The EU Commission president is making the risky move in a bid to avoid the embarrassment heaped on the Commission when Belgium’s tiny regional parliament, Wallonia, threatened to scupper the entire EU-Canada free trade deal last year.
The EU nearly lost seven years of negotiations to secure the CETA (EU-Canada Comprehensive Economic and Trade Agreement) after the Wallonians threatened to veto the deal.
CETA was narrowly passed after amendments were made, but after the near miss Jean-Claude Juncker wants to ensure this power is removed from the regional governments in future.
The EU Commission President aims to restore the EU’s credibility on the global stage as being free to strike trade deals unhampered by pesky regional assemblies.
In his state of the union address on he set out a new trade deal model which national assemblies cannot block.
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But the price to secure this new deal is to scrap investment clauses, considered necessary for emerging economies such as India.
Crafting new trade deals without investment clauses would allow the European Parliament and member countries represented yet the council in Brussels to exclusively ratify deals – removing regional vetoing powers.
But there are fears he may have gone too far by removing investment protection for EU companies and business in foreign countries.
Mr Juncker mooted the responsibility for handling investment disputes by taken care of by a global investment court – which does not yet exist and the framework being discussed by the EU is some 10 years away from fruition.
And when the idea was presented to 60 leading trading nations at the UN Commission on International Trade Law, the US rejected the plan.
Maria Demertzis, deputy director of the Bruegel think tank, told Politico: “While it’s good to see Juncker supporting multilateralism, you have to be realistic.
“Any multilateral system for dispute resolution requires the big guys to be on board. And it’s quite difficult for me to imagine the US under Donald Trump supporting this concept.”
And how the EU treats certain countries could backfire on it, as deals with Canada and Australia possibly viewed as setting a precedent which would not be replicated in emerging countries such as India and Mexico, considered far riskier.
While seen as a snub, it could also lead to countries reverting back to the old-system of bi-lateral agreements between members states and other countries, something the EU is trying to avoid.
Kai Mykkänen, Finland’s trade minister, told Politico: “Of course there are negative consequences to splitting trade deals … but this is a totally unbalanced situation if investment security questions hijack or make it impossible to get agreements in force, which has been the risk.”
He added it would take “at least a decade” to set up the investment court.
The Commission declined to give details on Mr Juncker’s plans.