Growing the Canada-India Partnership

On expanding the economic relationship with India
Canada urged to hike trade with India  

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“We have a lot of catching up to do just to get on India’s radar screen,” said the Canadian Chamber of Commerce president Nancy Hughes Anthony. “It’s never too late, but obviously the longer you stay on the outside, the steeper the climb.”

The 41-page report released by Canada's largest business group is sounding the alarm over this country's miserable trade and investment performance with a major emerging economic superpower -- India.

The Chamber detailed the poor record of firms and unfocused efforts by Canadian governments that have left Canada outside looking in on the tremendous potential of the world’s second most populous country.

"It's never too late, but obviously the longer you stay on the outside, the steeper the climb."

The report makes a series of recommendations for expanding the economic relationship with India, which has one of the world's fastest expanding economies with annual growth rates ranging from 7 to 9 per cent.

Canada last year exported a mere $1.7-billion in goods to India, the majority in primary commodities such as newsprint, metals and wheat. That represents only 0.5 per cent of Canadian exports and less than a quarter of what Australia ships to India.  

Trade is penetrating into India. In the past five years, the country's imports have grown an average of 22 per cent annually and trade in the services sector has grown even faster. But Canadian firms have yet to fully exploit the situation.

This is partly a hangover from cool diplomatic relations between the two countries over India's use of Candu reactors to spark its nuclear weapons program, and continued nuclear tests. And it's partly a reflection of the long-standing practice of Canadian businesses to look primarily to the U.S. for trade and investment.

The Chamber’s report echoed many recommendations made in January by the Asia Pacific Trade Council appointed by the B.C. government.

“The reports are complementary. We hope they will together be a blueprint for future action in B.C.,” said Arun K. Garg, chairman of the APTC’s market advisory group on India, which produced the B.C. report.  

Trade is penetrating into India. In the past five years, the country's imports have grown an average of 22 per cent annually and trade in the services sector has grown even faster. But Canadian firms have yet to fully exploit the situation.

This is partly a hangover from cool diplomatic relations between the two countries over India's use of Candu reactors to spark its nuclear weapons program, and continued nuclear tests. And it's partly a reflection of the long-standing practice of Canadian businesses to look primarily to the U.S. for trade and investment.

The Canadian Chamber report homed in on a number of opportunities that Canadian firms are well positioned to exploit, including India’s massive program to modernize its transportation, power and telecommunications infrastructure, estimated to be worth about $140 billion over the next decade. It also highlighted India’s need for foreign expertise in engineering and services and cited the presence of Canadian firms such Sun Life, Scotiabank, and SNC Lavalin, as well as Bombardier.  

The report praises recent trade missions to India by the federal government, Ontario and Quebec as steps in the right direction, but notes there needs to be greater co-ordination, focus and follow-through. It quotes an Indian business contact as calling Canadians "suitcase investors" who "come, look around and leave."

Among the recommendations:

- The federal government should move quickly to complete a Foreign Investment Protection and Promotion Agreement with India, and also move to negotiate an enhanced trade, investment or services deal.

- Ottawa should appoint a senior level "Indian champion" to oversee the relationship;

- Hiring more immigration officers to fast-track business class visas for temporary visitors, reducing wait times that can last up to five years;

- Greater co-ordination among federal and provincial governments and business in their efforts to improve trade and investment and a common "Canada brand" look during missions to India.

The report cautions there are risks to investing in India, including some discriminatory tax regulations and corruption. But even firms that don't want to jump in should have an India strategy, Hughes Anthony said.

"Suppliers from these lower cost countries like India are now moving into the U.S. market and threatening some of the long established markets Canadian industries have held," she explained.

"So the idea you're going to hang on forever and a day to your traditional markets is a bit old-fashioned because you always have to have an eye on the competition."

Arun pointed out that while the Canadian Chamber report focused mostly on trade to India by companies and industries in Canada’s eastern provinces, B.C. also has niche exports with strong potential for that market.

He said: “India is going through massive, massive development and it has very big needs in terms of infrastructure. This is an area where B.C. doesn’t have a strong industry base in the form of large corporations. We might not have a strong base in building big dams and bridges compared to companies out East, but we do have a background in environmental issues, which is a big part of what India faces in waste management.”

Likewise, while the Canadian Chamber report focused on banking and insurance business, much of which, again, is based in Toronto and Montreal, the B.C. report touted post-secondary education as a key area, both in the form of students from India coming to B.C. and vice versa, said Arun.

The Canadian Chamber report also called on the federal government to move quickly on completing a Foreign Investment Protection and Promotion Agreement (FIPA) with India, as well as moving to negotiate an enhanced trade, investment or services deal.

From B.C., however, there is less emphasis on the importance of signing a FIPA.

“A FIPA is neither a necessary or sufficient condition to signing a free trade agreement,” said Nizar Assanie, a vice-president at Vancouver-based IE Market Research Corp who also sits on the board of the Canada-India Business Council’s B.C. chapter. “FIPA is such a mantra in international investment circles. It’s already inherent. I can’t think of any developing country of India’s stature where foreign investors’ assets have been seized. FIPA is so 1970s-ish, a time when capital was becoming global and multinationals were moving from developed to developing countries so protections were sought. We are now 30 years down the road.”

The B.C. report pointed out that some of the largest investors in India, such as the United States, Japan and Singapore, do not have a FIPA with India. “Even if a FIPA were concluded in the near future, it is not clear whether the absence of a FIPA is a significant deterrent for investors in the Indian market.”

[Source: Agencies]

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