Securing a wide-ranging economic agreement with India

Letter to Global Affairs Canada regarding the restart of the Canada-India Trade Negotiations towards a Comprehensive Economic Partnership Agreement (CEPA).

The Business Council of Canada has a long history of engagement and support for the expansion of the Canada-India economic partnership. We were deeply encouraged by the recent announcement to restart negotiations toward a Comprehensive Economic Partnership Agreement (CEPA) with India, as a part of a renewed bilateral economic relationship.

While we have been supporters of initial CEPA and Foreign Investment Promotion and Protection Agreement (FIPA) negotiations, as well as more recent plans to negotiate an Early Progress Trade Agreement (EPTA), we believe Canada has an even greater opportunity today. Given significant changes in the global economy since initial negotiations commenced in 2011, we believe it makes sense to approach these negotiations with a renewed imagination for what is possible, and necessary, for this important economic partnership.

The world has fundamentally changed since we began negotiations over 15 years ago, and both Canada and India face many similar economic challenges brought on by uncertainty. We can build a new relationship that enhances our shared resiliency and prosperity.

Yet, as we look at the relationship today, and despite growing into one of the world’s largest economies, India remains an underdeveloped market for Canada. This is not to overlook the many Canadian companies successfully exporting, investing and conducting business in India. This relationship has many success stories. However, when reviewing data, Canada-India trade is more limited than it should be and is imbalanced.

Merchandise trade

In our 2022 report, Why India, analysis showed that Canada was under-trading in merchandise by a significant margin, and in relative terms, India is among the most under-traded jurisdictions for Canada in Asia, including in key areas such as agri-food and in manufactured goods. Concluding an agreement that addresses this gap by ensuring greater access, predictability and stability would help grow Canada’s exports to the market. Canada is fortunate to be able to learn best practices from other large agricultural exporting jurisdictions such as Australia, which also recently concluded its first agreement with India. Various Canadian agricultural exporters depend on the Indian market, and a CEPA must result in a more competitive and predictable agricultural trade relationship than Canada experiences today.

Canada was not historically a major exporter of energy to the region. However, with new export-oriented projects coming online, Canada is quickly becoming a major energy exporter to Asia. India has significant demand for secure and predictable energy. Energy trade could be a more important feature of the bilateral trade relationship and should be considered when modelling Canada’s economic potential. An agreement should seek to liberalize and enhance predictability for Canada’s various energy providers, including in conventional energy, nuclear, and renewables.

Services trade

Overall trade between Canada and India is primarily led by significant services trade, particularly in professional and financial services, education, and transportation. The financial services sector represents a significant and growing part of the Canada-India economic relationship. Companies are optimistic about opportunities to expand this area for cooperation further.

To support the continued success of this sector, Canada should consider replicating the financial services chapter in the recently negotiated Canada-Indonesia Comprehensive Economic Partnership Agreement. This chapter provides important commitments for market access, fair competition, national treatment for foreign players, regulatory transparency, efficiency and aligns with global best practices.

Further, applications by Canadian financial institutions for licenses, approvals, or authorizations are considered in a timely, transparent, and non-discriminatory manner. Measures such as those listed above will ensure Canadian companies are well positioned to compete in this exciting sector.

As India’s demand for education grows, Canada must consider how we can deliver more education on the ground in India and contributing to the growth of India’s domestic educational institutions through digital tools and other solutions.

Investment

The current Canada-India Economic partnership is largely defined by a significant and growing investment relationship. Canadian pension funds and other institutional investors have been tremendously successful in India in recent decades. The investment flow has been mutually beneficial, often contributing to world-leading infrastructure in critical areas essential for India’s rapid growth, including in transportation and energy. The scope of Canadian investment is broad and could grow much further, to the benefit of both countries.

Currently, Canadian investors operate in the market without the protection of an investment treaty or comprehensive trade agreement. To unlock the full potential of this investment relationship, it is essential that this new CEPA covers investment and does so in a way that provides a degree of protection and certainty to Canadian investors.

At the same time, India investment in Canada is also important and growing. Leading India technology companies have set up successful operations in Canada, providing well-paying jobs for Canadians. An agreement should encourage this flow to continue and grow. And as Canada works to develop major natural resource projects and export infrastructure, it would be beneficial to Canada to secure investment from leading companies in India, as we have from other key Asian partners. An agreement should help promote investments that support our shared objectives of bringing more safe and reliable energy to the region.

CEPA

 Canada should be prepared to move quicky and with a high level of ambition to secure a wide-ranging, economic agreement. If successful, Canada could be well-positioned to complete in one of the largest, most dynamic markets for the next several decades.

The Business Council of Canada is broadly supportive of this initiative and stands ready to work with governments and our private sector partners to help the Canada-India economic partnership reach its full potential.

Yours very truly,

Goldy Hyder