FTA : India Halts Free Trade Talks with Canada

FTA : In a surprising turn of events, India has decided to halt discussions on a comprehensive free trade agreement (FTA) with Canada, citing concerns over diplomatic tensions and alleged support for anti-India elements on Canadian soil. This decision made official on September 16, marks a significant shift in the relationship between the two nations.

The bilateral merchandise trade between India and Canada in the fiscal year 2023 amounted to a modest $8 billion, with exports and imports nearly in equilibrium, according to two unnamed officials. However, recent developments have raised concerns about the future of this trade relationship.

The concern that prompted India’s decision to pause the FTA negotiations stems from numerous incidents involving anti-India elements being entertained in Canada, with some alleging support from the Canadian government. These incidents have escalated tensions between the two countries, prompting India to take a cautious approach to its FTA relationships.

Despite the trade volume, India appears confident in its ability to find alternative, more amicable suppliers for its critical commodities, reducing its reliance on Canada. This strategic shift aligns with India’s national interests, as per undisclosed officials.

The impact of this decision is already evident in the first four months of the current financial year (FY24), as India has experienced a year-on-year decline of more than 20% in its exports to Canada, totalling $1.24 billion.

Imports have also decreased by 6.39% to $1.32 billion during the same period. India’s exports to Canada include a range of products, such as pharmaceuticals, iron products, telecom equipment, garments, marine products, auto components, iron, and steel.

FTA & Core Provisions

The halt in negotiations comes after both nations had made substantial progress in their discussions on the FTA. The ninth round of negotiations, held virtually from July 12 to July 21, covered various aspects, including goods, trade remedies, rules of origin, origin procedures, services, institutional arrangements, and core provisions.

Additionally, the sixth ministerial dialogue on trade and investment (MDTI) took place on May 8 in Canada as part of these negotiations.

Furthermore, India and Canada were actively working towards an interim Indo-Canada Early Progress Trade Agreement (EPTA), with the ultimate goal of establishing a Comprehensive Economic Partnership Agreement (CEPA) or a comprehensive FTA. Since the relaunch of FTA negotiations between India and Canada in March 2022, they had already conducted nine rounds of negotiations by July of the same year.

It’s important to note that Canadian Pension Funds have collectively invested over $55 billion in India, viewing it as an increasingly favorable destination for their investments. Moreover, more than 600 Canadian companies have established a presence in India, with over 1,000 companies actively pursuing business opportunities in the Indian market.

However, the impact of this diplomatic pause goes beyond trade and investments. There is growing concern among individuals aspiring to study abroad and those applying for Canadian Permanent Residency (PR).

The strained diplomatic ties between India and Canada have raised uncertainty about the prospects of Indian students and the significant reliance of Canadian educational institutions on international students, with 40 percent of them originating from India.

Diplomatic tensions have also raised concerns about visa prospects for immigrants, students, and workers traveling to Canada. Canadian Prime Minister Justin Trudeau‘s suggestion of Indian government involvement in the murder of Khalistan Tiger Force leader Hardeep Singh Nijjar in June has further strained relations.

Canadian intelligence agencies are actively investigating this matter, adding to the diplomatic dispute between the two countries.

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