Deeper Integration between Canada and India?

Abstract

Relative to their economic sizes, structures and linkages, the bilateral relationship between Canada and India is too small. Trade and foreign direct investment (FDI) flows are gradually increasing within such sectors as finance, energy, power and environmental services, agriculture and information technology (IT) services. Two channels are identified to expand this economic footprint: deeper linkages among bilateral business groups to reduce Canadians’ transactions costs relative to those in the United States (US) market; and improved market access for India’s competitive low-cost producers. Governments, which focus primarily on incremental improvements, should elevate the bilateral relationship to a strategic level with the negotiation of a free trade agreement (FTA). Although each government prefers the World Trade Organization (WTO) as the venue for liberalising agricultural trade, it is argued that a services-only FTA would yield mutual gains by removing many of the restrictions affecting both domestic markets and foreign entrants in the two countries revealed by the comparative analysis in this paper.