Good morning. Escalating tensions between Canada and India are jeopardizing Ottawa’s plans to find a much-needed ally in the arms of a fast-growing superpower. Today, we look at how that rift could leave Canada more vulnerable to global economic risks. But first:
In the news
Deals: Shareholder urges 7-Eleven owner to engage in talks with Couche-Tard over latest offer.
Power: ‘The age of electricity’ is poised to hit oil demand by the end of the decade.
Ridesharing: Meet the app going up against Uber with better wages for Canadian drivers.
Space: The next frontier in fashion.
Happening today
- In the U.S., investors are getting retail sales data that provide more proof the economy is on the right course.
- The ECB delivered its second consecutive interest-rate cut, trimming 25 basis points off its key rate.
- Earnings include Netflix, which stream after the close.
A Mumbai market in 2022.NIHARIKA KULKARNI/Reuters
In focus
How a rift with India leaves Canada vulnerable
When Canada unveiled its Indo-Pacific Strategy in the fall of 2022, India was front and centre. As Mark Rendell reports, the country was a “critical partner” in Canada’s plans to expand trade in the fast-growing region.
That was before relations with China went from bad to worse after the federal government announced a 100 per cent tariff on Chinese-made electric vehicles.
That was before Donald Trump, who may well occupy the White House in the new year, said he would introduce new and increasingly higher tariffs on ... everything.
And that was before Canadian Prime Minister Justin Trudeau accused Indian government officials of being connected to the death of Hardeep Singh Nijjar, a Canadian citizen and proponent of a separate Sikh state. As more accusations and diplomatic expulsions are exchanged this week between Ottawa and New Delhi, I spoke with Matthew Holmes, senior vice-president of policy and government relations at the Canadian Chamber of Commerce, about what comes next.
What concerns do you have with tensions escalating in India?
The first thing I’d say is we’re pretty shocked and concerned by the allegations of assassination and criminal activity on Canadian soil against Canadian nationals. In terms of what we’ve seen already in the last year: a pretty significant impact on trade with India. I would say we’re very underindexed in our trade with India. Particularly given the diaspora community and the strong Canadian community that has Indian descent, you would expect to see more trade.
Why don’t we, then? What happened between 2022 and now?
It was looking promising for a while with the development of that (Indo-Pacific strategy). India traditionally hasn’t been particularly open to free-trade deals, and it was looking like we were kind of turning the corner with them in 2022 before this came up. So over the last year, we’ve already seen like a billion dollars come out of the trade relationship, which was already kind of small compared to where, you know, another similar-size country, a democracy with a growing middle class would be.
So, casting forward, we would expect to see further damage to the trade relationship and kicking out the opportunity that is there to do more trade with them. It’ll only put us back and further delay developing that kind of beneficial economic relationship.
That billion dollars: Is that something that you can directly correlate with political tensions?
It’s hard to know. What I’d say is that in 2022 there had been a pretty significant growth in the numbers. We were seeing a trend line that was going up. And then in 2023, we saw a sudden decline. We also had a trade mission to India that was canceled, and there would have been likely some announcements in the queue which, obviously didn’t get made or were delayed.
So, you know, we don’t have a direct line but I would presume that the chill that happened had a direct impact on trade. The other thing is just visa processing capacity within India from the Canadian consular side seriously diminished because of the expulsion of some of our diplomatic corps there. And that just by its nature slows down travel between the two countries, including business travel.
With uncertainty over the U.S. presidential election and tariffs being thrown down around the world, how does Canada’s relationship with India change? Does it become more important?
I’d say it’s strategic and long-term. So if we have an Indo-Pacific strategy, it’s hard to do that without the “Indo” part. And they’re a major, major player within that region. They have a lot of market heft. They have a lot of market potential as they grow. They’re now the most populous country.
So there’s just a huge demand side, but they’re also a country that’s rapidly gentrifying and developing a middle class. So again, you know, what we saw 20 years ago from China is what we’re going to see from India over the next 20 years.
And that is to say, demand for things that we make?
Demand for things that we make. But they also have an incredible skill set. They have a lot of expertise in growing areas like cybersecurity and future-oriented sectors for Canada as well. And they’re our largest source of talent in terms of migrant workers at all skill sets – from the highly skilled to the temporary foreign workers. And they’re our largest source of international students.
So again, if you’re looking at the future orientation of a diversified Canadian economy – where we have a Commonwealth, shared history, we’re both democracies, we have a robust, complementary economic interest, and we’re not really competitors with each other – all of those signs point towards trying to deepen that trade relationship.
And how might India’s growth play out in geopolitical terms? In the Middle East, for example?
India’s not particularly aligned with Russia or China. Although they’re part of the BRICS, they really go their own way and they have a lot of sway, and they will be one of the important players within that region to show a different path to the other countries in that area.
The long-term strategic play, again: It makes sense for Canada to be cultivating and working on that trade relationship, although in no way can we diminish or look away from the seriousness of these allegations right now. But in the long-term, Canada really does need to be serious about deepening its trade with India.
This interview has been edited and condensed for clarity.
Charted
Yanks win! (At reselling jerseys.)
Hey, a win’s a win. And after a historic (and delightful) drought of World Series championships, the New York Yankees will take it. A spokesperson for cases.gg, which published a compilation of eBay stats yesterday, chalked up the sales to “a growing trend of integrating sports influence into fashion, fuelled by the celebrity status of sports stars and the endorsement by influential A-listers.” Sure! Maybe. But after $3-billion spent over 15 winless years, I wonder if there are other factors at play. I’m not making fun of the Yankees: I’m just a lowly Jays fan looking for solace wherever I can find it.
Morning markets
Global markets were mostly higher ahead of the European Central Bank’s monetary policy decision later this morning. Wall Street futures gained on upbeat corporate earnings, and TSX futures pointed higher.
Overseas, the pan-European STOXX 600 was up 0.69 per cent in morning trading. Britain’s FTSE 100 advanced 0.4 per cent, Germany’s DAX gained 0.78 per cent and France’s CAC 40 rose 1.19 per cent.
In Asia, Japan’s Nikkei closed 0.69 per cent lower, while Hong Kong’s Hang Seng gave back 1.02 per cent.
The Canadian dollar traded at 72.57 U.S. cents.