking a major trade agreement between Canada and the 28 sovereign states of the EU.

The court case could set a legal precedent related to an EU trade pact with Singapore, which may make it easier for Brussels to conclude future deals without needing unanimous backing from every government and parliament. However, it can do little for the Canada agreement.

As it is, the government of Wallonia, with its seat in the ancient fortress city of Namur, has been likened to Asterix the Gaul defying the Romans, for resisting pressure to let Belgian federal leaders sign the EU's CETA deal with Canada on Thursday.

The CETA treaty concerns not just trade tariffs - a power long centralised with the EU in Brussels - but also access to services markets, particularly some public services, where national governments jealously guard their authority. That opens it to the wide-ranging veto power of EU states and regions.

But a legal opinion by the advocate general as early as December, followed by a ruling by the European Court of Justice next spring, should clarify the situation. It will determine whether a similar treaty with Singapore falls within the "exclusive competence" of the EU or is "mixed", needing approval in national and some regional parliaments.

Trade was once an area of abstruse inquiry for policy wonks. Now efforts to draft an ambitious trade deal with the United States known as TTIP have energised mass campaigns against that pact and CETA, notably by labour unions and environmentalists.

The European Commission, the EU executive, began talks with Ottawa seven years ago under a mandate from the Council of member states. It had wanted CETA to be approved by the Council as an EU-exclusive deal. But pressure from states, including Germany, which sought to appease anti-globalisation protesters, led the commission to accept it as "mixed".

Hoping to limit such problems in future and set a legal precedent, the Commission asked the European Court if the Singapore deal, agreed in 2014 but not yet ratified, is EU-exclusive or not.

Wallonia's Socialist-led parliament has stressed the mixed nature of the deal. It cited concern about its impact on public services in twice voting against CETA - exercising its powers under Belgium's highly devolved constitution to prevent the federal government from signing up.

Asked last week if it was a mistake to classify CETA as mixed, an irritated Commission President Jean-Claude Juncker made clear he thinks blame for that lies with hesitant EU governments.

The CETA debacle and the court ruling are being closely watched by countries the EU has concluded deals with - Vietnam - or is in free trade talks with, such as the United States and Japan, or those it aims to engage, such as Australia and New Zealand.

"We are all waiting anxiously for the outcome," said one diplomat of a would-be EU trade agreement partner.

The EU's Lisbon treaty of 2009 says the EU has exclusive competence in "common commercial policy", meaning trade, and sets out voting rules for member states' agreement. The Commission negotiates but needs the Council of states to agree.

If declared an EU exclusive competence, then trade deals like the Singapore agreement would not need to be approved by some 40 national and regional legislative bodies, although Belgium might still feel it had to listen to its regions.

Instead, in principle, a deal could be agreed by the 28 national governments in the European Council, either by a majority vote or, in some cases, by unanimity.

"Going mixed means you are going to kill a deal. There's no way you can get through every single parliament," said Hosuk Lee-Makiyama of the Brussels trade policy think-tank ECIPE.

The CETA fiasco threatens further the credibility of the EU, already battered by Britain's vote to leave the bloc and disputes over migrants. It also highlights difficulties that post-Brexit London may face in cutting a trade deal with the EU.

Gianni Pittella, the centre-left leader in the European Parliament, whose group includes the Socialists who run Wallonia, urged reforms to prevent EU policy being blocked.

Guy Verhofstadt, former Belgian premier and liberal leader in the EU parliament, called for an end to mixed deals: "The Council can decide that it is a purely European agreement ... That would be a step forward in European integration."

(Editing by Alastair Macdonald, Larry King)