The Canadian government’s recently released Global Markets Action Plan includes India as a priority market in the category of “emerging markets with the best potential for broad Canadian commercial interests”.
India and Canada had expected to finalize their Comprehensive Economic Partnership Agreement (CEPA) by the end of 2013. While that target proved to be overly ambitious, negotiations are ongoing and significant milestones have been met in fostering the countries’ trade relationship.
Two-way trade between Canada and India has remained at a relatively steady C$5 billion (US$4.5 billion) over the past several years but a target of tripling this number to C$15 billion annually by the end of 2015 was set during the CEPA negotiations. While that target may also prove to be ambitious, the inclusion of India as a priority market in Canada’s Global Markets Action Plan is an indicator of the importance that Canada continues to place on expanding its trade relationship with India.
Perhaps most significant step in revitalizing the trade relationship between the two countries has been in the area of nuclear trade. India and Canada have had an Agreement for Cooperation in Peaceful Uses of Nuclear Energy for three years but nuclear trade had been held up while the countries worked through final arrangements, including monitoring by the International Atomic Energy Agency to ensure non-proliferation of Canadian nuclear fuel beyond peaceful uses.
Last April marked an important milestone as these arrangements were finally concluded, enabling the export of nuclear equipment and fuel from Canada to help meet India’s energy needs. This milestone was important for historical reasons, perhaps even more so than economic reasons, since India-Canada relations had previously suffered for several decades after India tested its first nuclear bomb in 1976 using plutonium from a Canadian test reactor.
This year has already seen another important milestone with the first shipment of Canadian oil to India by Husky Energy, which announced the sale of 1 million barrels to Indian Oil late last year. While not a large shipment in comparison to India’s overall oil imports, it marks an important next step in an area poised for natural growth between the two countries.
India imports 80% of the oil it consumes, while Canada’s oil reserves (including oil sands) are among the world’s largest, with output estimated to reach more than 6 million barrels per day by 2025. Sharp growth in production is accompanied by technological innovation and a desire to build pipelines from Alberta (home of Canada’s oil sands) to both the Pacific and Atlantic coasts, which will enable increased transport of Canadian oil to Asian markets, including India. 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 offers perhaps the highest levels of political and social stability of any major oil producer, the importance of which should not be overlooked given the political unrest and uncertainty that has been seen in many other oil producing countries around the world over the past two decades.
Information technology (IT) and life sciences are other important areas of focus between the two countries. The Canadian government recently opened trade offices in Bangalore and Hyderabad as part of Canada’s Global Commerce Strategy, to help foster trade in the technology sector in particular. Many Indian-based IT companies already feature prominently in the Canadian marketplace and are using Canada as a platform to access the US market, taking advantage of Canada’s proximity to the US as well as its favourable exchange rate and bilingual workforce.
The Global Markets Action Plan identifies mining, oil and gas, information and communications technologies, and life sciences as areas that offer key opportunities, along with aerospace, agriculture and processed food, automotive, business and financial services, defence and security, education, infrastructure, sustainable technologies and transportation. In many of these areas synergistic two-way trade and investment relationships can help keep trade between the two countries relatively balanced.
In 2012, India exported approximately C$2.856 billion and imported approximately C$2.36 billion worth of goods and services to and from Canada. While the C$5.2 billion total is a long way from the C$15 billion two-way trade that India and Canada are hoping to achieve by the end of 2015, both countries have met significant milestones in the past several years, which position them well to significantly expand their trade relationship.
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 and Doha, and representative offices in Washington DC and Beijing.
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