Last November, Maclean's columnist Paul Wells wrote a piece on the Canada - EU Trade Agreement in which he expressed doubt about the ability to conclude the deal ("Everybody connected to the negotiations assures me there will be a deal. Every public sign I see makes me think there won’t."). I was skeptical about the prospect of years of negotiations falling apart and expected the political level meetings in November to wrap things up.  They didn't.  Last month, International Trade Minister Ed Fast and his European counterpart Karel de Gucht tried again.  Still no deal.

While Fast wants everyone to believe that momentum is building toward an agreement, it clearly is not. Over the last year, Canada's lead lawyer on the negotiations resigned, Canada's lead agricultural negotiator was re-assigned, and the EU's lead negotiator has added the EU - Vietnam agreement to his responsibilities with rumours that he will head the EU - Japan trade talks. Fast says he won't negotiate the agreement in the media and then proceeds to do exactly that by staking out positions on agriculture and investment. The same business groups that have been lobbying for the deal issue a public letter on the agreement that does little other than promise "future support."

All of this adds up to missed deadline after missed deadline. In 2010, officials said the deal would be completed in 2011.  In early 2011, they said it would be completed by the end of the year.  By late 2011, the deadline had moved to 2012.  Yet it is now 2013 and Fast admitted this week that there may not be an agreement this year. 

Canadian officials indicate that progress is being made, but the outstanding issues have remained unchanged for years. Some commentators claim the agreement is being held up by "nickel and dime politics", but leaving aside the nearly $2 billion cost to health care from the patent reforms alone (which is a lot of nickels), the reality seems to be that the hold up involves more than just political posturing.  Given that everyone knew the key issues going in, Canada seems to have hoped that the negotiations would follow a conventional compromise script: the EU would compromise on some key concerns (agriculture, investment) in return for Canadian compromises on issues such as pharmaceutical patents and agriculture.

But with the EU the stronger of the two parties, it doesn't see any urgency to compromise. In fact, with a growing number of EU negotiations (including talks with the U.S.), compromise with Canada may undermine its position in more economically important deals.  If CETA were the only deal on the table, it might be willing to find middle ground, but given the effect on talks with the U.S., Japan, India, and Vietnam, the Canadian deal just isn't important enough to harm its position elsewhere. That suggests the EU is presenting a take-or-it-leave-it deal to Canada - it wants to win on all its issues in order to make the agreement worthwhile.

If that is the case, that leaves three possibilities. The first is that Canada continues to hold out hope of a compromise. That approach has failed for several years but hope springs eternal, particularly when this is the only option that allows the government to present CETA as a "win." The second is that Canada simply caves to the EU demands.  This gives the government its trade deal, but with an election in 2015, caving on everything from agriculture to investor protection to pharmaceutical patents, is a risky political strategy as a CETA deal won't win many votes but could prove costly among certain vocal constituencies.

The third possibility is that CETA is replaced by TAFTA, the Transatlantic Free Trade Area. At the moment, TAFTA involves only the U.S. and EU, but there have been reports that Mexico wants in and Canada might follow suit. The argument for TAFTA would be that Canada is consolidating its negotiations into major agreements covering the Pacific (TPP) and Atlantic (TAFTA) to ensure that it is part of two potential large trading blocks.  The danger with this approach is that Canada becomes a bit player in both negotiations with even less leverage to promote Canadian interests. But if CETA isn't going anywhere, the switch would buy time and the hope that a restart would lead to a better deal.

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