Not-So-Free Trade

Europe's Wallonia Debacle

  • Why it matters

    Why it matters

    The Walloon resistance to the CETA trade deal highlights the deterioration of relations within the European Union due to regional disputes.

  • Facts

    Facts

    • The signing ceremony for CETA was held on Sunday. The Belgian province of Wallonia had blocked the deal for weeks, but Belgian leaders on Thursday reached a deal that allowed it to be signed.
    • The E.U.’s 27 member states must still approve CETA and some diplomats seem skeptical that a final deal will actually be reached.
    • Wallonia is a largely socialist region of 3.6 million people, and politicians there wanted greater protection for the environment, labor market and farmers.
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CETA protesters brandish a banner featuring Wallonian Minister-President Paul Magnette. Photo: DPA

Nicolas Buissart has made a part-time job out of his hometown’s uglier side. Two or three times a week he takes tourists on an “urban safari” through Charleroi, a medium-size industrial town in the Walloon region of Belgium, showing them the industrial wasteland areas and alleyways.

The largest city in Wallonia, less than 40 miles south of Belgium’s capital, Brussels, is a depressing place.

As a child, Mr. Buissart lived through Charleroi’s decline, when it went from a bastion of the steel and coal industry to a wasteland with an unemployment rate of over 20 percent. “In the 1980s we used to listen to the evening news where they often reported one factory after the other being closed down,” recalls the 36-year-old artist.

The job losses continue. In September, the U.S. tractor manufacturer Caterpillar announced it was closing its plant and taking 2,200 jobs with it.

In Wallonia, they have gotten used to stories that end badly, something that is essential to know when trying to understand its Minister-President Paul Magnette. He’s showing not just Europe, but the whole world, what resistance is. And pride.

Ever since Mr. Magnette, who is also the mayor of Charleroi, became the figurehead of the opposition to the European-Canadian free-trade agreement (CETA), he has become a hero for globalization opponents around the world.

This week he made Belgium the scene of hectic crisis management, as diplomats scrambled to save the trade agreement with Canada, which has been seven years in the making. On Thursday, a signing ceremony was cancelled after Wallonia vetoed the agreement.

Belgian leaders later said they had finally reached a consensus, and a signing ceremony including Canada’s prime minister finally took place through on Sunday. Still, the parliaments in the E.U.’s 27 member states must still approve the deal, and some diplomats seem skeptical that a final deal will actually be reached.

With their protest, the Walloons were calling into question the whole of European trade policy. The president of the European Council, Donald Tusk, and the president of the European Parliament, Martin Schulz, conducted exploratory talks in varying constellations, meanwhile the Belgium government negotiated with the regions.

Ultimatums were followed by fresh offers, hope followed head-shaking. And as always, when things get serious, the main issue was money. The E.U. structural funds, with prospects of more funds for Wallonia, for example, helped in making a case. Some €681 million ($743 million) had already been budgeted up to 2020 for regional promotion anyhow.

The scene highlighted once again just what a delicate state Europe is in. The squabbling over CETA has done lasting harm to the image of the European Union. But how can it be that a small region has been able to delay progress for the entire bloc? How could Europeans still be bogged down in the details of an international agreement even though the partner country was literally on its way to sign the agreement?

“We didn't look after the losers of globalization.”

Senior E.U. Official

There is something special about Belgium that helped little Wallonia, with its 3.6 million inhabitants, gain so much power in Europe. Because the considerably-richer Flanders region had sought broader independence, the regions were given more power under pressure by the Flemish. Free trade agreements are the responsibility of the regions, in contrast to Germany, where the German states have no say in this matter. The Belgians have now belatedly discovered what kind of instrument has been put in their hands.

Mr. Magnette, the rebellious regional minister-president, understood well that CETA would help him immensely in domestic politics. For one thing, he can make a name for himself in party politics because the Belgian federal government, of which his party is not a member, now looks foolish. At the same time, he is presenting himself as a fighter for consumer and environmental protection, which would allegedly be undermined by CETA.

“It wasn’t clear in Magnette’s first three years as minister-president just what direction he was leading Wallonia,” says Dave Sinardet, professor of politics at the Vrije Universiteit Brussel.

But that has now changed.

Artist and tour guide Mr. Buissart sees Mr. Magnette’s fight against CETA as being “staged.” But the opposition goes down well with many Walloons.

“The no to the agreement is a victory for society,” says Fred Gillot, a parliamentarian from the left-wing Workers’ Party of Belgium (PTB). He lists groups in Wallonia that reject CETA: The farmers’ associations, unions and even the health insurance companies.

Mr. Magnette has realized that he can gain points in Wallonia with anti-globalization rhetoric. The region has never really had any way to counter the decline of the heavy industry. At the same time, the Walloon economy isn’t very export orientated. Barely ten percent of Belgian exports to Canada come from there. Powerful middle-sized companies are a rarity. There is only limited success in getting foreign investors to settle there.

Militant unions in the south of Belgium also frighten off investors. “Class warfare is raging in Wallonia,” says a German businessman. During a general strike at the beginning of October, a group of protesters forced their way into a building belonging to the employers’ organization, Agoria, in Charleroi and smashed computers.

Parliamentarian Mr. Gillot understands the workers’ anger and frustration at losing their jobs. As a steelworker, and later a unionist, he watched the heavy industry in Lüttich disappear. “Thirty years ago, we were 30,000 steelworkers, 20 years ago still 20,000, and now only 1,000 are left,” he says.

There is a great desire in Wallonia to somehow restrain globalization. Minister-president Magnette recommends to his fellow citizens that they buy more products from Wallonia, and he specifically says that companies should above all purchase more raw materials and preliminary products in the region. But he doesn’t have a prescription for sparking an economic upswing.

“There are many regions like Wallonia. Lothringen, for example, or the Midwest in the United States,” says the Belgium economist Paul De Grauwe, a Keynesian economist who teaches at the London School of Economics. “One would think that after the demise of heavy industry, something else would rise up, but investors preferred other places.”

Many have a fear of globalization, particularly in regions that never managed the structural change — as the political leadership in Brussels is now belatedly recognizing. “We didn’t look after the losers of globalization,” says a senior E.U. official.

When the president of the European Commission, Jean-Claude Juncker, gave in to the strong pressure from the member states this summer — not least of all from Germany and from the leader of the Social Democrats, Sigmar Gabriel — and conceded to CETA having to be approved by the parliaments of the member states, he should have guessed there would be opposition. The Walloon parliament had already passed a resolution against CETA in April and clearly announced its rejection.

The former E.U. Commissioner, Karel De Gucht, a Flemish liberal, who had negotiated CETA with the Canadians, considers Mr. Juncker’s concession to be “a historical mistake.” Mr. Juncker, on the other hand, considers himself to be the victim of the member states.

Europe’s disastrous handling of CETA could at least have some benefit. Namely the realization that free trade agreements will have to be negotiated differently in the future. “We can’t continue on as we have,” says a top-ranking diplomat of an important E.U. country in Brussels. “One possibility would be to cleanly separate those parts of the agreement that fall under the authority of the E.U. and those that fall under the authority of the member states.” Then the national and regional parliaments would only vote on the sections that the member states are responsible for, such as transport.

But these considerations are still in their infancy. The Walloon PTB parliamentarian Mr. Gillot is prepared to continue to take part in demonstrations in the meantime. He is satisfied with the partial victory. “The politicians have finally listened to the people,” he says.

 

This article origianlly appeared in Handelsblatt’s sister publication, business weekly WirtschaftsWoche. To contact the author: wirtschaft@wiwo.de

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