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Ailish Campbell
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Ailish Campbell
2013-03-27 15:35
Thank you, Mr. Chairman and committee members. It's wonderful to be here. Thank you for the invitation to appear before the Standing Committee on International Trade concerning the negotiation of a Canada-India comprehensive economic partnership agreement.
The Canadian government's actions to advance foreign market opportunities are critical. It is a difficult time for economic negotiations. The need to continue efforts towards open, dynamic trade has been described as a bicycle. To avoid backsliding into protectionism, countries must stay on the bicycle and keep pedalling, even if the terrain covered looks quite minimal on a day-to-day basis.
Despite our best efforts, the large bicycle built for the 159 members of the World Trade Organization has, regrettably in our view, stalled. We, Canada, and the rest of the WTO members who've invested in the Doha Round are regrettably somewhat off this bicycle, in fact, and riders with the best support teams are now mounting new, smaller bicycles and pedalling off, and frankly, in many directions.
In this challenging context, we commend the government for having developed a strong suite of bilateral and plurilateral negotiations for Canada. The suite of ongoing negotiations is of course very well known to this committee, and includes the Canada-EU comprehensive economic trade agreement negotiations and bilateral agreements in Asia, including with South Korea, India, and Japan, as well as plurilateral options, namely, the Trans-Pacific Partnership. These agreements will be a vital source of future jobs and opportunities for Canadian workers and families.
As an element of this ambitious agenda, the negotiation of a timely Canada-India comprehensive economic partnership agreement is one that the Canadian Council of Chief Executives fully supports. This negotiation must be well resourced, both in terms of negotiating staff and political will, and should be a top priority given the size and projected growth of the Indian market, in particular once the Canada-EU negotiations conclude, we hope.
GDP is rising in developing countries faster and at a greater scale than ever before in human history. Canadian firms from agriculture to energy, and to financial services and IT, must be part of this growth story.
In our view, the CEPA should be comprehensive and include the elimination of tariffs and non-tariff barriers on the majority of trade within 10 years of entry into force; the liberalization of services trade in most sectors, including, most critically, financial services, and a strong exchange of offers between Canada and India on all four modes of services supply; strong investment provisions to promote Canadian investment in India; simplified rules of origin; a binding dispute settlement mechanism; regulatory coherence and cooperation to promote market transparency; government procurement; transparent and simplified customs procedures; and high standards of IP protection.
Our commercial relationships should develop not simply through the exchange of goods and services, but through dynamic interactions, including investment in foreign subsidiaries and joint ventures, licensing, IP, and supply chains, and across multiple jurisdictions. In short, we call on the negotiators for both Canada and India to ensure that the CEPA aligns and keeps pace with the ways in which business is in fact done on the ground today.
As such, a critical piece to promoting a deeper relationship is the conclusion at the earliest opportunity of a comprehensive Canada-India foreign investment promotion and protection agreement, or FIPA. These negotiations have effectively concluded, but no final deal has been signed. We should examine the FIPA to ensure it is of the highest quality and, in our view, then put in place a clear timeline to finalize this agreement.
For our part, to raise awareness in the Canadian business community and among policy-makers of the opportunities in India and Asia more broadly, the Canadian Council of Chief Executives has launched an initiative called “Canada in the Pacific Century” to promote and identify key policy solutions to enhance Canada's ability to succeed in a transforming global economy. The results of this initiative are available online on our website, www.ceocouncil.ca.
As the secretariat for the newly created Canada-India CEO Forum, along with our critical partner, the Confederation of Indian Industry, the Canadian Council of Chief Executives will continue to promote private sector relations to improve our commercial activities. We are pleased to support our CEO forum co-chairs, Tom Jenkins of OpenText, and Hari Bhartia of Jubilant Life Sciences, and the CEOs who form the committee and working groups.
At that inaugural meeting of the CEO forum on November 6, 2012, members identified priority sectors, including natural resources, infrastructure, education, ICT, and financial services. Forum members clearly expressed support for a timely and comprehensive CEPA negotiation.
I trust that my remarks here today underscore that the private sector itself is of course taking action, working with government enablers, such as Export Development Canada, the trade commissioner service, and our dynamic diplomatic assets in India to deepen our commercial relations.
