A European Union flag is waved outside the High Court in Central London, October 17, 2016. REUTERS/Stefan Wermuth(reuters_tickers)
By Philip Blenkinsop
LUXEMBOURG (Reuters) - EU governments failed on Tuesday to approve a free trade agreement with Canada, as continued opposition from French-speaking southern Belgium threatened the entire deal.
Almost all 28 EU governments, whose ministers were meeting in Luxembourg, now back the Comprehensive Economic and Trade Agreement (CETA), which would be the bloc's first trade accord with a G7 country.
Failure to strike a deal with such a like-minded country would call into question the EU's ability to forge others, and offer a pointer to the difficulties Britain might face in seeking a new trade relationship with the EU after it leaves.
Romania and Bulgaria were still demanding Canada allow visa-free travel for its citizens. But the biggest risk to finding unanimity was opposition from Belgium's Wallonia region.
"A formal agreement was not possible because Romania, Bulgaria and Belgium still have reservations," German Economy Minister Sigmar Gabriel told reporters after the meeting, adding these issues could be resolved in the coming days.
In Ottawa, Canadian Trade Minister Chrystia Freeland said she was cautiously optimistic.
"We appreciate European politics is complicated ... ultimately this is a European decision. I am both hopeful - and I also hope - that Europe and Europeans can come together to make this decision," she told reporters.
CETA's supporters say it will increase bilateral trade by 20 percent and boost the EU economy by 12 billion euros (£10.57 billion) per year and Canada's by C$12 billion ($9 billion).
Belgium's centre-right coalition government is in favour, but the country's particular structure means it cannot sign without backing from all five sub-federal administrations representing its regions and linguistic communities.
Belgian Foreign Minister Didier Reynders said he hoped to find a solution by the time EU leaders met in Brussels on Thursday and Friday.
However, Walloon premier Paul Magnette told a committee of the Walloon parliament that there were too many unresolved problems to be able to find a solution by the end of the week.
Negotiators sealed an accord in 2014 after five years of talks. Since then they have revised a contentious section on investment protection and drafted a binding declaration to show the agreement's limits.
The latter won over most doubters, including wavering Austria. But Belgium's French speakers continued to say 'Non!'.
The EU trade ministers had been due to approve CETA on Tuesday, enabling it to be signed at an EU-Canada summit attended by Canadian Prime Minister Justin Trudeau on Oct. 27.
EU trade commissioner Cecelia Malmstrom said EU and Belgian officials would see if Walloon concerns could be answered by the existing declaration or if it needed to be expanded. She ruled out reopening the treaty.
Gabriel said EU authorities had done well to insert binding guarantees, adding: "The agreement cannot fail".
However, Walloon parliament president Andre Antoine said the concerns went beyond what could be resolved with a declaration, with terms on agricultural exports, for example, unbalanced.
With support from EU governments and the European Parliament, CETA could come into force provisionally next year.
This would allow an immediate removal of import tariffs on 98 percent of goods while leaving out the most contentious aspect of the deal - a court to protect foreign companies' investments.
Critics say the court - which would come into being only after the pact is ratified by all national parliaments - would allow big business to dictate government policy by threatening legal action. They say the deal would start a 'race to the bottom' in labour and environmental standards.
The deal would be the first time Canada's provinces and municipal governments have committed to opening their markets for procurement to EU suppliers. It would also allow Canadian farmers to export much more pork, beef and wheat to Europe.
(Additional reporting by Robert-Jan Bartunek and Julia Fioretti in Brussels, Andrea Shalal in Berlin and David Ljunggren in Ottawa; Editing by Andrew Hay and John Stonestreet)