Whalesbook
Talks Progress on Trade Pact
India and Canada have finished their second round of negotiations for a Comprehensive Economic Partnership Agreement (CEPA) in New Delhi. The talks, held May 4-8, 2026, followed Terms of Reference agreed in March and reaffirmed a commitment to an ambitious trade deal. Progress suggests an aim to finalize the agreement by late 2026. The next talks are scheduled for July 2026 in Ottawa, with efforts to maintain momentum between sessions.
Boosting Trade: The $50 Billion Goal
The main goal is to double bilateral trade to $50 billion by 2030, a significant increase from current levels. For fiscal year 2024-25, trade was $8.66 billion, with India exporting $4.22 billion and importing $4.44 billion. Although some reports place 2024 trade higher, up to CAD 30.9 billion, this is still well below the target. India's main exports to Canada include pharmaceuticals, iron and steel, electronics, and chemicals. Key imports are pulses, fertilizers, and precious stones. Services trade, especially in education and IT, is also important but could face policy changes. Canada's large Indian diaspora (nearly two million people) and over 425,000 Indian students act as a bridge, boosting economic and cultural ties. Canada sees India as key to its Indo-Pacific strategy and a way to reduce reliance on trade with the United States. Potential growth areas for the trade pact include critical minerals, clean energy, defense, and technology.
Challenges Remain: Strains and Sensitive Sectors
However, the path to a CEPA faces significant hurdles. Talks were paused in 2023 due to major diplomatic strains, showing how political issues can impact economic ties. A key Canadian concern is the trade imbalance, with India typically having a merchandise trade surplus. Canadian exporters can be disadvantaged by differing tariffs in India's growing sectors, potentially losing market share as India strikes deals with other countries. Canada's dairy, poultry, and egg industries are protected and unlikely to see increased market access. Issues like labour mobility and agriculture also remain sensitive. Analysts recommend a practical, phased agreement rather than an 'all-or-nothing' approach, focusing on managing political sensitivities to build progress.
Outlook: Ambition Meets Reality
A trade pact could significantly boost bilateral trade and Canadian GDP, with estimates suggesting an extra CAD 8.8 billion in trade by 2035 and a GDP gain of CAD 5.1-8 billion. The $50 billion trade goal by 2030 remains ambitious, needing substantial annual growth. While talks show progress, reconciling national interests, especially on sensitive sectors and market access, will likely make negotiations lengthy. Success depends on pragmatically navigating these issues, possibly with a phased approach to build confidence and achieve early successes, shielding the economic partnership from future diplomatic shifts.