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A file photo of Prime Minister during his Canada visit in April this year. Photo: Reuters
A file photo of Prime Minister during his Canada visit in April this year. Photo: Reuters

No progress on trade pact with Canada despite 9 rounds of talks

Canada's insistence on higher standards in services under the ongoing negotiations for the deal has stalled progress

Canada’s insistence on higher standards in services under the ongoing negotiations for comprehensive economic partnership agreement (CEPA) has stalled progress in the trade agreement even after nine rounds of talks.

Canada is adamant that clauses such as standstill, ratchet and MFN-forward be part of the talks which India thinks are detrimental to its interests, a government official said on condition of anonymity.

Similar clauses in the ongoing plurilateral Trade in Services Agreement (TISA) negotiations at the World Trade Organization have prevented India from joining it.

‘Standstill’ binds the current level of domestic liberalization in services which a country cannot reverse in future.

‘Ratchet’ implies future domestic policy changes by a member country will also automatically get committed under TISA, while ‘MFN-forward’ means any future concession given to a trading partner under a bilateral treaty will automatically get extended to other members of the TISA.

“For example, if India promises to give permanent residency to Canadian citizens living in India for seven years, in future, we cannot change our domestic policy to make it eight years," the official said.

The official said talks have not reached a stage where both sides will seek market access from each other as “even modalities have not been finalized yet". Modalities are methods or formulas used to finalise tariff cuts by each negotiating country.

Biswajit Dhar, professor of economics at the Jawaharlal Nehru University, said India has a mistaken notion of being a service powerhouse.

“We don’t have strength beyond information technology (IT) and IT enabled services. If we consider ourselves a demander of services liberalisation, we should have a game plan, which we don’t, making us defensive even in trade in services negotiations," he said.

In a joint statement agreed by both sides during Prime Minister Narendra Modi’s visit to Canada in April this year, both sides said they have agreed to a roadmap to expeditiously conclude a “progressive, balanced, and mutually beneficial CEPA as a basis for significantly expanding two-way trade and investment and directed the negotiators to prioritize its finalization".

A Canadian trade spokesperson in September said in a reply to email queries that Canada is committed to negotiating a “high-quality" trade agreement with India.

“We are looking to sign an ambitious agreement which would improve market access for goods and services, eliminate tariffs, and reduce non-tariff barriers to trade," said Claude Rochon, trade spokesperson for the Canadian government.

In September 2008, the India-Canada CEO Round Table concluded that the two countries would benefit enormously from CEPA by eliminating tariffs on a substantial majority of bilateral trade items.

CEPA would cover trade in goods, trade in services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade and other areas of economic cooperation.

The report by a joint study in September 2010 highlighted the benefits of CEPA for both.

Accordingly, the announcement of a launch of India-Canada CEPA negotiations was made by prime ministers of both countries in Seoul in November 2010 and the negotiations were formally launched by their trade ministers on 16 November 2010 in New Delhi.

During the first 11 months of 2014-15 (April-February), India exported goods worth $1.9 billion to Canada and imported goods worth $3.7 billion leading to a trade deficit of $1.8 billion.

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