While India and Canada are members of the Commonwealth of Nations, robust democracies, and multi-cultural societies, their bilateral relations are generally perceived to have underperformed with differences overshadowing the convergences of interests between the two nations. The visit of Prime Minister (PM) Justine Trudeau to India in 2019 was criticised by many in Canada for its lack of political agenda. His comments on the farmers’ protests in India were strongly objected to by India. In addition to India’s concerns regarding counter-terrorism and security, progress in the development of bilateral trade and economic agreements have also been slow. Nonetheless, seven months into his third term in office, PM Trudeau and his government have sought to build greater coordination between G-20 economies and Indo-Pacific democracies. The appointment of High Commissioner Camerron Mackay in 2021, who is familiar with the Indo-Pacific region and trade negotiations, is indicative of the Canadian focus areas for the relations. As Canada works towards releasing its own Indo-Pacific strategy by the end of 2022, it expects to build close economic, security and defence ties with India. India, as the largest democracy in the region with a stable economic and political environment and a robust security outlook, is a natural partner for Canada. As the two nations work together to build synergies in the Indo-Pacific region, robust trade and economic relations remain important aspects of the bilateral ties.
India-Canada Economic Relations
The current geopolitical space provides India and Canada an opportune moment to build a relationship for the future especially as they face common socio-economic challenges as a result of the pandemic. Economic relations remain an important pillar in the development of this futuristic relationship. Trade has to move from the traditional stream of raw materials, textiles and minerals to include high technology transfers and higher end manufactured products.
Expanding trade and investment with large, fast-growing markets, including India, is a priority for the Government of Canada. In 2020, India became the world’s sixth-largest economy and is frequently labelled the world’s fastest-growing major economy, with an annual GDP growth regularly above 7 percent. Nonetheless, bilateral trade has remained low and stood at $6.36 billion in 2019-20. The pandemic has further reduced this figure to $5.64 billion in 2020-2021. The two governments are looking for avenues to deepen the trade and investment relationship.
At the fifth India-Canada Ministerial Dialogue on Trade and Investments (MDTI) held in New Delhi on March 11, 2022, Piyush Goel, Minister of Commerce and Industry, Consumer Affairs and Food, and Public Distribution and Textiles and his Canadian counterpart Mary Ng, Minister of International Trade, Export Promotion, Small Business and Economic Development announced that the two nations have decided to re-launch the Comprehensive Economic Partnership Agreement (CEPA) negotiations. India and Canada have been in talks to explore a CEPA since 2010. The last round of negotiations for the same was held in 2017. Both sides agreed to consider an interim agreement or Early Progress Trade Agreement (EPTA) that could be concluded early as a transitional step towards the CEPA.
The interim agreement would include “high level commitments in goods, services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, and dispute settlement, and may also cover any other areas mutually agreed upon. Some of the sectors that have been identified to help strengthen trade and commerce are agro-products, chemicals, footwear, textiles, automobiles, energy, electronics, minerals and metals, urban development, information technology, and tourism.” The two countries will also work to enhance cooperation in sectors, such as pharmaceuticals, rare earth minerals as well as in areas like tourism, urban infrastructure, renewable energy and mining. India has also noted Canada’s interest in recognising of traditional medicine including Ayurveda and other AYUSH systems. During the 5th MDTI meeting, the two sides also discussed the potential to strengthen cooperation in the public health sector given that India is a reliable partner of Canada for the supply of good quality and affordable pharmaceutical products. This gains prominence as there is a need to collaborate to continue to fight the Covid-19 virus and its mutants through vaccine development and production.
The Ministers also stressed on the need to encourage collaborations in the science & technology and innovation sectors. It was agreed during the 5th MDTI that there is significant potential to strengthen business collaborations to support sustainable economic recovery.
As in all other trade deals that are currently being negotiated by India, the trade pact with Canada is expected to include the subject of supply chains. The two Ministers acknowledged the significance of establishing resilient supply chains in critical sectors and exchanged views on collaboration in this area along with enhancing cooperation on data security and cyber safety. It is hoped that the partnership would also contribute to job creation in both nations. The two ministers also reaffirmed the commitment of their respective countries to the rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system embodied under the WTO. Bilaterally, Canada and India can also help reform an outmoded world order especially as the United States tries to adjust to China’s ascendency and Russian aggression. Multilaterally, Canada, a Group of Seven member with vast multilateral experience and depth, can share its knowledge and work with India as it prepares for its Group of Twenty (G20) presidency in 2023.
India and Canada have both recognised that a comprehensive trade agreement between the two countries would help to bolster trade, investment and further strengthen the bilateral relationship. The people-to-people linkages are well established, with a large population of Canadians of Indian origin who are engaged in different professions and are also politically active. Canada is also becoming the preferred destination for Indian students, with close to with nearly one-third of the international students coming from India. They not only contribute to the Canadian economy as students but also as workers later on.
With economic recovery as the priority for both countries, the lessons learnt from the pandemic show that the resumption of trade talks between India and Canada comes at an opportune moment. Canada has long identified India as a priority market and the finalisation of a trade agreement would go a long way in strengthening relations which have been overshadowed by other concerns in the relations such as terrorism etc. The trade talks also come at a time of geopolitical tensions as a result of Russia’s attack on Ukraine, which has impacted global economic recovery. There are opportunities for the two countries to build relationship for the future amidst the converging geopolitical shifts.
Cooperation in the digital arena, fintech, health infrastructure and development of new technologies and industrial innovations need to be explored for the future. Cooperation in the Indo-Pacific and in the digital realm can deliver quick results and lay the groundwork for deepening the relationship. For India, cooperation with Canada in sectors such as high technology, renewable energy, and sustainable infrastructure development would help it to achieve its developmental goals domestically and it can partner with Canada for projects in third countries as well. In this there is a huge scope for collaborations in the Indo-Pacific region, which is gaining prominence in Canada’s foreign policy thinking and within the India-Canada bilateral ties.
*Dr. Stuti Banerjee, Research Fellow, Indian Council of World Affairs.
Views expressed are personal.
Government of Canada, “Canada-India Comprehensive Economic Partnership Agreement negotiations - Background information,” https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/india-inde/fta-ale/background-contexte.aspx?lang=eng, Accessed on 14 March 2022.
Ministry of Commerce and Industry, “Joint Statement issued at conclusion of the 5th India-Canada Ministerial Dialogue on Trade & Investment,” PBI, 11 March 2022, https://pib.gov.in/PressReleasePage.aspx?PRID=1805112, Accessed on 16 March 2022.