The impact of Canada’s dispute with India on its struggling trade relationship

The strained diplomatic relationship between Canada and India could hinder a trading partnership that is already falling short of its potential, experts caution.

Tensions between the two nations have escalated following Canada’s decision to expel India’s top diplomat and five other officials based on shocking allegations from the RCMP on Monday. The RCMP suggested that Indian government operatives have been involved in criminal activities such as murder, extortion, and coercion within Canada.

In an effort to reassure Canadian businesses, International Trade Minister Mary Ng released a statement on Tuesday acknowledging the uncertainty created by the situation for exporters and investors. She assured that the federal government will continue to support commercial and economic connections between the two countries.

However, analysts believe that the current spike in tensions will inevitably impact the trading relationship between Canada and the rapidly growing Indian economy in the short term.

“In the short term, I think certainly this will have a negative impact … if you’re a Canadian business trying to establish a presence in India or if you’re an Indian business seeking opportunities in Canada,” said Partha Mohanran, director of the India Innovation Institute at the University of Toronto.

Given the recent developments, it appears that progress towards the India-Canada Comprehensive Economic Partnership Agreement (CEPA) is unlikely in the near future. This proposed bilateral trade deal, which has been under negotiation since 2010, has witnessed sporadic advances and setbacks.

Mohanran highlighted the challenge posed by the limited volume of trade between India and Canada, emphasizing that the current levels are well below their potential. For instance, in 2022, Canada’s exports to India were valued at $5.3 billion, accounting for just 0.7 percent of global exports.

Comparatively, Canadian exports to China stood at $28.7 billion in 2022, despite India’s population surpassing China’s for the first time last year.

Addressing the issue, Mohanran stated, “(Canada-India) is a relationship which has woefully underperformed its potential. If you look at bilateral trade, both countries barely register on each other’s radar.”

Key products that Canada exports to India include coal, potash fertilizers, and lentils.

In her statement, Ng reaffirmed Canada’s support for its businesses engaged with India while emphasizing the country’s commitment to safeguarding its citizens from any foreign threats or harm.

“We must balance our economic interests with the imperative to protect Canadians and uphold the principles of justice,” she concluded.