In what could be the newest trade deal on the block, India hopes to begin fresh talks for comprehensive trade and investment agreements with Canada.
There has been considerable progress on preliminary talks since Canadian Prime Minister Justin Trudeau won a third term in 2021, senior officials said.
While India's trade with Canada has remained relatively low, the North American country is looked at as a major base because goods can be shipped across the border to the US. This is due to Canada’s favourable trade arrangements with the US.
“Talks had stagnated since 2018 due to myriad reasons, including elections in India and our focus on a proposed trade pact with the US,” a commerce department official said. “But now, there is a new optimism on both sides to again begin talks since much of the trade potential is untapped.” he stressed.
The official added that the agreement with the US has been put on the backburner for now owing to Washington DC’s changed perception of its potential trade benefits.
India and Canada have been engaged on and off in negotiations of a proposed Comprehensive Economic Partnership Agreement (CEPA) or proposed free trade pact.
Meanwhile, both nations had also discussed a proposed Foreign Investment Promotion and Protection Agreement (FIPPA) to facilitate investments. Talks on FIPPA had earlier been stalled by New Delhi’s decision to conduct negotiations for all investment pacts under the framework of the model Bilateral Investment Treaty issued by the government in 2015.
Now, officials say a single deal combining both the elements of tariffs and investments can be secured if Canada is willing.
There are more than 400 Canadian companies with a presence in India such as train manufacturer Bombardier, insurance major Sunlife, and Canadian pension funds, which are looking to expand in India.
Room for growth
Bilateral trade with Canada has remained low and stood at $6.36 billion in 2019-20, before the pandemic. It slipped to $5.64 billion in 2020-21 and was at $4.32 billion for the April-November 2021 period. Of this, India’s exports stood at $2.35 billion, while imports were $1.97 billion.
India has maintained a positive trade balance with Canada for the past few years, mainly due to exports of pharmaceutical products ($226 million), organic chemicals ($170 million), diamonds & jewellery ($159 million), iron and steel articles ($144 million) and steel products such as flat-rolled steel and ferroalloys ($135 million).
“India’s export basket for Canada has always been widespread, leading us to believe that there exists captive demand in the Canadian market for Indian products cutting across tariff lines,” the official added.
Exports of heavy machinery ($128 million), textiles ($126 million) and plastics ($101 million) are also expected to do better under a pact with more focus on bilateral trade facilitation, the official pointed out.
Pulse of the deal
Among imports, shipments of pulses — red lentils (masur) — amounted to $320 million, or about 80 percent of India’s total red lentil imports.
Till 2016-17, the import of pulses had made up as much as a quarter of all imports from Canada. That share shrank in subsequent years after caps and higher duties by India following a supply glut in the domestic market.
However, incoming shipments had started to rise again before the pandemic disrupted supply chains. Owing to the potential of yet untapped trade, Canada is learned to have focussed on pulses as a major topic of trade discussions.
“The large agri-processing companies which dominate Canada’s agriculture exports have pushed the issue. They are well aware of the cyclical nature of pulses production in India, whereby a bumper harvest year is often followed by a year of relative shortage,” a senior official said.
Another agro-product – paper and wood pulp – imported from Canada was worth $221 million in 2021-22.
Products such as coal ($329.5 million), petroleum ($215 million), fertiliser ($163 million), iron and steel ($85 million) and heavy machinery ($82 million) made up other large imports from Canada.
Services trade
For India, the deal is also being looked at as a way to cement the already relatively easy provisions regarding the movement of professionals to Canada. Officials said the government wants Canada to reaffirm its commitment to provide easy visas to Indians wishing to work there, even as entry to the US becomes difficult.
According to the 2016 Canadian national census, 1.37 million Indo-Canadians made up 4 percent of the country’s total population. This number has been bolstered by waves of Indian migration to Canada in recent years. According to Statistics Canada, the country’s statistics agency, India became the highest source country of immigration to Canada in 2017.
Canada welcomed 96,660 permanent residents from India in the first 10 months of 2021. This was about 13 percent higher than the total number of Indians who made Canada their home in 2019.
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