Canadian, Indian Leaders Look to Reinvigorate Economic Ties

22 February 2018

Canadian Prime Minister Justin Trudeau is in India this week for a series of talks with domestic leaders and business officials, including a highly anticipated meeting on Friday 23 February with Indian Prime Minister Narendra Modi that is slated to focus on trade, investment, and other shared priorities. 

The two countries already have deep ties, and launched trade negotiations towards a Comprehensive Economic Partnership Agreement (CEPA) over a decade ago, although efforts to bring this process to completion have faltered. 

Whether this week’s meetings will help bring added momentum to the 11-year-old initiative remains unclear; however, officials and analysts alike have noted that the two sides have significant potential to deepen their trading relationship, and already have strong cultural links between them.

“India is one of the fastest growing economies in the world, and offers significant opportunities to strengthen Canada’s middle class and bolster our shared prosperity. Our deep cultural and people-to-people ties foster an economic relationship that creates high quality jobs in both our countries,” said a statement from Trudeau’s office on 20 February, following the leader’s stop in Mumbai and the announcement of various new and lucrative commercial deals involving Indian businesses.

To date, ten rounds of CEPA negotiations have been held, with the last such meeting taking place in New Delhi in August 2017 – two years after the round prior. According to a brief summary published by the Canadian government afterward, the round addressed various aspects of goods and services trade, along with e-commerce, telecommunications, sanitary and phytosanitary (SPS) measures, and technical barriers to trade (TBT).

Among the sticking points has been how to address services liberalisation in the talks, reportedly on whether to adopt a positive or negative list approach, which deals with how to include or exclude services sectors from coverage. Media reports ahead of the visit suggested that India is now willing to back a combination of the two approaches.

Proponents say that a trade deal between the two economies could yield significant opportunities for growth, along with meeting other public policy priorities. In 2016, two-way merchandise trade between the two nations reached C$8 billion (US$6.3 billion), though services trade flows were about one-quarter of that level.

Canadian officials have suggested that increased agricultural exports to the South Asian nation is one major area of interest for Ottawa.

“Pulses represent more than C$1.1 billion of exports for Canada," said Canadian trade minister François-Philippe Champagne in comments to CBC News. “That’s very important for Canadian farmers in terms of stability and predictability.”

Other areas of interest for the North American nation include greater trade in renewable energy products and technology, along with natural resources and infrastructure development, according to a backgrounder published by the Canadian government. Indian officials, meanwhile, have expressed particular interest in boosting services trade flows, among other negotiating priorities.

The meetings between Canadian and Indian officials this week are also expected to touch on topics such as clean energy, climate, and gender, officials say. Both Trudeau and Modi have expressed interest in ramping up the use of renewable energy sources as part of their climate action work. On gender, Trudeau has spent part of this week participating in panels with Indian business representatives on women’s economic empowerment and leadership.

Both Trudeau and Modi will face general elections in 2019, which could affect the political momentum and timing for advancing both CEPA talks and a separate negotiating process on investment.

Building regional ties

Aside from the Canada-India discussions, Ottawa has also been looking at developing deeper trading relationships with other major partners in the region.

Along with being part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is due to be signed in Chile in early March, Canada has also been actively exploring with China the possibility of formally launching trade negotiations. (For more on the CPTPP, see related article, this edition)

Trudeau travelled to Beijing and Guangzhou last December to develop further with his Chinese counterparts their exploratory talks towards a future trade agreement, though plans to announce formal negotiations were ultimately scuttled. Some bilateral advances were reported at the time on addressing tensions involving select agricultural goods.

Meanwhile, India is a member of the 16-country Regional Comprehensive Economic Partnership (RCEP) coalition, which is aiming to bring its negotiations for a trade deal to a close this year.

New Delhi has also been in negotiations with the EU for a trade pact, though those efforts have struggled to advance in recent years. Canada, meanwhile, has a trade agreement provisionally in place with the European Union, with full application pending ratification in EU national, and in some cases regional, legislatures.

ICTSD reporting; “Canadian PM Justin Trudeau says he has a lot in common with Donald Trump at IIM-A townhall,” BUSINESS TODAY, 19 February 2018; “Trudeau's India mission mixes global business with local politics,” CBC NEWS, 17 February 2018; “Canada’s Trudeau talks trade in India on weeklong state visit,” NIKKEI ASIAN REVIEW 20 February 2018; “Justin Trudeau India visit: India-Canada trade has the potential to grow, says Canadian PM at IIM,” THE INDIAN EXPRESS, 19 February 2018; “For trade talks with Canada, India offers ‘Hybrid’ model of positive & negative lists,” INDIA TIMES, 19 February 2018; “Canada, China delay launch of trade talks as the Chinese cancel planned press conference,” FINANCIAL POST, 3 December 2017; “China and Canada Fail to Agree on Launching Free Trade Talks, BLOOMBERG NEWS, 4 December 2017; “China seeks to restart free trade talks with Canada,” FOREX LIVE, 2 February 2018. 

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