Business Councils Call on Ottawa to Secure Trade Agreement With India

Business Councils Call on Ottawa to Secure Trade Agreement With India
Prime Minister Justin Trudeau and Indian Prime Minister Narendra Modi shake hands prior to a bilateral meeting at the G7 summit in Schloss Elmau, Germany, on June 27, 2022. (Paul Chiasson/The Canadian Press)
Andrew Chen

Two business councils are urging the Canadian government to reach a trade agreement with India, as Western countries seek stronger political and economic ties with allies in the Asia-Pacific region.

The Business Council of Canada and the Canada India Business Council commissioned a report in which they recommend that the federal government forge stronger economic ties with India and develop a “comprehensive India strategy.”

“There is no path to achieving success in this massive and strategically important region without building strong and enduring economic ties with India—one of Canada’s last large, untapped trade opportunities,” said the report, published on Aug. 4.

The report included analysis from Ciuriak Consulting, which found that exports to India grew by an average of nearly 12 percent per year between 2001 and 2019, rising to US$3.9 billion from US$517 million. Over that same period, Canada’s imports from India rose at an annual pace of nearly 10 percent.

While Canada–India trade appears quite robust, the report said the Indian market is actually shifting away from North America and Europe, and is increasing trade with China, the United Arab Emirates, and member countries of the Association of Southeast Asian Nations, such as Indonesia, the Philippines, Singapore, and Vietnam.

“The best path forward is a comprehensive economic partnership agreement (CEPA) with India,” the report said.

CEPA, which the report describes as an ambitious bilateral trade deal, would increase Canada–India two-way trade by an estimated $8.8 billion a year, and bring about an annual GDP boost of 0.25 percent by 2035.

Trade negotiations between Canada and India began in 2010 under the Conservative government of former prime minister Stephen Harper, but the deal was later stalled and has been shelved for the past 12 years.

In early 2022, the two governments announced plans to resume talks toward a comprehensive free-trade deal.

This reanimation of the trade deal negotiation comes as Ottawa is looking to develop an Indo-Pacific strategy to strengthen its political and economic ties in the region.

The term “Indo-Pacific,“ previously referred to as ”Asia-Pacific,” marks a shift to bolster India’s prominence in the region, according to Vivek Dehejia, an associate professor of economics at Carleton University.

That shift, he says, is driven by the West’s perception of China as a threat.

However, the report noted that it “won’t come easy” for Canada to forge stronger ties with India, which has historically been closed off to trade negotiations.

“A free trade agreement alone won’t miraculously open up opportunities for Canadian businesses,” the report said. “Canadian policymakers and businesses will need to get out of their comfort zone when it comes to India, and work hard to leverage the full benefits of closer economic ties and market-opening opportunities. That will mean putting capital at risk, investing in local talent, expanding trade facilitation support, and more.”

“The elephant in the room is that the real driver of the relationship between Canada and India, I don’t see anymore as the economy, it really is diaspora-driven,” Dehejia told The Canadian Press.

The Indian diaspora in Canada is 1.6 million people, or roughly 3 percent of the Canadian population. In 2017, India overtook China as Canada’s largest source of landed immigrants.

The Indian diaspora, which is concentrated in metropolitan regions like the Greater Toronto Area, is made up of swing voters, Dehejia said, adding a political incentive for the Liberal government to reach a deal.

Dehejia also said there are some positive signs that India has recently become more open to trade negotiations, as it is expected to reach a free-trade agreement with the United Kingdom this fall. India is also reviving trade talks with the European Union.

“I think [India] realized that trade is just too important for them to put that on the back burner,” he said.

The Canadian Press contributed to this article.