India, Canada Trade Talks Paused As Political Tensions Escalate

As diplomatic tensions rise between India and Canada, economic and trade ties—particularly the Free Trade Agreement negotiations—have come to a standstill. It includes the upcoming October trade mission that was called off by Canada on Sept. 15, amid larger trade talks being paused.

Due to certain political developments in Canada, the India-Canada FTA negotiations had been paused, with any movement to begin only after those issues were settled, according to a New Delhi official who spoke on the condition of anonymity.

In terms of the cancelled trade mission, the spokesperson for the Canadian Trade Minister, Mary Ng, said that the trade mission due in October was called off without any future date being set. The trip, according to a Bloomberg report, was to head to Mumbai beginning Oct. 9 and focus on sectors including automobiles, agriculture, and information technology.

The negotiations for the India-Canada Comprehensive Economic Partnership Agreement, or an Early Progress Trade Agreement, were relaunched in March 2022.

Nine rounds of the India-Canada CEPA/EPTA negotiations were held till July; the ninth round was held from July 12–21 in a virtual format.

In these talks, the areas of negotiation included goods, trade remedies, rules of origin, origin procedures, service tracks, institutional provisions, and core provisions.

The sixth Ministerial Dialogue on Trade and Investment was also held on May 8 in Canada, following which there was a ministerial review of the EPTA.

In terms of existing trade volume, Indian exports to Canada in FY23 came up to $4.1 billion, of a total export trade of $450 billion—representing close to 1%.

In FY24, till June, the Indian export trade to Canada stood at $1.2 billion. Major Indian items of export in the previous year included pharmaceutical products, iron and steel, machinery and mechanical parts, electrical equipment and hardware, gems and jewellery, seafood, and apparel.

India’s imports from Canada stood at $4 billion of the total $714 billion trade, representing 0.5% in FY23. Between April and June FY24, $1.3 billion worth of imports have passed to India from Canada.

Top imports from India include coking coal, lentils, fertilisers, wood pulp, paper, and paperboard, among other items.

Strained ties between the two nations escalated on Monday after Canadian Prime Minister Justin Trudeau told the country's Parliament that Canadian investigators were pursuing credible allegations of a potential link between agents of the Indian government and the shooting of Hardeep Singh Nijjar, a Sikh separatist leader, outside a gurudwara in British Columbia last June.

The comment was met with a statement by the Ministry of External Affairs, which termed the allegations "absurd and motivated".

The diplomatic tensions may also threaten Canadian investments in the Indian capital markets, which stood at Rs 1.77 lakh crore—including Rs 1.5 lakh crore in equity markets—at the end of August this year, according to the National Securities Depository Ltd.