While firmly keeping our paramount economic relationship with the United States robust and dynamic, Canada must also expand its activities in growing markets such as India. These large markets provide the scale of customer demand required for Canadian firms to create jobs, growth and global presence. The member firms of the Canadian Council of Chief Executives wish to see more businesses using Canada as the staging ground for their global operations. In that regard investment and economic agreements with India and other large economies are particularly critical.
Thank you for your time.
Cam Vidler
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Cam Vidler
2013-03-27 16:36
Thank you, Mr. Chair, for this opportunity to provide comments on the Canada-India comprehensive economic partnership agreement or CEPA.
I'm Cam Vidler, director of international policy at the Canadian Chamber of Commerce, which is one of Canada's most representative business organizations. Many of our members are active in India, including Scotiabank, which is represented here today by Nav Bubber, director of operations at Scotiabank Private Client Group, who will also be providing remarks after I do.
The Canadian Chamber is a long-standing supporter of increased trade and investment with India. In 2009 and 2010, we called on the federal government to undertake bilateral trade negotiations. Last November, our president and chief executive officer, the Honourable Perrin Beatty, travelled to New Delhi to meet with members of the business community there. Developing strategies for Canadian businesses to access new markets like India is one of the Canadian Chamber’s top 10 priorities for 2013.
Last year the Canadian Chamber produced a report called “Canada-India: The Way Forward”, which outlines the views of our membership, as well as policy recommendations to improve our relationship with India.
We believe that India is crucial to Canada’s global commercial engagement. Rapid economic growth and urbanization, combined with a young population of over 1.2 billion people, are boosting consumption and investment in India, and creating a booming market for Canadian goods and services—right at a time when our traditional markets are slumping.
In addition to the sales opportunities, India is establishing itself as a prime location for innovation and production, based on its growing pool of talent and emerging global companies. We all know about the IT clusters in Bangalore and Hyderabad, but India’s manufacturing sector is also becoming more sophisticated, with a number of local and foreign companies supplying the broader region from their bases in India.
Despite a recent slowdown in growth that has led to some skepticism by commentators, India appears to be turning a corner. A new wave of liberalization is under way, and economic confidence is returning.
Canada’s capabilities in areas of extreme need for India—including energy, infrastructure, agriculture, financial services, and education—make us very well placed to succeed there. Leading Canadian companies such as Bombardier, Sun Life Financial, McCain Foods, Research in Motion, SNC-Lavalin, CGI, CAE, and Scotiabank, to name only a few, have made significant inroads. Our SME presence in India is growing as well.
Despite these positive developments, the business relationship between Canada and India remains underdeveloped. Distance, language, and cultural differences certainly play a role, but a number of policy barriers in India also hold back Canadian companies.
The CEPA is an opportunity to address them. I’d like to outline four general priorities here. A more exhaustive list can be found in the report I mentioned earlier as well as the submission we made to this committee.
First, the CEPA should reduce and bind Indian tariffs on major Canadian exports, such as chemicals, wood products, manufactured goods, and especially food stuffs, where tariff rates can hover near 30%.
Second, these tariff reductions need to be accompanied by strong disciplines against non-tariff barriers. Licensing requirements, technical standards, and product certification procedures can often be onerous and insufficiently harmonized with international best practices. Companies also report local content requirements and government procurement practices that discriminate against foreign companies.
Third, the CEPA must extend Canada’s access to India’s services sector. There are, for instance, significant restrictions on foreign involvement in banking and insurance, some of which my colleague Nav Bubber will be able to speak to. Market access should also be complemented in the services sector by arrangements for the temporary entry and mutual recognition of professionals.
Finally, protections should be included in the agreement for Canada’s growing stock of foreign direct investment in India. A foreign investment promotion and protection agreement, or FIPA , was signed in 2007, yet India has yet to ratify it. This leaves Canadian investments potentially exposed to discriminatory or arbitrary regulations and taxes, and without recourse to investor-state dispute settlement procedures.
The Canadian Chamber applauds the government’s intent to complete the CEPA negotiations in 2013, but it is important that Canada not sacrifice quality for speed. An ambitious and comprehensive agreement that secures real, long-term market access for Canadian companies and their Indian counterparts is an achievement worth waiting for, albeit not forever.
With that, I’d like to pass the microphone to Nav Bubber.
Thank you, and I look forward to your questions.
Nav Bubber
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Nav Bubber
2013-03-27 16:40
Thank you, sir.
