The Potential to Grow Canada-India Economic Linkages: Overlooked or Oversold? (2015)

SummaryFor decades, Canada has sought stronger trade and investment links with countries beyond traditional markets in the United States and Europe. Where does India fit into this desire for trade diversification? In this study, Someshwar Rao and Stephen Tapp investigate the potential to grow Canada's economic relationship with India through a trade agreement. Negotiations on a comprehensive economic partnership agreement (CEPA) have been underway for years, but progress has been slow. Recently, however, optimism has increased thanks to the election of a new majority government in India that is committed to economic reforms and the first visit to Canada by a sitting Indian prime minister in over 40 years.With several other trade negotiations underway, should Canada focus on finalizing a trade deal with India? The authors find that the bilateral economic links between Canada and India have grown quickly in recent decades, but remain weak. Looking ahead, Rao and Tapp identify several factors that suggest considerable untapped potential in India over the long term. For instance, India's economic growth outlook is among the most favourable in the world. Canada and India have strong social ties, aided by Canada's large Indian diaspora; they have a common language for business, similar legal frameworks and democratic political institutions. However, the authors caution that India's enormous economic promise may be unrealized if policy-makers fail to properly harness its strengths, which could ultimately become weaknesses.If a truly comprehensive CEPA is implemented, the Canadian sectors that would likely benefit the most are natural resource industries and providers of high-value services (such as finance and education). Consumers and businesses in both countries could enjoy more product variety and lower prices. Canadians would likely face adjustment challenges in some business services and in lower-wage, labour-intensive manufacturing.While both countries could reap big gains from freer trade, the most promising areas are also the most politically sensitive, which may make a good deal hard to achieve. Contentious issues include foreign direct investment, services and temporary labour mobility, where bilateral ties are least developed and barriers to international commerce are highest. Even without a wide-ranging CEPA, the relationship could be jump-started with a less ambitious package that could later be scaled up or down. Within this smaller deal, Canada might allow temporary migration of skilled Indian labour (subject to a cap) in exchange for better access to the Indian market for Canadian investment or services. And even without a trade deal, existing personal and business networks could be better leveraged.Finally, the authors stress that we need to keep expectations realistic, as improving our engagement with India will be a long-term endeavour. Nevertheless, they conclude that the potential rewards are sufficiently large that the upsides for Canada should not be overlooked, but nor should they be oversold.ResumeDepuis des decennies, le Canada cherche a renforcer ses liens commerciaux et d'investissement avec des pays autres que les Etats-Unis et l'Europe, qui sont ses marches traditionnels. Someshwar Rao et Stephen Tapp examinent dans cette etude les possibilites d'un accroissement des relations economiques entre le Canada et l'Inde au moyen d'un accord commercial. Les deux pays discutent deja depuis des annees d'un accord de partenariat economique global (APEG), mais jusqu'a maintenant, les negociations n'ont que peu progresse. Deux evenements, toutefois, ont recemment ravive l'espoir : l'election d'un gouvernement majoritaire en Inde qui s'est engage a realiser des reformes economiques, et la visite de son premier ministre au Canada.Deja engage dans des negociations commerciales avec plusieurs pays, le Canada devrait-il accorder la priorite a celles qu'il mene avec l'Inde ? …