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An emotional Canadian Trade Minister Chrystia Freeland left the talks in Brussels, saying the EU was "not capable" of signing a trade agreement.
Belgium, the only country blocking accord, needed consent from the regional parliament of Wallonia.
The wide-ranging deal, seven years in the making, was to be signed next week.
Speaking outside the seat of the Walloon government, Ms Freeland told reporters: "It seems evident for me and for Canada that the European Union is not now capable of having an international accord even with a country that has values as European as Canada."
She added: "Canada is disappointed, but I think it is impossible."
It was unclear whether the EU would keep negotiating with Wallonia in coming days to solve the impasse.