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Canada pushing India to sign bilateral investment treaty

Canada’s Prime Minister Stephen Harper, center, and his wife Laureen Ann wave as they arrive at the Indira Gandhi International Airport in New Delhi, India, Monday, Nov. 5, 2012.

The Associated Press/Mustafa Quraish

Canada is criticizing India's investment environment as murky on the eve of Stephen Harper's visit with counterpart Manmohan Singh in New Delhi.

After a business roundtable discussion in India's capital, International Trade Minister Ed Fast said Ottawa is eager to build trade with India but left the impression Monday that Canada won't consider the welcome mat fully laid out for investors until India signs an agreement that gives Canadian investors more assurance of their rights in the South Asian country.

"We've made it very clear to the Indian government that a bilateral investment treaty between Canada and India is going to be a very clear signal to Canadian investors that India is open for business," Mr. Fast said.

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"Right now, we still have a relatively opaque investment environment here in India," the minister said.

Mr. Fast's candid comments speak to Canada's frustration at slow progress with New Delhi on trade talks, including delayed legal protections for Canadian investors in the south Asian country. A foreign-investor protection agreement is a basic building block of a maturing trade relationship between two countries. It gives foreign investors legal standing in the other country so they can sue for compensation if their investment is damaged by government actions.

Canada and India announced more than five years ago that they had concluded talks on such a deal, but New Delhi effectively reopened the agreement in 2009, citing concerns – and it's been stalled ever since.

Mr. Fast said that is why Canada wants to drive home the point that the agreement should be put into force sooner rather than later, adding that the issue is now in New Delhi's hands. He said Canada is ready to move forward but told reporters they'd "have to ask India" about what happens next.

Mr. Harper's visit to India is intended to rekindle talks on the investment treaty as well as on a bigger free-trade deal – plus to wrap up a deal to resume supplying nuclear material to New Delhi after years of bitter acrimony.

Mr. Harper will meet Tuesday in New Delhi with Mr. Singh, as well as Sonia Gandhi, the president of the governing party.

Canada's ambassador to India announced earlier this week that Ottawa does not expect to be able to sign a foreign-investor protection agreement during Mr. Harper's six-day visit because New Delhi has been spooked by a string of cases where foreign investors were threatening to use bilateral investment treaties to challenge Indian government measures.

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India is now reviewing its approach to investment treaties and Canada is waiting to see what it decides.

This includes an incident this past April where UK-based telecom giant Vodafone issued a notice warning India it intended to challenge tax legislation that allows authorities to reopen tax cases dating as far back as the 1960s and collect more revenue over past corporate deals.

Canada and India's annual two-way trade totals more than $5-billion. Mr. Fast said Canadian businesses see energy-hungry India and its growing middle class as a major opportunity but are telling him they're having trouble feeling certain about the investment rules in this emerging economy.

"I just had meetings with some Canadian business people who are looking to invest here in the market," the Trade Minister said.

"They've shared with me some of their frustrations: the difficulty in getting clear answers about what investments are permitted, what aren't. What the rules, what the regulations are going forward," Mr. Fast said.

"That's where these trade agreements, that's where investment agreements come in: They clarify those rules going forward."

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Mr. Harper has political reasons for courting India. There are more than a million people of Indo-Canadian origin in Canada and voters with Indian ties helped clinch Greater Toronto Area seats in the past election, when Mr. Harper won his first majority government. It's also good business. A study commissioned by Canada and India concluded that free trade could boost Canada's annual economic output by at least $6-billion. The Tories are also keen to diversify trade beyond Canada's heavy dependence on U.S. customers and is targeting rapidly emerging economies such as China, India and Brazil.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More


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