Kevin Yin is a doctoral student at the University of California, Berkeley and holds a master’s degree in economics from Yale University.
The paltry sums Canadians would have earned from increased trade with India are not a fair exchange for tolerating the alleged foreign-sponsored assassination of Hardeep Singh Nijjar, a Canadian, on domestic soil. Moreover, doing so carries its own economic price.
Yet this is essentially the bargain some are asking this country to make when they argue that Ottawa should avoid escalating the matter because we cannot afford to lose on trade with India.
It is important to keep in mind how marginal the gains on the table are. Industry experts estimated that the Comprehensive Economic Partnership Agreement (CEPA) with India would have increased Canadian GDP by about $5.1-billion by 2035. To put this number in perspective, this means that the deal would have increased Canadian output by less than a fifth of a per cent over a decade. In annual terms, that is more zeros after the decimal than are appropriate to put in writing.
Furthermore, the Canadian industries that would export to India under the deal are largely selling goods that will be increasingly sought after in global markets with or without a deal.
The largest export gains from CEPA would have gone to Canadian agriculture of fruits and vegetables, and manufacturing of chemicals, plastics and rubbers. Even in the absence of an India deal, Canada’s overall fruit exports grew by over a third in the past five years. The international market for plastics and rubbers is projected to expand by almost the same amount in the next five. These are already rapidly growing industries with strong prospects, and they do not need India.
Nor are the present-day leading exporters in dire straits. The largest share of exports from Canada to India is currently in fossil fuels and fertilizers. Conveniently for these sectors, international oil, gas and coal demand are projected to rise over the next decade, and fertilizers have become short in supply since the invasion of Ukraine as Russia was a key exporter.
In other words, people want what we have. If foreign-policy considerations dictate our goods cannot be sold to India right now, they can be sold elsewhere. The long time horizon that would have been needed to realize growth from CEPA is time that can be spent searching for other buyers. In a climate of friend-shoring, this should not be too difficult.
The claim is not that Canada would not have benefited from improved trade relations with India, nor that escalating tit-for-tat trade measures would not be harmful. As Nobel laureate Paul Krugman once said, if there were an economist’s creed it would certainly contain the affirmation “I advocate free trade.” But the economic consideration of protecting the proposed trade deal is only one among many. In this case it is overruled by the need to set a strong foreign-policy precedent.
The alternative is to invite adventurism from India and other dissatisfied countries in the future, conceding the basic tenets of Canadian citizenship. India is not the only unfriendly power with diasporas in Canada it disagrees with, and with which it has the corresponding incentive to interfere. Foreign intelligence agencies would love nothing more than an indication that extrajudicial killing goes unpunished in Canada. Trade, especially of CEPA’s magnitude, is not sufficient reason to give that invitation. The rights to safety from foreign powers and the rule of law should be non-negotiable within our borders.
In addition, showing weakness now and encouraging more foreign adventurism carry not just political costs but also economic costs down the road. These mounting national-security issues would be a massive sink for attention and resources. Moreover, at some point there will be a line crossed that even the most dovish will agree necessitates a response, and by then it would come at far greater cost to Canada than that of standing up to India today.
Canada will one day negotiate trade deals worth more than CEPA, with countries more powerful than India. If history repeats itself then, and Canada is finally forced to take a stand, defending sovereignty would mean losing larger trade and investment deals. That could be avoided if we had simply deterred such actions in the first place, by sending a strong message to India today. It is, in fact, fortunate that today’s diplomatic spat is only with India, whose CEPA is of relatively small value.
Two thousand years ago, safety was said to be guaranteed to anyone who could utter the phrase civis Romanus sum – “I am a Roman citizen.” The anecdote exists because the Romans understood that protecting citizens was a fundamental pillar of statehood. For a 21st-century democracy to compromise it for minor trade interests would be a grave miscalculation.