India looks forward to starting fresh negotiations for comprehensive trade and investment agreements with Canada. Senior officials said that initial talks have made great progress since Canadian Prime Minister Justin Trudeau won a third term in 2021. Even though India’s trade with Canada has been relatively low, the North American country is seen as a major base, as goods can be sent across the border to the US. This is due to Canada’s favorable trade arrangement with the US.
“Negotiations have been stalled since 2018 for a myriad of reasons, including elections in India and a focus on a proposed trade deal with the US,” a Commerce Department official said. “But now, there is a new optimism on both sides to resume talks, as much of the trade potential remains untapped,” he emphasized.
The official said the deal with the US has been put on hold for the time being, as Washington DC has changed perceptions about its potential trade benefits.
India and Canada are engaged in negotiating a proposed Comprehensive Economic Partnership Agreement (CEPA) or a proposed free trade agreement. Meanwhile, the two countries also discussed the proposed Foreign Investment Promotion and Protection Agreement (FIPPA) to facilitate investment.
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Negotiations on FIPPA were earlier stalled by New Delhi’s decision in 2015 to negotiate all investment agreements under the framework of the Model Bilateral Investment Treaty issued by the government.
There are more than 400 Canadian companies in India, such as train maker Bombardier, insurance major Sunlife and Canadian Pension Fund, which are looking to expand in India.
Bilateral trade with Canada has been low and stood at $6.36 billion in 2019-20 before the pandemic. It fell to $5.64 billion in 2020-21 and $4.32 billion for the April-November 2021 period. Of this, India’s exports were $2.35 billion, while imports were $1.97 billion.
India has maintained a positive trade balance with Canada for the past few years, mainly in pharmaceutical products ($226 million), organic chemicals ($170 million), diamonds and jewelery ($159 million), iron and steel items. (144 million) and steel products such as flat-rolled steel and ferroalloys ($135 million).
“India’s export basket to Canada has always been broad, leading us to believe that there is captive demand in the Canadian market to cut tariff lines for Indian products,” the official said.
Exports of heavy machinery ($128 million), textiles ($126 million) and plastics ($101 million) are also expected to outperform under an agreement with a greater focus on facilitating bilateral trade, the official said.
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In imports, shipments of pulses – red lentils (lentils) amounted to $320 million or about 80 percent of India’s total red lentil imports. As of 2016-17, pulses imports accounted for a quarter of all imports from Canada. The stock shrank on the back of excess duty from the Indian side following an excess supply in the domestic market.
However, incoming shipments started to rise again before the pandemic disrupted supply chains. Due to the potential for as yet untapped trade, Canada has focused on pulses as a major topic of trade discussion.
A senior official said, “The big agro processing companies, which dominate Canada’s agricultural exports, have taken the issue forward. They are well aware of the cyclical nature of pulses production in India, which results in bumper crop years often leading to shortages. Comes after a year.”
Another agricultural product – paper and wood pulp – imported from Canada in 2021-22 was worth $221 million. Products such as coal ($329.5 million), petroleum ($215 million), fertilizers ($163 million), iron and steel ($85 million) and heavy machinery ($82 million) were the other major imports from Canada.
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