India and Canada undertook a “stock-taking” exercise last week on the proposed free trade agreement (FTA) between the two nations, raising hopes of an early resumption of negotiations, which last took place in March 2015.
As many as nine rounds of negotiations for the FTA, known as the Comprehensive Economic Partnership Agreement, were held between the two countries since its beginning in November 2010. However, as no negotiations took place since March last year, some analysts had apprehended a deadlock due to differences over contours of the proposed pact.
The talks on the FTA include mainly two pillars, goods and services trade, while investment aspects are covered separately by a bilateral Foreign Investment Promotion and Protection Agreement (FIPA).
Sources told FE that the process of negotiations slowed down as Canada wanted concessions such as ‘MFN (most favoured nation)-forward’ and ‘ratchet’ from India under the FTA.
Offering ‘MFN-forward’ would mean any concession given by India to a trading partner in future under a bilateral treaty will automatically get extended to Canada. Similarly, ‘ratchet’ suggests benefits arising out of India’s domestic policy changes in future will have to be provided to Canada as well.
A source told FE that India has asked Canada to state in which sectors the latter wants ‘MFN-forward’ and ‘ratchet’ before it starts examining the possibility of offering any such concession.
India feels offering ‘MFN-forward’ in all sectors could be counter-productive as concessions under each FTA are based on attributes peculiar to that particular partner, which shouldn’t be extended to others. Similarly, it fears that agreeing to ‘ratchet’ could affect its own domestic policy space in future.
Though Indian goods exports to Canada are less than 1% of its total outbound shipments, a joint study before the FTA talks started in 2010 had estimated fairly symmetric gains for both the nations. Annual export gains for Canada were estimated to range between 39% and 47%, and for India, between 32% and 60%.
India’s exports to Canada stood at $2.2 billion in 2014-15, while its imports from that country were to the tune of $3.7 billion. In the April-January period of the last fiscal, Indian exports to Canada touched $1.7 billion and its imports hit $3.5 billion.