It's my pleasure to present to all of you today, and I thank you for this opportunity.
I am Nav Bubber, director of the Scotia Private Client Group at Scotiabank.
You just heard from Cam Vidler of the Canadian Chamber of Commerce on the opportunities that the Indian market has to offer to Canadian companies. I would like to add to Cam's comments, both in my capacity as a representative of Scotiabank and as a board member of the Canada-Indian Business Council.
There are two key points I would like to make today. First, I want to emphasize the importance of securing this agreement. The timing is excellent for a trade agreement with such an important market. Second, Canada has several strengths that make it an ideal trading partner for India, something we believe needs to be effectively communicated.
Before I go into details, let me briefly summarize our experience in India. Scotiabank is Canada's most international bank. With more than 81,000 employees, Scotiabank and its affiliates serve about 19 million customers in more than 55 countries around the world.
We have been in India since 1984 and are proud to be the most active Canadian bank. With more than 170 employees and five branches, we offer a broad range of corporate and commercial services along with some retail banking products. ScotiaMocatta, our precious metals division, is now one of the largest precious metal dealers in India and has been recognized as the “Best Bullion Bank” for the past four years.
But this is just a start. We would love to expand our operations, but the regulatory environment and market access barriers for foreign banks in India have definitely slowed our progress. A trade deal could help remove such barriers and allow us to make a much larger contribution to the development of the Indian banking sector as a whole.
In our view, Canada has some unique qualifications as a potential trade partner for India: the strength and stability of our economy; consistent and transparent policies; a multicultural and educated workforce; and also top-tier sectors in education, energy, and services such as banking.
The mix of stability, policy orientation, and sectoral expertise make Canadian institutions ideal partners, with the ability to meaningfully contribute to India's economic transformation. Looking at the financial sector specifically, Canadian banks are global leaders in risk management, corporate governance, and financial control. We also have a proven track record of partnering in the development of banking sectors around the globe.
We want to bring these strengths to India. In light of what Canada has to offer, the CEPA agreement needs to provide increased market access and transparency for Canadian companies, to increase access for all financial services in respect of right of establishment, and to grant Canada full national and most-favoured-nation treatment.
In terms of market access, the two main barriers are India's 5% foreign ownership limit on domestic private sector banks, which prevents Canadian banks from expanding through partnerships, and the branch authorization policy, which limits the ability of foreign banks to open new branches because of the imposition of non-transparent quotas.
In return, we encourage Canada's negotiating team to consider a strong market access offer to India in areas of their interest, such as labour mobility. This will ensure mutual benefits and a successful agreement.
I believe that Scotiabank's history in India and Asia as a whole, and our deep commitment to the development of emerging markets place us in a unique position to offer insights on this topic. I hope these recommendations are helpful in your deliberations.
Thank you.
View Wayne Easter Profile
Lib. (PE)
Okay, I don't have time to use that quote.
Some hon. members: Oh, oh!
Hon. Wayne Easter: Let me turn to Mr. Bubber.
You outlined in your remarks that India's 5% foreign-ownership limit on domestic private sector banks prevents banks from Canada expanding there. Why, from your perspective, does India have that limit?
Nav Bubber
View Nav Bubber Profile
Nav Bubber
2013-03-27 17:16
As far back as 10 years ago, all the banks were nationalized. They did open up that sector, but only for private Indian investment. It's been a very heavily regulated environment. We've seen very recently that they have opened up certain sectors, for example, insurance is now up to 26%. They recently opened up FDI in retail, meaning for foreign direct investment in the retail sector, including companies such as Walmart and other large retail organizations that are going in there. It's been a little more protectionist in the financial sectors. Will that change? Possibly, but we haven't seen anything speaking to that in the recent past.
John Harriss
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John Harriss
2013-02-27 16:38
I am sorry; I wasn't clear whether you wanted a presentation from me to begin with or not. I was rather expecting questions first.
But what I have to say, really, is as follows. It's pretty obvious that there should be terrific benefits to both Canada and India from increased trade. The level of trade between two such very big economies is very small at the moment and has been historically. The extent of Canadian investment in India is very small. Indian investment in Canada is a bit more significant and has been increasing. I think we start from the basic position that there must be tremendous benefits from increasing trade connections.
I think it's important to remember that, though the Indian economy is big, the Indian economy historically has not been really a major trading economy. Although India's share of trade and the share of trade in the Indian economy has increased very considerably over the last decade, the country is still rather feeling its way in trade negotiations.
