Expansion of wood exports latest step in bilateral trade

By Raj Sahni, Bennett Jones LLP
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After the recent completion of the eighth round of negotiations toward a Comprehensive Economic Partnership Agreement (CEPA) between India and Canada, the Canadian government announced in July the immediate opening of the Indian market to Canadian eastern spruce lumber. The value of Canadian wood product exports to India has more than tripled in the past five years, to C$9.6 million (US$9.2 million) in 2012.

According to data from Natural Resources Canada, Canada is the world’s second largest exporter of wood products, with approximately C$10 billion exported annually. India is regarded as an important market for Canada and the addition of eastern Canadian spruce to the trade mix is an important step in overall trade discussions between the two countries.

Tripling two-way trade

Two-way trade between India and Canada has remained relatively stable at approximately C$5 billion for the past several years, but both governments have set a target of C$15 billion by the end of 2015, with much focus on the CEPA as a platform for increasing two-way trade. Exploratory discussions regarding the India-Canada CEPA began in January 2009 and negotiations formally commenced in November 2010.

Raj Sahni
Raj Sahni

Both countries had set a deadline to finalize the agreement by the end of 2013 but it appears unlikely that target will be met. Nonetheless, the Canadian government has reiterated the importance of its partnership with India and progress has been made on several key fronts on the India-Canada trade and investment agenda. For example, this April marked an important step towards full implementation of the India-Canada Nuclear Cooperation Agreement as India’s Department of Atomic Energy and the Canadian Nuclear Safety Commission announced that they had finalized arrangements allowing for the export of nuclear equipment and fuel from Canada to India for energy use. This opened a new chapter in the relationship between the two countries in this area, which had previously soured when India used Canadian supplied nuclear technology to test-detonate a nuclear device in 1974.

Focus on energy and resources

Both countries recognized that the nuclear energy agenda needed to be sorted out in order to advance trade between India and Canada, not only for historical reasons, but also to help both countries prosper economically. To meet its burgeoning growth, and resulting energy needs, India has announced plans to establish 12 new nuclear power reactors by 2021. It has been estimated that such an increase in nuclear energy capacity will require some 1,500 additional tonnes of uranium each year. Canada is the world’s second-largest producer of uranium (after Kazakhstan) and produces over 10,000 tonnes of uranium per year.

The broader energy agenda also offers opportunities for the two countries to prosper by working together. India imports approximately 80% of the oil it consumes, while Canada has the world’s second-largest oil reserves, with output from oil sands alone forecast to grow from 1.8 million barrels a day in 2012 to 5.2 million barrels a day by 2030. This explosion in production is accompanied by technological innovation and a desire to build pipelines from Alberta to the eastern (Atlantic) and western (Pacific) coasts, which should enable increased transport of Canadian oil to Asia.

With continuing political uncertainty in the Middle East, Canada is quickly emerging as an important oil producer with the highest levels of political and social stability.

The food and agriculture sectors are other important areas where partnership between the two countries is important for their mutual success. India’s middle class is growing, both in number and economic prosperity, and is expected to comprise 600 million people by 2020. This will mean heightened demand for food and agricultural products. Canada is already India’s largest supplier of imported lentils and other pulses but there is room for further growth, including in the fertilizer area. Canada is one of the world’s leading producers of potash, an essential component of industrial fertilizers, and has the capacity to meet the current global potash demand for centuries.

Another important sector is that of “human capital”. With a relatively small population (about 33 million) compared to its vast geographic size, Canada is in perpetual need of skilled workers, particularly in the high technology and energy sectors where Canada continues to see rapid growth. Canadian universities have recognized this need and have been actively courting talented Indian students, including a delegation to India at the end of August, in which nine major Canadian universities participated.

As CEPA negotiations advance toward finalization of the agreement, it is encouraging to note the progress that has been made on many fronts in the India-Canada partnership.

Raj Sahni is a partner and chair of the India Business Group at Bennett Jones LLP, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Dubai, Abu Dhabi and Doha, and representative offices in Washington DC and Beijing.

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