Canada's Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng speaks at a Lunar New Year celebration in Ottawa on January 31.BLAIR GABLE/Reuters
It’s time to get the Canada-India free trade agreement over the finish line.
Business leaders in both countries have been pushing for a deal for almost two decades. So, after more than 13 years of on-and-off free trade talks, it’s clear that a firm deadline is needed to get the job done.
After all, what’s being discussed is an “early progress trade agreement” – not a comprehensive free trade deal. The goal is to secure “high-level commitments” on a small number of issues to lay the foundation for predictable market access so businesses can invest more capital with confidence. It should be a relatively easy task for two democratic countries that claim to have complementary economies and minimal conflicts.
Here’s the uncomfortable truth. Canada needs India more than ever – both as a strategic ally and a trading partner in the Indo-Pacific region. Setting the backdrop for Indian Commerce and Industry Minister Piyush Goyal’s visit to Canada this week was an escalating row between Ottawa and Beijing.
Allegations of Chinese government interference in Canada’s internal affairs, including a plot to intimidate Conservative MP Michael Chong and his overseas relatives, along with tit-for-tat diplomatic expulsions, are all increasing the urgency for Canada to diversify trade away from China, its second-largest trading partner.
Not only have these geopolitical realities weakened Canada’s bargaining position with India, the South Asian country has a lot more leverage of its own these days. India recently signed trade deals with Australia and the United Arab Emirates, and it is also aiming to increase bilateral trade with the United States and Britain.
Canada-India bilateral trade is worth roughly $15-billion. It’s a paltry amount given the total amount of trade conducted by each country.
India’s overall trade stands at US$1.2-trillion and is on track to hit US$5-trillion over the coming years, easily eclipsing Canada’s $1.5-trillion.
Now consider this: When it comes to trade in goods alone, Canadian exports to China were worth $28.6-billion in 2021, while Chinese imports were worth $57.2-billion, according to federal data. India, meanwhile, didn’t even make our list of top 10 trading partners that year.
To her credit, Minister of International Trade Mary Ng acknowledged the current level of Canada-India trade is “just not good enough.” It was a sentiment echoed by her Indian counterpart.
“I generally get the sense that this is a relationship which is, despite so many years, one of lost opportunities,” Mr. Goyal said Wednesday. “And what Minister Ng and I are trying to do is get down to the drawing board, script the future different from the past.”
While there certainly appears to be a genuine camaraderie between Ms. Ng and Mr. Goyal, neither has provided a fixed date for delivering a deal. Their joint statement hints of a finalized memorandum of understanding later this year, but nothing is set in stone.
“We hope we can do some quick outcomes without putting a deadline to it. Speed will be of the essence,” said Mr. Goyal.
Let’s hope he is right.
There are plenty of business opportunities in areas of mutual interest such as clean technologies, renewable energy and natural resources. India, for instance, is planning to auction off lithium reserves found in Jammu and Kashmir, a region in the country’s north.
“We have allowed 100-per-cent foreign direct investment in mining in India,” said Mr. Goyal. “So, we would very much welcome Canadian mining companies.”
During his trip to Toronto, Mr. Goyal also invited Royal Bank of Canada to hold a board meeting in India and explore financial-services possibilities including fintech.
More than 600 Canadian companies are already working in India, including major pension funds. But there is no denying that businesses require regulatory certainty before ramping up investments.
An early progress trade agreement would offer a “measure of insurance” on issues such as tariffs and dispute resolution in a geopolitical environment “rocked with risk,” said Goldy Hyder, president and chief executive officer of the Business Council of Canada.
“If you can’t get an early progress trade agreement done, you’re a long ways from a full-blown trade agreement,” Mr. Hyder said.
“If we can’t demonstrate that democracies like Canada and India can find a path forward … you’re actually emboldening the very people that India and Canada are competing against,” he later added.
Similarly, there are about 80 Indian headquartered companies operating in Canada looking for added certainty about the rules.
“From an industry perspective, it’s a question of a level playing field,” said Subhrakant Panda, president of the Federation of Indian Chambers of Commerce and Industry.
“There are certain sectors in particular that can benefit from a free-trade agreement such as leather, footwear, apparels et cetera, where India sort of suffers from a disadvantage vis-a-vis other nations that export into Canada.”
Hmm, it seems India’s largest business organization also has China on the brain.
For his part, Mr. Goyal played down suggestions that China was influencing India’s trade talks with Canada, arguing the bilateral trading relationship was being pursued on its own merits. Still, he didn’t miss an opportunity to be cheeky.
“We are just perfect collaborators,” Mr. Goyal said. “So, the C-word here is complementarity and collaboration.”
Great. Let’s get it done.