It’s time to reignite talks on economic partnership

By Raj Sahni, Bennett Jones LLP

After much initial fanfare and enthusiasm when discussions on a comprehensive economic partnership agreement (CEPA) between Canada and India began some five years ago, little has been accomplished over the past year and the progress and good work between the two countries could be lost if the talks are not soon reignited.

Raj Sahni
Raj Sahni

Exploratory discussions began in January 2009, negotiations formally commenced in November 2010, and a deadline was set to finalize the agreement by the end of 2013. Both governments had set a target for two-way trade of C$15 billion (US$13.6 billion) by the end of 2015, up from C$5 billion-5.5 billion for the past several years, with much focus on the CEPA as a platform for increasing two-way trade.

While tripling two-way trade by the end of next year may be a lofty goal, the time is right for reigniting the talks and finalizing the CEPA. With India’s new majority central government focused on trade as one of the pillars for rejuvenating “Brand India” and a pro-trade federal government in Canada facing elections in 2015, the political will should exist to finally consummate the CEPA.

Past progress

Some significant progress has been made on several key fronts on the India-Canada trade and investment agenda over the past several years. For example, the India-Canada Nuclear Cooperation Agreement has been finalized, including arrangements allowing for the export of nuclear equipment and fuel from Canada to India for energy use. July of last year saw the opening of the Indian market to Canadian eastern spruce lumber. Last October, India and Canada negotiated a five-year memorandum of understanding (MOU) to “establish a framework for discussions on petroleum and natural gas issues with the view to advance the trade and investment ties between Canada and India, enhance energy security and increase cooperation”. The MOU appoints high-level officers in each government to head a working group to develop and implement activities to foster trade and investment in oil and natural gas.

Oil and gas

Oil and gas and other energy products are natural areas for expansion of India-Canada trade and investment. India’s oil minister, Dharmendra Pradhan, has said that India is diversifying its sources of oil imports to reduce dependence on any one region (currently India relies on the Gulf region for more than 60% of its crude oil and petroleum imports). Canada is the world’s sixth largest producer of oil and gas with the third-largest proven oil reserves (including oil sands) in the world and offers a stable political and economic source of supply.

While Canadian oil often sells at a (sometimes deep) discount to world crude prices, traditional barriers to export of Canadian oil to India have included shipping costs and questions as to whether Canadian grades of crude could be refined in India. These barriers proved to be surmountable late last year, when Husky Energy sold 1 million barrels of Canadian crude to Indian Oil Corporation, to be shipped from Canada’s Atlantic (east) coast to Indian Oil’s refineries in India.

India has some of the most advanced refineries in the world and this deal shows that at least lighter grades of Canadian crude can be processed and refined in India. With proposals for trans-Canadian pipelines (to both the east and west coasts) being pursued, there is renewed hope of Canada becoming a significant supplier of oil and gas to help meet India’s burgeoning energy requirements.

In addition to oil, tremendous (albeit longer-term) potential exists for trade in natural gas. India is one of the world’s largest importers of liquefied natural gas (LNG) and Canada is the world’s third-largest gas producer, with depressed domestic gas prices. One of the primary challenges facing Canada has been development of the infrastructure needed to export LNG to Asia. There has been a significant push in the past several years for development of ports and natural gas liquefaction facilities on the Pacific coast of Canada, so it is realistic to envisage Canada becoming a major source of LNG to Asia within the next 10 years.

More gains await

The Indian elections and the change in government could partly explain the lack of significant advancement on the CEPA in more than a year. Canada cannot expect to be the focus of attention on India’s trade agenda. However, the CEPA has been through eight rounds of negotiation and should not be far from completion. Rather than risk losing the advances India and Canada have made over the past five years, it is time to reignite the talks and finalize the CEPA so that India and Canada can reap the mutual benefits and move closer to their goal of C$15 billion a year in bilateral trade.

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, Vancouver, Washington DC, Dubai and Doha, and a representative office in Beijing.


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Tel: Raj Sahni, Chair – India Business Group +1 416 777 4804