Update on India-Canada economic partnership

As we are now more than halfway through the year, we thought it would be apt to provide an update on the Comprehensive Economic Partnership Agreement (CEPA) negotiations between Canada and India. At the close of the fourth round of CEPA negotiations in February, the Indian and Canadian governments committed to stepping up their efforts to complete the CEPA in 2013. Then in May, the Canadian government announced its Global Commerce Strategy, which affirmed the priority of deepening of trade and investment ties through the ongoing negotiations with India.

Spotlight on Asia

At the June meeting of APEC trade ministers, Ed Fast, Canada’s minister of international trade and minister for the Asia-Pacific gateway, again affirmed the Canadian government’s focus on trade liberalization. The minister advocated expanding multilateral and bilateral trade agreements, and other action to reduce barriers to trade.

The CEPA is a cornerstone in the Canadian government’s broader trade policy strategy, which includes gaining admittance into the Trans-Pacific Partnership Free Trade Agreement and a renewed focus on Asia. For both Canada and India, the trade partnership is a natural evolution as India’s continued economic growth is dependent on access to resources of every variety, and Canada’s agricultural, energy, mineral, and technological resources are well-positioned to meet India’s expanding needs and fuel future growth.

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Energy resources

India has launched an ambitious infrastructure plan that may revolutionize the transportation network, but will also increase demand for energy resources. India imports 80% of the oil it consumes, while Canada has the world’s second-largest oil reserves with the output from oil sands alone forecast to grow from 1.6 million barrels a day (b/d) in 2011 to 5 million b/d by 2030. This explosion in production is accompanied by technological innovation and a desire to build pipelines from Alberta to the Pacific Coast, which should enable increased transport of Canadian oil to Asia.

Foreign direct investment has spurred the growth as the profitability of the oil sands has increased along with the demand for oil. The Canadian oil industry has a lot of room for expansion, and, as a place for investment, Canada may offer the highest levels of political and social stability of any major oil producer.

India and Canada are also partners in the civil nuclear energy market through the Agreement for Cooperation in Peaceful Uses of Nuclear Energy. The deal is mutually beneficial: India intends to establish 12 new reactors that will require 1,500 additional tonnes of uranium each year, while Saskatchewan is the world’s largest uranium producing region, with about 30% of annual global production. The agreement further promotes energy-related trade.

India’s demand for coal and minerals has so far been met by supplies from Africa and Australia. Yet, Canada has abundant thermal and metallurgical coal reserves and could be an important alternative supplier to India, particularly in view of price spikes and unreliable production in recent years. Beyond coal, the Canadian Shield is home to rich reserves of minerals, including gold, rare earths, zinc, nickel, lead and aluminium.

As the world’s most significant centre of mining finance, Canada also offers Indian mining companies capital, expertise, and an infrastructure of bankers, traders and geoscientists who understand this booming industry. The Toronto Stock Exchange and Venture Exchange together list 55% of all public mining companies; 90% of all mining equity financings were done on these exchanges in 2011, making up nearly 40% of global mining equity capital raised.

Focus on food

India’s middle class is growing, along with its economic and trade success, and is expected to comprise 600 million people by 2020. This will mean heightened public interest in food and demand for agricultural products. Canada is already India’s largest supplier of imported lentils and other pulses but there is room for further growth.

Saskatchewan is the world’s leading producer of potash, an essential component of industrial fertilizers, and has the capacity to meet the current global potash demand for centuries. Canada also has extensive experience with agricultural technologies, grain industries and dairy management. The Canadian-Indian trade relationship can be diversified and expanded.

Both the Indian and Canadian governments have recognized the potential and are taking action to help this economic partnership flourish. They have set a target of C$15 billion (US$14.8 billion) of two-way trade by 2015 (tripling the current level of about C$5 billion). While such a target may seem ambitious, the myriad synergistic opportunities between India and Canada could well allow the two countries to achieve or even beat this target.

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Raj Sahni is a partner and co-chair of the India Business Group at Bennett Jones, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Dubai and Abu Dhabi. The author is grateful to Matthijs van Gaalen for his assistance with this article.