India-Canada Ties: Waiting For Trudeau – Analysis

One is an advanced economy, the other an emerging one, and yet they share a striking complementarity of interests—from democracy and liberal values to a history of cordial relations. But two important economic agreements remain as chasms to be bridged.

By Rajiv Bhatia*

With a population of 35 million, Canada contributes 2.1% to the global GDP of $74 trillion. India, a nation of 1.3 billion, accounts for a little more: 2.8%. Therein lies vast scope for economic cooperation. A striking complementarity of needs and capabilities exists, linking an advanced economy with an emerging one. What is also of help are political bonds, democracy and liberal values, the Commonwealth connection, and a history of cordial relations.

Yet, despite a flurry of high-level visits in the past six months, there is no indication yet of dates for the much awaited visit of Prime Minister Justin Trudeau. It is not certain if the visit will even take place in 2017. The claim that coordinating the calendars of two busy prime ministers is difficult evokes some skepticism..

The big moment in India-Canada relations came with Prime Minister Modi’s visit in April 2015 that took him to Ottawa, Toronto and Vancouver. Stephen Harper, the then PM, travelled with Modi on the Air India aircraft; the two leaders seemed to share a special chemistry. In the national election, held a few months later, Harper lost and cleared the way for Trudeau. A relationship has been developing between the 66-year old Indian PM and the 45-year old Canadian head of state, but not yet to the level where Trudeau has found time to visit India.

This delay could partially be due to the considerable gap that negotiators need to bridge before they succeed in finalising drafts of two important agreements: the Bilateral Investment Promotion and Protection Agreement (BIPPA) and Comprehensive Economic Partnership Agreement (CEPA). Both sides would want the Trudeau visit to culminate in a substantive outcome. Modi’s decisive political triumph in the recent state elections should help convince the Canadians that they should move forward quickly to deepen cooperation with India, now set more than before on a stable path, helmed by a strong leader.

There are ticklish issues that need to be resolved creatively. Of the two draft agreements, BIPPA negotiations are easier to close. Investments have been flowing in both directions, and showing a steady increase. Indian companies are investing three times more in Canada than Canadian companies are in India. Canadian pension funds are expanding their footprint in a receptive Indian market. But Canadian investors are looking for greater certainty and predictability that a formal BIPPA alone could provide. Issues like Investor-State Dispute Settlement (ISDS) and Most-Favoured Nation (MFN) status need resolution. The Indian side views them as “peripheral issues”,[1] suggesting that negotiations should “focus on bringing in promotion and protection elements, which provide stability and predictability to investments in each other’s country.”[2]

Further, lack of labour mobility seems to be a major irritant for India. On the other hand, CEPA may prove to be a tougher nut to crack. The two sides have been engaged in negotiations since 2010. Canada has recently signed a trade agreement with the EU that has “progressive elements” on environment, labour, right of states to regulate health and safety areas and other such concerns. The Canadians have termed it “the gold standard”,[3] hoping that India will accept it. New Delhi may not be inclined to oblige. Besides, India is concerned about reforms in the Temporary Foreign Workers Programme (TWFP) that have become more stringent, thus adversely affecting services export from India.

The driver for finalising the CEPA is that bilateral trade has been developing very well. Valued at $8 billion in 2016, its trajectory fuels a shared belief that it could head quickly towards the target set: $15 billion. The two governments have apparently agreed to work towards a common timetable to develop an agreed draft.

Canada-India relations, of course, encompass many other significant sectors that found mention in the joint statement entitled “New Vigour – New Steps”, issued during Modi’s historic visit to Canada. It not only confirmed elevation of the relationship to “strategic partnership”, but also delineated an ambitious agenda covering civil-nuclear cooperation, partnerships for urban transportation and energy, education and skills development, agriculture, defence and security, science and technology, innovation and space cooperation as well as closer coordination on regional and global issues. This agenda, now two years old, needs review and updating, which only a prime ministerial visit can ensure.

At a time when officials, corporates and political leaders are engaged in strengthening ties, a larger contribution by people-to-people exchanges can make a big difference. Two suggestions merit consideration. First, the 1.2 million-strong Indian diaspora in Canada should leverage its close links with the ruling Liberal Party to urge a stronger relationship with India. Second, think tanks should develop new channels for regular dialogue, factoring in the global and regional perspectives that impact both nations.

A unique meeting last month between a Canadian team of officials, led by Ian Shugart, deputy minister of foreign affairs, and a select group of Gateway House experts, led by this author, demonstrated the enormous value of widening communications and conversations. This could open the way for a quantum jump to broaden mutual understanding and cooperation.

In order to strengthen the relationship further, there is a pressing need for people in both countries to change their mindsets and get to know each other better. Prem Budhwar, a distinguished former high commissioner to Canada, asserted, “If the two countries have to get closer and provide more flesh to this partnership, then mutual awareness must increase manifold.”[4]

About the author:
*Rajiv Bhatia
is Distinguished Fellow, Foreign Policy Studies Programme, Gateway House and a former ambassador. He served as Consul General in Toronto during 1994-98.

Source:
This feature was written for Gateway House: Indian Council on Global Relations.

References:
[1] Ministry of Commerce and Industry, Government of India, Press Information Bureau, India-Canada Trade and Investment Relations, 2017, <http://pib.nic.in/newsite/PrintRelease.aspx?relid=158835> accessed on March 15, 2017

[2] Ibid.

[3] Base, Nayanima, and Amiti, Sen, ‘Absence of FIPPA curbing investments from Canada’, Business Line, 5 March, 2017. <http://www.thehindubusinessline.com/economy/policy/absence-of-fippa-curbing-investments-from-canada/article9571540.ece>

[4] Budhwar, K. Prem, Canada-India: Partners in Progress, New Delhi: Vij Books India Pvt. Ltd./ICWA, 2016, p. 157


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Gateway House

Gateway House

Gateway House: Indian Council on Global Relations is a foreign policy think-tank established in 2009, to engage India’s leading corporations and individuals in debate and scholarship on India’s foreign policy and its role in global affairs.Gateway House’s studies programme will be at the heart of the institute’s scholarship, with original research by global and local scholars in Geo-economics, Geopolitics, Foreign Policy analysis, Bilateral relations, Democracy and nation-building, National security, ethnic conflict and terrorism, Science, technology and innovation, and Energy and Environment.

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