One of the problems that must be faced in these talks is that the bureaucratic capacity in India for conducting trade negotiations is pretty limited. My colleagues talk to me of India turning up at major trade talks with three people, when the Chinese, for instance, come along with 50 people. There are limitations of bureaucratic capacity, and at the moment I think India's priorities are to conclude trading agreements with Southeast Asia and to get through the long-running trade talks with the European Community.
In this context, what are Canada's biggest chips? What is it that we really have most to offer?
It seems to me—and this is what I'm hearing from colleagues and friends in Delhi—that what would really make a big difference, because India has such strong interests in diversifying sources of oil and gas, is if Canada can use our oil and gas resources to help the Indians to diversify their oil and gas sources. The fact that India has had important connections with Iran in regard to supplies of oil and gas is a part of that picture at the moment, of course, given the American concern with limiting contact with companies in countries that have those kind of trading connections with Iran.
It seems to me that is the biggest sort of chip that Canada has to put on the table.
Where are there strong mutual interests? It seems to me they are in the area of energy. There are mutual interests in building trade in agriculture. There are important opportunities, perhaps, for Canadian companies in regard to infrastructure. I'm really not sure about our capacities in this regard, but I know there are tremendous needs in India in regard to power transmission and distribution.
The big problems of the electricity sector in India are not to do with power generation so much as with transmission and distribution.
There are mutual interests in education.
An area like financial services is probably a bit problematic. I think there are opportunities in financial services—and India certainly respects the quality of the Canadian banking sector—but of course this is an important area in which non-tariff barriers will come into play. Canada will have to confront problems relating to domestic regulation of financial services in India.
From the Indian side, there will also be, I think, a very strong interest in the movement of people, the movement of professionals, access for Indian professionals into Canada.
There are opportunities, perhaps, for Canada in some areas of retail, given the commitment of the government to opening up the retail sector. A friend, a former finance secretary of the Government of India, said to me yesterday, “If only Canada could come up with a kind of an IKEA, you know, use some of that timber to provide good furniture and materials for construction”. Given the tremendous boom, of course, in construction in India, there could be a deal, perhaps, with a major real estate company in India.
I think that, in general, it's probably going to be non-tariff barriers rather than tariff barriers that are going to be the sticky areas.
Lastly, what I might say by way of introduction—Mr. Cardegna included in an e-mail to me the possibility of a question about India's business environment—I'm sure that I don't need to tell the members of the committee that India, of course, ranks pretty low on the World Bank's index of the ease of doing business, and very low, indeed, in the area of contract enforcement. Those are facts that are probably pretty well known.
What I think also needs to be recognized is what the same friend I was talking to yesterday, the former finance secretary, describes as the stranglehold that is exercised by a small number of very big companies in India, companies like Reliance, SR, indeed Tata, as very powerful companies that actually do exercise a great deal of influence on the actions of government as importantly as on policy. The advice that my friend was suggesting to me yesterday was that it would be important to avoid areas where powerful vested interests are involved, to avoid areas such as telecom and pharmaceuticals, where the big boys have very strong interests.
The last point, and it really follows from that one, is with specific regard to SMEs, small and medium-sized enterprises. As I understand from what I have read, the Canada-India Business Council, which represents quite a lot of small and medium-sized enterprises, is looking for very significant opportunities through a comprehensive economic partnership agreement.
I think this is a somewhat contradictory kind of situation, if you will, because following from what I said about the importance of recognizing what was described to me as the stranglehold exercised by a small number of very big companies, that means there may well be significant opportunities for small and medium-sized enterprises that are operating in sectors of the economy, areas of the economy, in which the big boys in India don't have very powerful interests.
But as it seems to me, small and medium-sized enterprises in the two countries—last point and I really will shut up then, okay?
View Devinder Shory Profile
CPC (AB)
What about the banking and insurance sectors? I believe there are restrictions on foreign direct investments in those sectors in India. Are you aware of the restrictions and if they should be negotiated in the FIPAs?
John Harriss
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John Harriss
2013-02-27 17:03
I've had interestingly different advice on this from the colleagues with whom I've spoken. They include, as I mentioned, a former finance secretary in the Government of India, and somebody who was also a senior official in finance.
