Business Today | June 16, 2014
Canada wants quick decisions on CEPA, BITs
Anilesh S Mahajan
Canada hopes the Narendra Modi government will take decisions on two vital agreements the Manmohan Singh government could not. The first, a comprehensive economic partnership agreement, or CEPA and the second on Bilateral Investment treaties, or BITs.
In an exclusive conversation with BUSINESS TODAY in his office in the eastern block of the Canadian Parliament at Ottawa, Minister for Foreign Trade, Ed Fast, said that the draft of CEPA was ready, but the Indian government’s decision was awaited.
Fast is expected to lead a big delegation to India in September comprising his colleagues in cabinet, Canadian lawmakers and business leaders.
Before he lands at Delhi, he wanted to set his agenda on the table. "We are inviting PM Modi to complete the procedure and sign these two agreements," he said. Fast added, "We know that he understands foreign investment is valuable and his election as the prime minister has only increased the hope amongst the investors globally."
Fast said Canada was hoping the Modi government would take the relationship between the two countries further.
Canada was the only Western country which had continued its engagement with Narendra Modi throughout, even when the UK and the US issued embargoes against him in 2005, for his alleged involvement in the 2002 riots in Gujarat. Canadian parliamentarian Patrick Brown continued meeting Modi, and was one of the special invitees at the prime minister’s swearing in on May 6.
"The engagement paid off well. Our companies continued to do business in and with Gujarat. I took issues related to tax and water impacting two Canadian companies to Modi when he was CM of Gujarat. These issues were not only resolved, but much more quickly than we expected," Fast said. "Now that he is PM of India, I am hopeful that he will be able to resolve the stalemate, which is halting investments both in India and Canada."
Fast added, "Our stand was clear. We trust the judicial system of India. It ruled in favour of Modi. We believe our decision was right."
When asked why this same logic of trusting the Indian judicial system did not apply when former army and paramilitary officials previously posted in sensitive areas were denied visas or immigration, citing ’human right violations’; the minister clarified that such decisions were taken on a case by case basis.
Many observers in India believe that although PM Modi’s government is engaging with the US and the UK, these countries would not get any ’favours’ as they had during the last Manmohan Singh government.
Canada is developing its defence equipment, vehicles and aircraft manufacturing capacity. There could be a window for many Canadian companies to set up base in India. "All this is possible once these two agreements are concluded," the minister said.
In January 2009, during the visit of the then minister for foreign affairs of Canada, Lawrence Cannon to Delhi both countries agreed to initiate exploratory discussions towards CEPA. This led to negotiation rounds from November 2010, and in June last year, the eighth round of deliberation and negotiation concluding in Ottawa. This free trade agreement is aimed at reducing or eliminating several duties on products and goods traded between the two countries. Along with this, the agreement is also aimed at opening up the services sector and facilitation of investment proposals. According to a Joint Study Group (JSG) report by economist and bureaucrats of both countries, the agreement would benefit both India as well as Canada. The minister said that the target was to take trade to $15 billion by 2015 (during 2011/12 the trade between two countries was about $5 billion). "We anticipated that these two agreements will be concluded in this time frame. But now this (target) is not likely to be met," Fast said.
The Indian side wants more clarity on the taxes to be paid by the Indian IT companies and the status of their employees in Canada. India has $4 billion investments in Canada, with Tata Sons and Aditya Birla Group as two of the biggest names present there. Meanwhile, Canadian companies such as Bombardier, Blackberry et al have there bases in India.
Fast, on June 11, tabled the content of the similar agreement with South Korea in Canadian parliament; this is Canada’s first FTA with an Asian country.
Indian exports to Canada include organic chemicals, precious stones, metals, apparel and machinery, oil products while imports from Canada comprise vegetables, pulses, fertilisers, paper and paperboard, machinery, wood pulp, iron and steel.
Negotiations on BITs or as Canadian side calls this Foreign Investment Promotion & Protection Agreement, were stalled after Anglo-Dutch telecom operator Vodafone decided to take on Indian government in an arbitration tribunal in London, citing similar agreements. "We understand there are huge opportunities for Canadian companies to invest in India. We will work with the Indian government to conclude the negotiation on both these agreements and get on to work," the minister said.
The trade minister said that Canada is open for increasing the investments in India, especially in areas related to Food, energy, Infrastructure and education.
Canada and India have recently concluded treaty on supply of nuclear fuel (uranium) for peaceful use. The minister said that if an Indian company wants to buy equity upto 49 per cent in these mining companies, the government is open for this. India is also hoping to ship oil and gas along with metallurgy coal from Canada.
(The author travelled to Canada at the invitation of the Canadian government)