BY: Amitendu Palit and Douglas Goold
Time is ripe to conclude FTA talks with Canada, which could reinvigorate others.
Prime Minister Narendra Modi is expected to impart new dynamism to India’s ongoing trade negotiations. Currently, trade negotiations with Europe are mostly stuck on tariffs for European cars in the Indian market, intellectual property, data security, access to government procurement markets and movement of Indian professionals to Europe. Increasing foreign equity participation to 49 per cent in insurance and defence equipment manufacturing is expected to encourage the EU to work faster on closing the deal. Greater clarity, however, will be required on India’s stance on the bilateral investment mechanism, particularly dispute settlement. The Asean services agreement, which was all ready to be signed last year and was held up due to the demand for clearer enunciation on the policy of FDI in retail, might need review given the BJP government’s defensive views on it.
In contrast, the deal with Canada should be the easiest to conclude. India and Canada have been negotiating a Comprehensive Economic Partnership Agreement (Cepa) since December 2011. The negotiations were to end by 2013. The political imperative is to have it completed before the next federal election in Canada in October 2015. The Canadian government is keen on finishing the deal early, with Trade Minister Ed Fast urging the Modi government to reinvigorate negotiations. Current India-Canada trade is a meagre US $5.3 billion. According to a 2010 joint study, an agreement could increase India’s GDP by $12 billion and its exports to Canada by 30 per cent. Similarly, Canada’s output should go up by at least $6 billion and its exports to India by 50 per cent. Securing the CEPA would be a historic achievement for both nations.
For Canada, it would be only the second agreement with an Asian country and the first with
a BRIC emerging economy. It would offer Canadian trade and investment preferential access in the vast South Asian region, where its business presence is growing but still limited. Alongside the Nafta, it would complete an arc of major world markets having trade agreements with Canada, with the 2013 deal with the EU connecting its businesses across the Atlantic and the Trans-Pacific Partnership doing the same across the Pacific.
India is particularly important to the Stephen Harper government. It is one of Canada’s 13 priority markets and its million-plus diaspora helped the Conservatives achieve their first majority government in 2011. A Cepa would not only stimulate bilateral trade and investment but also improve the relationship, which has been vibrant since the signing of a Nuclear Cooperation Agreement in 2010, in the wake of decades of tension over the nuclear issue.
For India, the Cepa would be the first …continued »