SYLLABUS
GS-2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
Context: India and Canada have launched negotiations for a Comprehensive Economic Partnership Agreement (CEPA) after signing the Terms of Reference (ToR) in New Delhi, signalling a renewed push to deepen bilateral economic ties.
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- The launch of negotiations follows discussions between the two leaders during the G7 Summit 2025, where both sides agreed to work toward finalising the ToR.
- The negotiations signal a reset in India–Canada bilateral relationsafter a period of diplomatic friction, with Prime Minister Mark Carney’s visit aimed at strengthening pragmatic economic cooperation.
- Bilateral merchandise trade between the two countries stood at USD 8.66 billion in FY 2024–25, with India’s exports at USD 4.22 billion and imports at USD 4.44 billion.
- Major Indian exports to Canada include drugs and pharmaceuticals, iron and steel, seafood, cotton garments, electronics, and chemicals, while imports from Canada include pulses, coal, fertilizers, pearls and semi-precious stones, and petroleum crude.
- India’s services exports to Canada are led by telecommunications, computer and information services, and other business services.
- Both countries aim to expand bilateral trade to USD 50 billion by 2030 through deeper economic integration under CEPA.
About the Terms of Reference (ToR) for India–Canada CEPA
- The ToR provide the framework and roadmap for negotiating the proposed Comprehensive Economic Partnership Agreement (CEPA) between India and Canada.
- It outlines the scope of negotiations, format and frequency of meetings, modalities, negotiation approach, and the procedural roadmap for conducting the talks.
- The ToR is not the trade agreement itself, but a guiding framework that structures and facilitates the negotiation process.
- Areas covered under the negotiation framework include:
- Trade in Goods: Tariff reduction or elimination, market access, rules of origin, customs procedures, and trade facilitation.
- Trade in Services: Cross-border supply of services, mobility of professionals, and regulatory cooperation.
- Other policy areas (as mutually agreed): Investment facilitation, digital trade, intellectual property rights, government procurement, technical standards, sanitary and phytosanitary measures, and dispute settlement mechanisms.
- Emerging sector cooperation: Potential collaboration in areas such as energy trade (LNG, LPG, crude oil), critical minerals supply chains, technology and innovation, and advanced manufacturing.
Significance
- Expanding Bilateral Trade: The CEPA aims to unlock untapped trade potential and significantly increase the current bilateral trade volume.
- Diversifying Energy and Resource Partnerships: Canada can become an important supplier of energy resources and critical minerals, while India provides a large and expanding market.
- Boosting Services and Skilled Mobility: India’s strengths in IT, telecommunications, and professional services could benefit from improved market access and mobility provisions.
- Strengthening Supply Chains: Cooperation in critical minerals, technology, and energy will help build resilient supply chains.
- Reinforcing People-to-People Links: Canada hosts over 425,000 Indian students and a large Indian diaspora, which strengthens economic and cultural ties.
- Institutionalizing Economic Cooperation: The CEPA will provide a predictable and rules-based framework for trade, investment, and regulatory cooperation, strengthening long-term economic relations.
About the Comprehensive Economic Partnership Agreement (CEPA)
- It is an economic arrangement between two or more countries under which they agree to eliminate or significantly reduce customs duties on a large number of traded goods, while also addressing non-tariff barriers, services trade, and investment flows.
- Compared to traditional trade agreements, CEPA is broader in scope because it aims to promote holistic economic integration, including:
- Trade in goods (tariff reduction or elimination)
- Reduction of non-tariff barriers
- Promotion of services exports
- Facilitation of bilateral investments
- Trade agreements such as CEPAs or Free Trade Agreements (FTAs) provide several economic advantages:
- Zero-duty or reduced-duty access to partner country markets helps diversify and expand export markets.
- They encourage foreign investment, which stimulates domestic manufacturing and industrial growth.
- Provide access to raw materials, intermediate goods, and capital goods required for value-added manufacturing.
- Improve competitiveness of domestic industries in global markets.
- India has concluded trade agreements with countries such as Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, South Korea, Japan, Australia, the United Arab Emirates (UAE), and Mauritius, as well as regional groupings like ASEAN and the European Free Trade Association (EFTA) comprising Iceland, Liechtenstein, Norway, and Switzerland.
- Since 2014, India has signed several major trade agreements, including those with Mauritius, the UAE, Australia, EFTA, and the United Kingdom (UK).
- India is also currently negotiating trade agreements with a number of its trading partners, including the United States, European Union, Chile, Peru, and Israel.