By Viktoria Dendrinou and Valentina Pop 

BRUSSELS -- A defiant Belgian region representing less than 1% of the European Union's population has managed so far to halt a trade deal with Canada supported by the rest of the bloc, raising questions about Europe's ability to successfully negotiate complex economic agreements.

Left-of-center politicians in Wallonia, the poorer, southern region of Belgium, reacted with defiance and glee as they continued to withhold their approval of the deal and put in doubt a summit next week between the Canadian prime minister and top EU officials.

The so-called Comprehensive Economic and Trade Agreement with Canada, or CETA, has been hanging by a thread in recent weeks after a revolt by Wallonia has been blocking the country's leadership from supporting the deal.

Paul Magnette, the Walloon minister-president, said there had been too little democratic debate over free trade and the negative impacts of globalization. He told Walloon lawmakers Friday he has nothing against Canada but wants to curb the power of corporations in future EU trade agreements with the U.S. and other countries.

He acknowledged that his region's parliament got to play this role "by chance" and said that many in Europe likely regretted granting it this power.

"But the moment we are given this power, it's logical we use it," he said. While EU trade deals don't usually have to be ratified by legislatures, the commission decided in July that the 38 national and regional parliaments across the bloc should get a say on CETA. The move came in response to criticism from many European capitals, including Berlin, that the step shouldn't be decided only in Brussels, amid opposition against what critics said were opaque deals the public had no say in.

After hours of talks with Mr. Magnette and EU officials on Friday, Canada's trade minister said reaching a deal was impossible.

"It is now evident to me, evident to Canada, that the EU is incapable of reaching an agreement -- even with a country with European values such as Canada, even with a country as nice and as patient as Canada," said Chrystia Freeland, minister of international trade.

EU Trade Chief Cecilia Malmstrom acknowledged talks with Wallonia had been halted but said she still hoped to sign the trade deal eventually.

At stake isn't only the deal with Canada but also the bloc's reputation as a credible trading partner and its ability to negotiate similar deals in the future, especially as talks with the U.S. on a trade and investment pact are faltering.

Still, to revive the pact, the EU must solve its Belgium problem.

Lawmakers in Wallonia insisted they are standing up for many Europeans to demand a say on free trade and globalization. They also have said they are worried the trade deal will have a negative impact on the region's beef and pork farmers.

Frederic Gillot, a lawmaker from the far-left Belgian Workers' Party, seemed to have dressed up for the combative occasion, sporting a green army-style jacket and a dark scarf wrapped around his neck.

"I don't think Wallonia is isolated, this is the same public opinion in many countries," said the 54-year-old trade unionist turned politician.

In 11th-hour talks, the European Commission, which negotiates trade deals on behalf of EU governments, tried to reassure the Walloon government. In a 10-page explanatory document reviewed by The Wall Street Journal, it said that CETA "will not lower our respective standards and regulations related to food safety, product safety, consumer protection, health, environment or labor protection."

But the peace offering was again rejected. Chief among remaining concerns is a controversial court system to settle investment disputes, which critics say would give greater powers to large multinationals to sue EU governments.

EU officials are at a loss about what further incentives they can offer Wallonia, given that much of the region's concerns have been addressed over the past few days, while remaining complaints seem to stem from a broader anti-globalization sentiment.

On Friday, only one Wallonian MP, Pierre-Yves Jeholet, spoke in favor of CETA. He was continually heckled by his fellow lawmakers throughout the debate.

Since the Wallonian rebellion began early this week, the Belgian federal government has tried to put the best face on things, even though they insisted they are powerless to override the regional body.

"We can practically say that 27 and a-half-countries want to move forward with the deal," CETA-supporting Belgian Foreign Minister Didier Reynders said earlier in the week.

After that comment, his Twitter account was hacked and a tweet appeared with a photo of former Canadian Prime Minister Stephen Harper captioned with a nasty epithet.

The tweet was removed shortly afterward, and Mr. Reynders tweeted a new photo featuring a red maple leaf and the message: Keep calm and love Canada.

European diplomats say they were caught by surprise with Wallonia's persistent defiance. In hindsight, said one, the signs were everywhere in Francophone Brussels, just north of Wallonia.

On dozens of traffic lights all around Brussels' European quarter protesters have affixed stickers so that whenever the signal turns red the words "Stop CETA" are visible.

"We should have seen it coming," said an EU diplomat. "No one thought it could develop into such a deadlock in the final mile. But it did."

--Paul Vieira in Ottawa contributed to this article.

Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com and Valentina Pop at valentina.pop@wsj.com

(END) Dow Jones Newswires

October 21, 2016 15:19 ET (19:19 GMT)