The former finance secretary points out that banks like Lloyds and the infamous Royal Bank of Scotland do actually have very good business in India in the area of commercial services. Although the banking sector is very highly regulated in India and there are barriers to the participation of foreign banks, there are openings there. I believe that Singapore banks have also been able to enter into the areas of supplying commercial services in India, but there are a lot of detailed issues there about which I'm really not at all remotely expert.
View Geoff Regan Profile
Lib. (NS)
Thank you, Mr. Chairman.
Thank you, Dr. Harriss, for rising so early and allowing us to benefit from your insights.
I want to call on a question that Mr. Shory started because you raised the issue of the domestic regulation of financial services. On Monday of this week, the committee actually heard from Mr. Suresh Madan, who talked about the limit on foreign borrowing, the deferential tax treatment for portfolio investments, and the inability of Indian companies to tap Canadian markets. We think of Canada, obviously, as a market particularly for things like mining as well as oil and gas, but mining would be a key one internationally.
What can you tell us about the ills that the Indian government—or governments, it is a federal country, of course—is wanting to address in creating these measures? As Canada is negotiating with India trying to deal with these things, how do you view the problems that they're trying to address, and what's the motivation behind these measures?
John Harriss
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John Harriss
2013-02-27 17:07
I really can't give you a detailed answer to that question because I have so little expert knowledge in this field. But I know that the officials who have run the ministry of finance in India have always been a very conservative bunch. It is greatly to their credit historically that India did not suffer from the debt crisis that so many countries, erstwhile third world countries, suffered from in the 1980s.
There's an account of that period by two very distinguished Oxford economists, who try to answer the question of why India did not suffer from those sorts of problems. It concluded that the answer was actually in the quality of the officials in the ministry of finance and their extremely cautious kinds of attitudes. There's a real tradition of caution, and that tradition was confirmed. Certainly that's what the governor of the Reserve Bank of India talked of when I heard him speak here three years ago on their observation of the crisis of 2008.
Sorry, that's a very general and a rather woolly kind of an answer, but I think that's what you have to bear in mind.
Todd Winterhalt
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Todd Winterhalt
2012-12-06 16:53
Thank you very much, Mr. Chair, and honourable members, for inviting EDC to appear before the committee today. We certainly appreciate your interest in Export Development Canada's activities in support of deepening Canada's trade agenda with India.
Over the past seven years, we have seen Canada's annual bilateral trade with India grow almost 80% to reach $5.1 billion as of the end of 2011. That's up from approximately $2.9 billion in 2005. This growth has been driven by a 140% increase in Canadian exports to India during this time period. At the same time, Canada's imports from India have increased 40%.
In 2011, bilateral trade was largely balanced. Canadian merchandise exports to India totalled $2.6 billion, while imports from India reached $2.5 billion. Despite recent global economic slowdowns in other parts of the world, Canada’s merchandise exports to India over the first three quarters of 2012 showed year over year growth approaching 5%.
India, indeed, is one of EDC's top strategic markets worldwide. In recognition of the importance we place on India as a country of rising trade and overseas investment opportunities for Canadians, we opened our first international representation in New Delhi in 2005. This was followed soon after by a second opening, in Mumbai, in 2007.
EDC has achieved some success in India since establishing our first local market presence. The volume of Canadian business we help facilitate has grown from less than $400 million in 2005 to well over $1.7 billion in 2010. Growth in Canada’s trade and the number of Canadian companies exporting to India and establishing affiliates in the market have consistently kept India as a top strategic priority for EDC. Furthermore, the market’s potential, particularly the development needs in India’s infrastructure sector, features prominently in our five-year corporate plan.
That said, the business environment in India remains challenging for Canadians. India is a complex and very cost-competitive market. India's ranking by the World Bank in terms of the ease of doing business has remained largely unchanged over the past several years at 132nd out of 185 markets. Relativities are important here. Compared to similar lower middle income peer countries, India ranks 34th out of 53 nations.
From our perspective, some of the top challenges include, first, the notable bureaucracy that is endemic across government and the public sector. This is clearly apparent when looking at the time required to obtain permits and approvals.
Second, India's lack of reliable infrastructure means that everything from access to electricity to the entry of goods at port and the subsequent distribution are also hurdles.
Third, doubts about the enforcement of contracts and the ease of resolving disputes reflect a concern about the efficacy of India's legal system. A court decision and obtaining due process can often take more than a decade.
