Victoria Times Colonist, Canada
Trade deal with India would provide access to huge market
Long way to go before any agreement is signed
Joanne Lee-Young, Vancouver Sun
26 March 2007
When Tom Sundher, president of Surrey-based Coast Clear Wood, started exporting to India seven years ago, a container of his lumber for making doors, windows and cabinets would arrive in Mumbai and be stamped with a staggering duty of 37.5 per cent.
"For my customers, paying that much more on the invoice price was huge," said Sundher.
Over the years, that charge by the Indian government has slowly come down to about 17 per cent. Sundher estimates that this has, in part, allowed him to triple his business.
If the duty could be wiped out completely, Sundher thinks he could not only further increase orders with existing customers, but also add new ones beyond the port city.
"The savings would make it affordable for customers that have to build in over-land transportation costs, like rail or truck, to consider us. We could explore farther inland," he said.
There has been much touting of the prospects ahead since Ottawa announced a few weeks ago that it is officially pursuing a free-trade agreement with India.
In a nutshell, India’s rising middle class of some 200 million is lapping up goods and services that could be worth $400 billion by 2010, according to the Canadian Chamber of Commerce. It also needs to upgrade a host of infrastructure projects to the tune of $420 billion over the next 10 years.
This recent high-level interest by Canada in India is "a gesture, a political signal," said Asia Pacific Foundation research fellow Abhishek Kaicker. "It means Canada is eager to get into India and that it is interested in doing business with India."
There are all sorts of ways B.C. companies could benefit from a free trade agreement with India. Simply, it would allow for the free movement of goods to and from India. The next step might see the free flow of services. Later, an agreement could be expanded to include the free movement of labour.
"If this thing eventually morphs into an agreement that is comprehensive, then it could be possible that when a company like Pivotal (Corporation, a Vancouver-based software firm, which has a sizeable development centre in India) wants to bring an employee working from their Bangalore office (over here), it would just be a matter of doing that, rather than having to go through the complicated work visa application process," said Nizar Assanie, a vice-president at Vancouver-based IE Market Research Corp who also sits on the board of the Canada-India Business Council’s B.C. chapter.
Sanj Aggarwal, director of Abbotsford-based Regency Direct Marketing, looks forward to this. The current hassle involved in arranging business trips to Canada for employees in India means that he often is the middleman, linking the company’s India-based account executives with clients here. Regency handles printing, data entry and the re-mailing of magazines and pamphlets from India to help cut promotional costs.
Said Aggarwal: "An agreement would it make it easier for us to train staff from India on site here. They could then also do client visits across Canada themselves. It would just be more direct, efficient" and possibly lead to doing more business.
But getting to this scenario will take some time. Even when nitty- gritty negotiations do get under way, it could still take four to five years to hammer out a basic free-trade agreement, never mind a more complex one, according to Assanie.
One particular area that could stall a free-trade deal between Canada and India is the sensitive sector of apparel. India is a major global supplier, ranking No. 2 or 3 after China. "It would want to export to Canada," said Assanie. "However, Canada would want to protect its own industry, which is focused mostly in Montreal, Winnipeg and some in the Lower Mainland as well."
And so the negotiating dance will go.
"All these points are linked. It’s about trade-offs," said Assanie. "It can be as crass as something like Canada wants a long time horizon for apparel imports. The India side agrees, but says only if you allow our workers to come in for sector X. This can result in an almost infinite number of possibilities."
Even once an agreement is in place, B.C. firms will have to deal with some serious business culture concerns. Despite the obvious potential of the market, the World Bank currently ranks India 116 out of 155 countries surveyed for ease of doing business.
This puts India two spots below Iraq, 56 below Pakistan and 25 below China. The survey took into account business procedures such as how many days it takes to register a property (67 in India, 32 in China); number of signatures required on export documents (22 in India, 7 in China); and, time taken to enforce contracts (425 in India, 241 in China).
In the meantime, it is worth noting that Canada hasn’t yet inked any free-trade deals in Asia, even though there have been prolonged discussions with Korea and Singapore. Right now, the spotlight is on Korea’s inching toward a deal with the U.S. and observers are pegging the end of this month for an announcement.
"Once they close, will it be easier or harder for Canada to close with Korea? Will they care anymore? You can argue it both ways," said Yuen Pau Woo, co-CEO of the Asia Pacific Foundation.
Meanwhile, talks with Singapore date back to 2001, but a breakthrough has not happened.
Back to India, said Woo of the APF: "India has a bad reputation for being difficult negotiators. We have a bad reputation for not closing. So it is quite a match."
INDIAN RED TAPE
While a Canada/India free trade agreement would ease commerce between the two countries, Canadians considering whether to start a business in the subcontinent or Asia’s other rapidly growing economy, China, will want to consider this comparison of business procedures.
Time to start a business 71 days
Difficulty of hiring index (0-100) 56
Difficulty of firing index (0-100) 90
Documents needed for export 10
Signatures required for export 22
Time to export goods 36 days
Overall rank 116/155
Time to start a business 48 days
Difficulty of hiring index (0-100) 11
Difficulty of firing index (0-100) 40
Documents needed for export 6
Signatures required for export 7
Time to export goods 20 days
Overall rank 91/155
Source: Doing Business in 2006, World Bank