OTTAWA — As Canada and other Western nations step up efforts to strengthen their political and economic ties in Asia, business groups are calling on the federal government to finally strike a trade deal with India.
The Business Council of Canada and the Canada-India Business Council released a report on Thursday that examines Canada’s current trade relationship with India and the economic benefits that would flow from establishing a trade agreement.
The report, which includes analysis from Ciuriak Consulting commissioned by the two councils, calls India “one of Canada’s greatest untapped business opportunities” and compares its economy to that of China two decades ago.
The analysis reveals that while trade with India has grown by an average of nearly 12% over two decades, Canada has lost market share over the years.
“The best way forward is a Comprehensive Economic Partnership Agreement (CEPA) with India,” the report said, estimating that such an agreement would increase bilateral trade by $8.8 billion a year and lead to an annual increase in the GDP by 0.25% by 2035.
Trade negotiations between Canada and India began in 2010 under the Conservative government of former Prime Minister Stephen Harper.
Twelve years later, no agreement has yet been reached.
After years of inaction to reach an agreement, Canada and India announced in early 2022 that they had resumed talks towards a comprehensive free trade agreement.
The announcement was made following a trip to India by International Trade Minister Mary Ng.
Ms Ng and her Indian counterpart, Minister Piyush Goyal, agreed to relaunch negotiations with the aim of securing a fast-track trade deal, which would hold in the meantime until progress is made on establishing of a comprehensive trade agreement.
The two ministers have held monthly calls since the visit for further discussions.
According to a senior government official familiar with the negotiations, a preliminary trade deal is expected to be concluded in the coming months.
The official, who spoke on condition of anonymity to share information not yet public, said the deal will avoid contentious trade-related issues that would require more time to negotiate.
The possibility of a deal comes as the federal government works to release its Indo-Pacific Strategy, which will aim to boost its political and economic reach in the region.
Vivek Dehejia, an associate professor of economics at Carleton University, says the term “Indo-Pacific” itself is an attempt to reinforce India’s prominence in the region, which was previously called “Asia- Peaceful”. This shift, he says, is driven by Western perceptions of China as a threat.
Regarding Canada’s interest in a trade deal, Dehejia says the fact that India is the fastest growing major economy makes it an attractive country from a trade perspective.
However, the economist, who studies globalization and India’s economic development, says trade between the two countries is relatively low compared to other countries. In 2021, India was Canada’s thirteenth largest trading partner.
“The elephant in the room is that the real engine of the Canada-India relationship, I don’t see it as the economy anymore, it’s really diaspora-driven,” Mr. Dehejia said.
India’s diaspora, which is concentrated in metropolitan areas like GTA, is made up of floating voters, he said, adding political incentive to strike a deal.
Regarding Canada’s prospects for striking a deal, Dehejia said there were positive signs that such a deal could indeed be on the horizon. While India has always been closed to trade negotiations, it has recently shown itself to be more open to these negotiations.
India and the UK are expected to strike a free trade agreement this fall and India has also restarted trade talks with the EU.
“I think (India) has realized that trade is just too important to put on the back burner,” he said.
Dehejia said Prime Minister Justin Trudeau also had an incentive to strike a deal and release it as a victory for his government.
In February 2018, Justin Trudeau traveled to India, where official business was overshadowed by traditional Indian clothing worn by his family and the invitation of Jaspal Atwal, a convicted attempted murderer, to two official events.
India’s pursuit of trade deals comes as many countries, including Canada, take stock of their stance on China amid growing human rights concerns.
Like the Chinese leader, Indian Prime Minister Narendra Modi has also been widely criticized for perpetuating human rights abuses, including in a Human Rights Watch report last year that accused his government of subjecting critics to surveillance. , politically motivated lawsuits, harassment, online trolling, taxation of raids, and shutting down activist groups.
India has also refused to condemn Russia’s invasion of Ukraine due to its longstanding diplomatic ties with Moscow and reliance on Russian weapons.
Mr. Dehejia warned that for the negotiations to succeed, it would be best to avoid mixing social policy with trade policy, noting that Canada’s criticisms of the Indian government have been poorly received in the past.
In 2020, Justin Trudeau made remarks in support of protesting Indian farmers, saying he was concerned about the protests in India and that Canada would always support farmers’ right to be heard. In response, the Indian government said the comments constituted interference in its affairs and could damage its relations with Canada.
“In some ways, the two governments have to try to compartmentalize the trade deal and use it to say, look, you know, Canada-India relations are finally getting better. We finally got this trade deal,” Dehejia said.