Finally, access to credit remains an ongoing concern for many companies looking to operate in India. Central Bank restrictions limit foreign borrowing. As well, there is a preference in the domestic bank sector for providing shorter-term capital at higher interest rates. This means that planning a financing strategy at the outset of establishing investment in India is absolutely critical.
Despite some very real challenges in doing business in India's business climate, it would be wrong to paint them as insurmountable. We believe that it is possible to mitigate a number of these risks.
To capitalize on India’s growing consumer demand, we often counsel companies to establish a local presence, to be willing to adapt their products and business models to Indian norms, and to show that they are committed to staying for the long term. Partnerships between business and financial players, public and private, foreign and domestic, significantly increase the chance of the long-term success of an export transaction or an investment.
Canadian firms that take the time to understand the market, to develop these needed partnerships, and to adapt their products and processes to accommodate India can be successful. There are a number of real examples: McCain Foods, Sun Life Financial, TaraSpan, SENES Consultants Limited, Woodbridge, and many others. Indeed, at EDC, we are currently aware of more than 160 Canadian affiliates in India that are conducting business in the market across a wide range of sectors.
With respect to investment,
the stock of Canadian investment in India as of the end of 2011 was $587 million, significantly less than the $4.4 billion of Indian investment in Canada.
The stock of two-way investment between Canada and India has actually been declining since its height in 2008 ($7.2 billion in 2008 down to $5 billion in 2011). Dampening the enthusiasm expressed for India by foreign investors over the last couple of years has been the inability of India to move forward on needed government reforms to improve its investment climate. The general global economic downturn has also weakened investor confidence and withheld injection of capital into the market.
That said, hopes have been bolstered by a surprise slate of recent policy adjustments by the Indian government to open previously closed sectors to foreign investors, such as retail—you may be aware of Walmart's involvement now in India—and the relaxation of regulations surrounding the inflow of capital.
Sectors such as infrastructure, retail, and services are expected to create investment opportunities for foreign interests as additional reforms are implemented.
Indeed, overall there is great potential for trade and investment for Canadian companies across a wide range of sectors in India. Niche opportunities exist for Canadians, particularly in the sectors of telecom, health care, education—in strong agreement with Mr. Davidson—automotive, and infrastructure, including clean tech.
For certain, the sale of commodities such as grains and pulses, pulp, as well as metals, for example, iron ore, will continue to rank high in Canada's exports to this market. Where Canadian companies have achieved the most success is through the pursuit of business with India's leading private sector and privately held companies. These companies have rapidly been expanding their global operations, and are stepping forward to develop private sector solutions to some of India’s infrastructure constraints.
To accelerate Canadian opportunities in India, EDC is focused on the following strategies: to develop and deepen relationships with reputable private sector buyers and borrowers in India; to strengthen our financial partnerships in the region, with particular emphasis on enhancing our suite of financial services that support small and medium-sized enterprises; to help match Canadian capabilities to Indian market opportunities through targeted, planned matchmaking events with EDC strategic private sector Indian clients;
continuing EDC's efforts in reaching out to Canadian investors and exporters to discuss their strategic interest in India and promote suitable opportunities; deliver on services with bank partners that create financial capacity for Canadian affiliates in India; continued close engagement with Canada's trade commissioner service, bank partners, the Canada-India Business Council and the Indo-Canada Chamber of Commerce on delivering advisory services and tools for Canadian companies seeking to conduct business with India;
and finally, by leveraging EDC’s project finance and structured finance expertise and our relationships with multilateral agencies, to capture more Canadian procurement opportunities in India’s infrastructure sector as it evolves.
In conclusion, I would underscore four key points.
First, despite India’s many challenges, the country’s continued growth presents very significant trade and export opportunities for Canadian business.
Second, partnerships are and will remain absolutely critical to success in this market.
Third, India’s private sector companies are playing an increasing role in the development of the country. These companies’ supply chains now reach beyond India’s borders to present additional opportunities in a range of global markets.
Fourth and last, Canadian companies that are willing to make the effort to better understand India’s needs and adapt their products and processes will be the longer-term winners of these business opportunities.
I thank you again for the opportunity to be with you this afternoon.
Jason Langrish
View Jason Langrish Profile
Jason Langrish
2012-11-29 15:42
Thanks very much. I appreciate the opportunity to address the committee today.
