Canada walked out on the free-trade talks with the EU - BBH

Research Team at BBH, notes that the Canada walked out on the free-trade talks with the EU when a small part of Belgium succeeded in throwing a wrench into the works at the last minute.  

Key Quotes

“The agreement required the unanimous consent of all EU countries.  Belgium could not commit without all five sub-federal governments and Wallonia objected.  Its ultimate objection was over the establishment of new courts to resolve disputes.  This is a controversial measure that is in the TPP and TTIP.

Wallonia's objection is understandably frustrating for Canada.  However, the walkout by the Canadian delegation, led by Trade Minister Freeland was melodramatic.  She is inexperienced in an inexperienced government.  The drama does not end the prospects for the deal and leaders are scrambling for a workaround.

Too much is being made of it.  Even the optimists pointed to a 12 bln euro (~$13 bln) boost to the EU GDP and about CAD12 bln (~$9 bln) to the Canadian economy.  It was all about symbols.  For the Trudeau government, is would have been a tangible success.  For the EU, a successful trade agreement would be the first with a G7 country, and show that despite its demise having been foretold, it was still forward and outward looking.

Many observers are viewing the breakdown in talks through the prism of Brexit.  They blame the EU and think the failure bodes ill for its future and negotiations with the UK.  This seems too seems exaggerated.  First, if the deal can be successfully concluded, does it say anything about the difficulty of Brexit negotiations, whenever they begin?  The failure of trade negotiations (remember Multilateral Agreement on Investment or the Free Trade Agreement for the Americas) is not the end of the world nor is it a telling sign of protectionism or incompetence.

The weight on the Canadian dollar (the weakest of the major currencies last week, falling nearly 1.5% to its lowest level since March) was largely homegrown.  After upgrading the risk assessment to balanced, Bank of Canada Governor admitted that there was a discussion about easing policy.  This surprised the market, and it was followed up with an unexpected contraction in August retail sales and a slightly softer CPI report.”