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.