As Rob mentioned, I've been active on the Canada-EU agreement, but obviously I'm here today in my capacity as an adviser to the Canada-India Business Council.
I'm not going to echo a lot of the remarks that Satish has made, which I agree with; I'm going to focus my comments on the more granular aspects of the CEPA negotiations.
Before doing that, however, I will say that there a few principles that I think should be guiding this relationship.
One is that it's a long-term relationship. A trade agreement can only do so much.
I'd add the caveat that I don't believe it's the responsibility of trade agreements to open up markets, per se. I think that's the responsibility of business, and government can assist where they're able to assist. I think trade agreements predominantly exist to manage increasingly complex commercial relationships. That said, the CEPA can be a very useful tool for furthering this relationship and getting some immediate gains.
I also agree with Satish's remarks that the visibility of Canada in India, and Canadian business in particular, needs improvement. I think more attention should be paid to it.
As occurs in a lot of the big emerging markets, or in many cases markets that have already emerged, the focus tends to be on the large companies, in some cases the state-owned companies. However, there's another tier that's emerging that's very significant, very entrepreneurial, and potentially could be just as good, if not better, in terms of long-term strategic partners for Canadian service providers, investors, and also companies that trade in goods.
With regard to the CETA, one thing that's been notable in the business community has been the delay; it hasn't gone unrecognized. I think there's a sense that some deliverables need to be forthcoming rather soon.
There is some skepticism out there as to the degree to which, one, this agreement is going to be concluded, and two, the level of ambition that it's going to have. At C-IBC we still think this agreement can be concluded in a timely manner and can have ambition. However, all trade agreements are not the same. As an example, the trade agreement being negotiated with the European Union is a much more comprehensive agreement, but it's also a reflection of the scale of the trade, the investment relationship between the two territories, the institutional linkages, and the existing familiarity between the two sides, which allows you to negotiate intellectual property protections, public procurement, and those types of things.
In the India deal, I suspect that those things probably won't be in at least the first rendition of the deal. However, when you start looking at things like tariffs, it's a 9% average tariff across all tariff lines for Canadian products into India, and 95% of goods have tariffs attached to them. In the agricultural space, the tariffs average about 30%. There's clearly room for elimination of tariff in market access for Canadian agricultural, and industrial, and processed foods, the whole gamut, really.
There is also the issue of certainty. For instance, on lentils there's zero tariff at present. However, there's a shortage of lentils in India, so the market is open. That's not a certain market. The market can be closed at any time. A CEPA can reinforce the fact that this zero tariff on lentils will not be removed, shall we say, based on changes in circumstances on the Indian side. This is important. I mean, if you want to develop a deep long-term relationship, certainty needs to be a component of that.
I'd underline, as well, that it's essential that this FIPA be concluded in fairly short order. It's going to be very difficult to conclude a CEPA that doesn't have a FIPA element.
I'm assuming that the thinking is that the FIPA will become the investment component of the agreement. If that's the case, it's going to be very difficult to conclude the FIPA after a CEPA. It seems to me that the CEPA would need to be there in advance.
As to the details of what will be in the FIPA, it's hard to say. Will there be investor to state....? I know that's become a hot topic lately in the media. I don't think that's the principal issue. The issue is fair treatment for investors, as close as possible to the concept of national treatment, which means if you meet all the same kinds of requirements and legal conditions, you should be treated the same as a domestic investor. Also, there's the risk of expropriation. Of course this is notably of concern, and the risk of expropriation becomes more and more prominent in such areas as mining. It's something that would certainly need to be addressed.
I think this agreement could use some thinking outside the box. If it doesn't move a bit more quickly in the next little while, we may want to look at some thinking outside the box. I'll throw out an example of where you may be able to do something on this.
One of the big prizes of the Indian market is insurance, financial services, commercial banking. As it stands, there is no possibility to get a majority ownership stake in these areas. I believe it's about 49%. In some cases it's lower.
What India is very keen on, in particular, is getting a mode 4, which is the temporary entry of workers, in particular in IT. They have a very large and successful IT industry and everything that comes with that. However, if they're not able to leverage that, and that's not just providing IT and related services in India, but it's also the ability for their people, for Indian citizens.... This isn't immigration; this is economic immigration, temporary entry. If they don't have the ability to move their workers abroad, if they don't have the ability to get their workers into Canada, to service their client base and also grow their businesses, they're not going to be that interested in an agreement.
