India-Canada bilateral relations have been under stress for the past few years. It hit a new low during G-20 meeting in Delhi when Canadian Prime Minister Justin Trudeau visited New Delhi. A lot was discussed in media on both sides about the nitty gritties of the visit that led to negativity. In between all this, the Free Trade Agreement (FTA) talks between India and Canada have been paused since September 2023 due to unresolved political issues, primarily concerning Khalistan extremism in Canada and the alleged killing of a pro-Khalistan activist.
The background
FTA negotiations had restarted in March 2022 after a decade-long hiatus but were halted again after six rounds. This was because the political tensions led to a tit-for-tat expulsion of diplomats. However, Canada's upcoming 2025 election might influence the future course of negotiations. Bilateral trade between India and Canada stood at $7.6 billion (CY 2023), with India facing a trade deficit.
What it means for the textile & apparel industry
Both countries were aiming for a comprehensive trade deal, with India seeking duty-free access for textiles, leather, and easier professional visas. Canada desired better access for dairy and agricultural products. The stalled talks are a setback for Indian textile and apparel exporters who could have benefited from duty-free access to the Canadian market. For Canada too, this means reduced access to the growing Indian market for apparel. And potential benefits like lower prices for consumers and increased investment are on hold. The missed opportunities are:
Exports: Indian textile and apparel exports to Canada could have significantly increased with duty-free access.
Imports: Canadian consumers might have benefitted from lower prices on Indian textiles and apparel.
Investment: The FTA could have attracted greater investment in both countries' textile sectors.
Going ahead, the two sides are looking for a resumption of talks but that depends on resolving political issues. Also, Canada's 2025 election outcome could impact future negotiations. Meanwhile, both countries might explore alternative trade deals with other partners. Indeed, the stalled India-Canada FTA talks are a missed opportunity for economic growth in both countries, particularly for the Indian textile and apparel industry. Rekindling negotiations and finding common ground on political issues is crucial to unlock the potential benefits of this trade pact.
