In an unexpected turn of events, Canada has announced a temporary pause in its negotiations for a proposed trade agreement with India, occurring just three months after both countries expressed their intent to finalize an initial accord within the same year. This surprising delay follows years of intermittent discussions dating back to 2010 regarding a Comprehensive Economic Partnership Agreement between Canada and India. While the negotiations were formally resumed the previous year, India’s representative in Canada, Sanjay Kumar Verma, disclosed that Ottawa had requested this postponement “within the last month,” without specifying any reasons.
This announcement of a temporary suspension occurred shortly before Canadian Prime Minister Justin Trudeau’s ill-fated visit to India for the G20 summit.
In May, India and Canada publicly stated their intention to conclude an Early Progress Trade Agreement this year. This agreement aims to stimulate trade, promote additional investment, and establish dispute resolution mechanisms. Despite the absence of a clear explanation for the pause, Verma acknowledged Canada’s request, stating, “I’m uncertain about the reason, but there is a sincere request from the Canadian side, and we see no reason to decline.” trade deal. It’s noteworthy that in May of the same year, India’s Minister of Commerce and Industry, Piyush Goyal, visited Canada and engaged in discussions with his Canadian counterpart, Mary Ng. During these talks, both sides expressed optimism about the current state of the agreement, with Ng indicating that the two countries were nearing its finalization.
The recent pause in trade negotiations between Canada and India has prompted questions about the future of their bilateral relations, especially in light of the commitment both countries made earlier in the year to conclude an Early Progress Trade Agreement (EPTA). After years of negotiations and renewed efforts, the two nations now find themselves at a crossroads in their economic partnership. Therefore, it is crucial to examine the events leading up to this pause, the potential prospects ahead, and the strategic implications for both countries to make a case for reopening discussions and signing the Comprehensive Economic Partnership Agreement (CEPA).
Building a Case for CEPA
India and Canada initiated negotiations for a Comprehensive Economic Partnership Agreement (CEPA) in 2010. Despite the significant Indian diaspora in Canada, trade connections between the two nations remained stagnant. Imports from India accounted for less than 1% of Canada’s total imports, and Canada’s share in India’s imports barely exceeded 1% in 2015-16. In 2008, the India-Canada CEO Round Table proposed formalizing CEPA to enhance trade by eliminating tariffs and promoting economic collaboration.
Although negotiations began in 2010, differences in negotiating approaches and contentious issues halted the CEPA negotiations in 2017. However, in 2022, both countries agreed to relaunch negotiations and consider an EPTA as an initial step towards a comprehensive agreement. The rationale was to focus on areas of mutual agreement before proceeding to a full-fledged free trade agreement (FTA).
Within its Indo-Pacific Strategy, Canada has identified India as a vital partner, emphasizing their shared commitment to a rules-based international system. Both countries acknowledge the importance of addressing common concerns, such as trade relations with China. In this context, the proposed EPTA and CEPA could strengthen their strategic ties.
Economic Collaboration
In the ever-evolving landscape of international trade, several developed economies, including Australia, the United States, the United Kingdom, and the European Union, have actively engaged with India to forge lucrative trade agreements. These countries have recognized India’s vast market potential and the strategic necessity of building strong economic ties with the world’s largest democracy.
For a considerable time, India was seen as a protectionist and hesitant participant in free trade agreements. However, in recent years, India has actively negotiated free trade agreements with various nations, including the UAE and Australia.
Recent trade agreements exemplify the Indian government’s proactive approach to trade negotiations. A notable example is the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which took effect on May 1, 2022. This agreement is expected to significantly increase bilateral merchandise trade to a remarkable C$128.3 billion by 2026, up from C$88.2 billion in 2021. Notably, the UAE demonstrated its commitment to this collaboration by reducing import tariffs on 80% of its tariff lines, accounting for a substantial 90% of India’s exports to the UAE. In return, India eliminated duties on 64.6% of the UAE’s exports to India. Remarkably, this entire agreement was concluded in just 90 days, highlighting India’s willingness to expedite trade negotiations even in the face of challenges.
Another notable example is the Australia-India Economic Cooperation and Trade Agreement (ECTA), signed in April 2022. Although Australia has yet to ratify it, this agreement promises to more than double bilateral trade to C$56.8 billion by 2026, up from C$28.4 billion in 2021. These resources are essential to India’s export-oriented manufacturing industries, enhancing their growth and competitiveness on the global stage. Under the terms of the ECTA, Australia has pledged duty-free access to 96.4% of Indian exports to Australia, encompassing textiles, footwear, and pharmaceuticals. In return, India has committed to removing duties on 85% of tariff lines for Australian exports. This groundbreaking agreement, India’s first trade deal with a developed nation, illustrates the country’s readiness to form enduring economic partnerships with complementary markets.
As these global players race to secure deals with India, it becomes evident that Canada, too, must seize the opportunity and finalize a comprehensive economic partnership agreement (CEPA) with India. By doing so, Canada can unlock untapped trade potential and establish a strong foothold in one of the world’s most strategically significant regions.
In this dynamic and rapidly evolving global trade landscape, Canada must acknowledge the importance of these developments. By actively pursuing a CEPA with India, Canada can align itself with shifting trade dynamics and tap into the vast potential offered by India’s burgeoning market. The strategic implications of such a partnership are substantial, positioning Canada as a key player in one of the world’s most strategically vital regions.
Conclusion
While Canada and India have encountered challenges and delays in their trade negotiations primarily due to divergent views and domestic pressures, the potential advantages of a CEPA far outweigh these obstacles. A prosperous accord has the potential to greatly enhance bilateral trade and generate export prospects for both nations. As Canada seeks to diversify its trade beyond the U.S. and China, India emerges as a critical partner.
Therefore, it is in the best interests of both Ottawa and New Delhi to resume negotiations as soon as possible. The future of Canada-India trade relations appears promising, and the EPTA and CEPA could play a pivotal role in shaping this economic cooperation. Both nations have the opportunity to leverage their historical ties and mutual interests to create a prosperous future for their economies and people. However, this will require the Canadian leadership to take action against anti-India forces operating within its borders. Until then, it remains a relationship of missed opportunities
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