Canada-India trade and trade relations have plunged, stopped in their collective tracks by a Canadian government allegation that India may have been involved in the assassination of a Canadian Sikh activist.

In the balance is whether a Canada-India Free Trade Agreement (“FTA”) will ever come to fruition, and Canada’s growing trade with this aspiring superpower.

Here are the high points on why and why not a FTA with India would be a good thing for Canada.

India As Global Trade Presence

Canada has been trying for a FTA with India for years, all aimed to follow in the footsteps of its allies, who have already established close ties with India. Global Affairs Canada has described India as a “pivotal economic player, crucial to Canada’s economic prosperity and security.”

Indeed, India has been the world’s fastest-growing major economy recently, and was Canada’s 10th largest trading partner in 2022. In that year, for example, Canadian exports to India set an all-time high of $5.4 billion in goods and $6.2 billion in services. (Perhaps not surprising, Canadian fossil fuels and related products were at the top of that list, at nearly $1 billion). Canadian imports from India were also high, at $6.4 billion and $2.9 billion in goods and services, respectively. Canada was on track to surpass those records in 2023 until the allegations referenced above.

Canada’s Attempts to Negotiate a FTA

On the trade negotiation front, Canada identified India’s rising global presence many years ago, and started formal trade negotiations aimed at a FTA in 2010. These were abandoned in 2017, but restarted in 2022, and had been going well.

2023 Political Accusations

This all changed on September 18, 2023, when Prime Minister Justin Trudeau announced in the House of Commons that Canada has credible intelligence that agents of the Indian government may be linked to the murder of Hardeep Singh Nijjar. (Nijjar was a Canadian citizen who was shot dead on June 18, 2023, in Surrey, B.C.)

New Delhi denied the allegations, while accusing Canada of being home to Khalistani terrorists and extremists.

Trade is expected to be quite negatively impacted!

Bottomline

Until a FTA comes to fruition, Canadian-Indian traders will be required to pay particular attention to the customs “Big Three”, namely tariff class, valuation and origin. Getting any of these customs elements wrong will lead to CBSA assessments (called Detailed Adjustment Statements or DASs).

Best practices would be reviewing your business’ customs compliance procedures and avoiding customs compliance problems altogether. Reviewing your business risk and obtaining legal advice may also provide peace of mind.

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