Why it Should and What Both Sides Can Gain from Comprehensive Trade Talks

In this issue... For Canada, it makes sense to aim high in a deal with India. But the record of each country’s Asian initiatives suggests a lack of strategy and political will on both sides. NO. 138, JUNE 2011 TRADE AND INTERNATIONAL POLICY After years of an economic relationship that can be described fairly as cool, Canada and India have begun negotiating a Comprehensive Economic Partnership Agreement (CEPA). For both countries, the size of the economic relationship with the other is comparatively modest. Moreover, both also have long lists of uncompleted trade agreements begun with third countries. Accordingly, considerable commitment and enthusiasm will be required on both sides to overcome differences that were apparent in the 2010 report of a Joint Study Group of officials. To live up to the title of “comprehensive ” for an enlarged bilateral economic relationship, the CEPA negotiations will need vision and ambition. What is the significance of the talks for Canada? How do they fit into Canada’s overall trade strategy and economic relationships? This Backgrounder examines the status of the Canadian-Indian bilateral economic relationship, the basis for the talks, and the prospects for comprehensive liberalization of trade and investment between the two countries. Canada’s main interests in the CEPA are to secure transparency and non-discrimination for Canadians in the Indian economy, to take advantage of the efficiencies available from Indian information technology services providers, and to gain greater access to both the Indian and wider Asian markets using India as a platform for regional operations. For India, the strategic priority could be to gain greater access to the US market through Canada, given that a comprehensive US-India bilateral free trade agreement does not seem to be in the cards. A negotiation with Canada could be a second best route to this objective as a strategic signal of India’s potential importance to the North American economies. Many thorny issues potentially stand in the way to achieving the mutual benefits available. ABOUT THE INSTITUTE

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