The recent Ministerial Dialogue on Trade and Investment (MDTI) between India and Canada marked the fifth instance of such a dialogue, leading to an agreement to resume negotiations for the Comprehensive Economic Partnership Agreement (CEPA). This meeting also gave consideration towards employing an Interim Agreement or Early Progress Trade Agreement (EPTA) to foster early commercial benefits for both nations. The agreement comes on the heels of a similar announcement between India and Australia stating plans to reach an Interim Trade Agreement by March 2022, followed by a Comprehensive Economic Cooperation Agreement (CECA) within 12 to 18 months.
The Key Points of Discussion
The Interim Agreement contains critical commitments in goods, services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, and dispute settlement. It may include other mutually agreed areas as well. The discussions highlighted cooperation in sectors like pharmaceuticals, critical and rare earth minerals, tourism, urban infrastructure, renewable energy, and mining.
India and Canada have agreed to intensively examine issues related to Canada’s pest risk management system for pulses and potential market access for Indian agricultural products like sweet corn, baby corn, and bananas. There are also plans to speed up the request for Conformity Verification Body (CVB) status to APEDA, allowing easier facilitation of Indian organic exports.
Understanding the Nitty-Gritty of an Interim Trade Agreement
An Interim or Early Harvest Trade Agreement liberalizes tariffs on specific goods traded between countries or trading blocs before finalizing a comprehensive Free Trade Agreement. These interim agreements are tactical government strategies to achieve a trade deal with minimum commitments and delay resolving contentious issues. However, these early agreements are potentially problematic as they preferentially target low-hanging fruits, leaving complex goods and services to be dealt with later.
Role and Significance of CEPA
The CEPA is a form of a free trade agreement that includes negotiations on trade in services and investment, coupled with numerous other areas of economic partnership. It may also involve discussions on trade facilitation and customs cooperation, competition, and Intellectual Property Rights. More comprehensive than Free Trade Agreements, CEPAs also address the regulatory aspects of trade. India has already signed CEPAs with South Korea and Japan.
India-Canada Trade Relations at Present
Canada currently ranks as India’s 11th largest export market and the 12th largest trading partner overall. The trade between the two nations stood at USD 2.9 billion for exports and USD 2.68 billion for imports in the year 2020-21.
Canada’s commercial interests in India align with India’s policy objectives and sectors where Canada has a competitive advantage. These include India’s energy security through exports of conventional and nuclear energy, urban and transportation infrastructure development, education and skills training, commercial research and development to drive innovation, and increased exports of food products and fertilizers to support India’s food security needs.
Throughout the fifth Ministerial Dialogue on Trade & Investment, the emphasis on setting up resilient supply chains in crucial sectors was acknowledged. Both countries also exchanged views on potential collaboration in this area.