Canada and beyond

| Updated on January 13, 2018 Published on March 08, 2017

India should keep its trade cards close to its chest in these times of flux

It is a reflection of the state of flux in world trade, post-Trump, that Canada should be making a pitch to expand both trade and investment ties with India. While Canada is the world’s tenth largest economy, a member of the G-8 and a major agriculture, food processing and energy powerhouse, its bilateral goods trade with India is a piffling $7 billion, more or less evenly balanced. Canada’s direct investment in India is less than a billion dollars, whereas India’s investments in Canada are above $3 billion. Yet, Canada has said that it would like to expand its footprint in India and seal a trade and investment pact. Its optimism also stems from its recent success in finalising a trade deal with the European Union, coinciding with the virtual demise of the US-EU Trans Atlantic Trade and Investment Partnership. Under this, the EU will eliminate tariffs on most of Canada’s exports, while Canada in exchange will offer more free access for people, obviously ‘trumping’ the US here. However, it has its own share of headaches to deal with, emanating from across the border. The US is Canada’s largest trading partner, their mutual merchandise trade amounting to $575 billion, with a trade deficit of $15 billion in Canada’s favour; in the case of services, the US holds the advantage in about $90 billion bilateral trade. But there is a cloud of uncertainty arising out of the Trump administration’s stated ‘trade policy agenda’, which does not take a kind view of NAFTA. Canada is obviously exploring options in this context.

Canada is playing a hard dealmaker, pushing for international arbitration platforms. There is no need for India to rush into a knee-jerk response. Its model Bilateral Investment Treaty makes its policy transparent for the stakeholders concerned. The Centre should adopt a consultative approach so that the mistakes of earlier FTAs are not repeated. Rather, the focus should be on enhancing ease of doing business, and trade facilitation measures as agreed to in the Bali Ministerial of the WTO. India also needs to work out its negotiating strategy in RCEP and the WTO. The US trade agenda warns that “The Trump Administration will use all (emphasis added) possible leverage to encourage other countries to give US producers fair, reciprocal access to their markets.” Simply put, this could translate into pressure to dilute intellectual property rights and eliminate, as opposed to reduce, tariffs. Barriers to trade in digital data and services are an area of interest to the US. With TPP no longer in the picture, India’s negotiating position in RCEP could improve. It should not flinch from seeking market access in services in exchange for more free tariff lines.

Global trade is a win-win game in principle, provided the actors play by the rules. Unless the political and economic contours of a new trade regime become clearer, India should not make precipitate moves on the world trade chessboard.

Published on March 08, 2017
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