There are few more important things Prime Minister Stephen Harper can do for the future of the Canadian economy in our lifetimes than start free-trade talks with India. Against the backdrop of aging populations, thickening borders and the unlikely return of the U.S. consumer as the global ATM - and in order to build the foundation for competitiveness beyond the current downturn - we need to think differently and act quickly to reduce our reliance on a single partner.
We need to diversify into the big trading markets of the European Union, Brazil, China and India. Given global multilateral trade talks are mired in the sands of Doha for the foreseeable future, Canada's preference for bilateral pacts has proven a good instinct. With NAFTA, and an EU free-trade deal in the works, we have secured two of the largest markets, but Brazil remains tied up in its own regional trading regime and China seems forever complicated. And so India stands out as the next great opportunity for Canada.
Frankly, the timing could not be better. India is keen to expand its global trade footprint and is selectively engaging in large deals of its own, including ones with the EU and South Korea. But it is also keen to get a foothold in the North American market. A quiet visit by the Indian commerce minister to Ottawa in September has set the stage for diplomatic dialogue on a comprehensive economic partnership - a commitment to talk about talks. The Prime Minister should follow up aggressively in India this week and stake his claim for full-blown free-trade discussions.
Most countries got the memo circulated at Davos a few years ago
An agreement will not happen overnight and will likely take years to negotiate. But seizing on this initiative is rich with symbolism of our intent to engage the New India and will help us jump the snaking cue of the global great and good forming in Delhi. Most countries got the memo circulated at Davos a few years ago: India, like China before it, emerged from the global economic realignment as one of the great players of the 21st century. It is now the fourth-largest economy in the world in purchasing power parity, having grown at 6 to 9 per cent over two decades, and will be, barring calamity, one of the big three within 30 years.
Its self-sustaining growth is now past the tipping point - not fuelled by exports alone but by a private sector composed of millions of entrepreneurs, domestic consumption and new global ambition. India is set to become one of the great global consumer markets in the decades ahead as its North American-sized middle class flex their credit cards and the country brings half a billion of its poorest into the global economy for the first time.
Underwriting this growth has meant converting two enormous challenges into strengths. India's democracy, long viewed as a handicap to growth, is now widely regarded as a source of multilayered strength, able to see off complex challenges from security threats to brokering the aspirations of the fast urbanizing poor. India's billion-plus population, once a Malthusian trap, now looks more like a demographic dividend featuring a young population (half under 25) set to grow rich(er) before they grow old - similar to postwar America and Europe.
A Canada-India free trade agreement would likely be focused primarily on investment, labour mobility and services - fears of job losses and a flood of cheap exports are overblown. The China-U.S. relationship, often citied by critics of trade arrangements between developed and big emerging markets, is instructive: Job losses and cheap imports have occurred precisely because trade and investment liberalization is lacking, creating a situation where China has depressed its currency to dampen consumption and drive exports that are bought by U.S. consumers increasingly through debt - debt that is, in turn, financed by the Chinese. This, of course, will not be the case with Canada's trade with India.
With similar democratic institutions, Commonwealth heritage and strong diasporic links, Canada and India have much in common institutionally, making an agreement possible. What is required now is a greater level of political and corporate-sector commitment - and a little imagination - to make it a reality.
Rana Sarkar is president and executive director of the Canada-India Business Council.