There is an opportunity here. For instance, in the case of the deal that the European Union is currently negotiating with India, there has been pushback in this area. That's because the issue of temporary entry has been confused with the issue of immigration. Notably in the U.K., and when places are going through economic trouble, one of the first things that starts popping to the forefront is that they don't want immigration into their country. That whole debate really misses the fundamental point, which is that this is not immigration for immigration's sake; this is strategic entry tied to investment.
Perhaps Canada could say that in return for their opening up their banking, commercial banking and insurance market to Canadian participation above the minority threshold, we would reciprocate by opening up our market on mode 4 temporary entry for their workers. The reason this would be compelling to the Indians—and I don't think this would be a discussion that would necessarily occur in the first instance with the negotiators, but probably something that would have to be debated with India at the planning committee—is that it would signify for them for the first time with an advanced country getting a win, and establishing a precedent that they would really like to have.
In return, they'd be opening up to participation from Canadian financial service and insurance providers, that are not necessarily of the scale, or at least have the perception, that they would have an undue influence on the market. This is an area that could be pursued.
As it stands, what we're looking at is a deal that would include those things, and then probably we would also look at goods and services. I understand they're going to take a positive list, which means you cover only the things that are on the list. That's not as ambitious as a negative list, where only the things that are excluded are not covered. So you have an opportunity there to push the goods and services angle.
The investment component is obviously key, but we have to look at it this way: if Canada is offering, what is India getting? The Canadian side wants market access. The Canadian side wants investment opportunities in India, but the Indians really need to get something as well. It's not just access to the commodities we have and the expertise we have that they could use in, say, engineering, public transit, and all those areas where there is potential for gains. We have to give them something in return, and that something in return has to be a recognition that this is a key strategic growth area for them, and they want international, tangible recognition of this.
I would encourage that further consideration be given to that. This is not necessarily precedent setting in the sense that the temporary entry program was quite successful and had been implemented. I believe it's been temporarily suspended, but I think that's something that should be revisited.
All in all, it's a long-term relationship. I think it's important. The political commitment has been very good. Probably the political commitment and the business participation could be a bit more joined up. For instance, in visits to India, missions to India, rather than business going separately from government, I think they'd do better if they did it together, at least in some instances.
All in all, the business community stays very optimistic about this deal, but the optimism won't be there forever.
Thanks very much.
View Wayne Easter Profile
Lib. (PE)
I'll not deny that sometimes—my son's actually in IT—the companies do not want people who are going to be with that company for a short time even if they have the skills because of the proprietary rights, etc. I understand that.
You talked about strategic entry tied to investment, Jason. What did you mean on that point?
Jason Langrish
View Jason Langrish Profile
Jason Langrish
2012-11-29 16:14
What I mean is sort of a quid pro quo. I'll go back to Mr. Cannan's remarks on what the advantages are.
I'm going to answer your question, but I just want to preface it with this. India is a big market, but it's not really ready to play the same game as the U.S., European Union, and China. I think it still has a way to go. Canada is sort of a better fit. I think there's more of a comfort level there. The Indians would probably say that they do want to negotiate with the United States, but I don't think they'd like what that negotiation would look like.
What I'm saying is that instead of trying to get this broad, ambitious agreement, go for an ambitious agreement, but don't be so set on it being broad. I think there are a lot of things we'd like to have in agreements, but we won't always get them. I think it's more important to get some institutional framework in place as opposed to getting the perfect deal that never really materializes.
What I'm saying is that one of the key things the Indians are looking for is this temporary entry for IT workers. A big prize for the Canadian side of the equation, or one of the big prizes, would certainly be access to the rapidly expanding commercial banking and insurance market. They would get a first-mover advantage by doing it, which would essentially be a—“reward” is not the right word—return for acknowledging and addressing a key strategic interest of the Indians that's not getting accepted in their other international trade negotiations.
View Bev Shipley Profile
CPC (ON)
Thank you very much, Mr. Chair.
Thanks very much to our witnesses for coming here.
I'd like to follow up on Wayne's comments and concerns regarding the labour mobility movement and temporary workers.
You talked about the length of the agreement. You mentioned it was in place and was suspended, and that is on the Canadian side. Can you help us on what caused that and what the solutions may be to bring that back in, outside of working through the agreement?
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