Canada lacks awareness of India’s growing economy

A conversation between Joanna Smith and India’s high commissioner, Dinesh K. Patnaik, in Ottawa last month, has left a lasting impression. Patnaik’s comment about Canada recognizing the difference in the size of the economies highlights the change in global conditions since former prime ministers Stephen Harper and Manmohan Singh initiated trade talks in 2010.

There is hope that India’s trade agreement with the European Union could pave the way for a similar pact with Canada. However, it would be misguided to assume Canada will receive equally favorable terms, given its lack of economic weight and influence.

Canada’s Economic Standing

At the time, the oilpatch was booming, and Bay Street had survived the 2008-2009 financial crisis intact.

Former Prime Minister Stephen Harper had been in power for nearly five years and decided it was time to make his debut at the World Economic Forum’s annual retreat at Davos, Switzerland. Harper wrote in his book, “Right Here, Right Now,” that his purpose was to showcase Canada’s successful economic management to an international audience.

For a long time, Canada offset its relative lack of economic weight with the prestige of being one of the economic winners from the Second World War and a member of all the right clubs. However, this approach may not be effective now, as India’s economy is almost seven times larger than Canada’s.

Disembarking at Mumbai’s Chhatrapati Shivaji Maharaj airport is like traveling to the future. The chaos outside is a quick reminder that India has some work to do, but it is no longer a country that will be cowed by a mid-sized economy with an enviable level of GDP per capita.

Canadian Ignorance about India

Canadians can be unaware of their standing in the world. The country’s history of privileged access to America and British preferential tariffs has led to a lack of curiosity about the rest of the world. A poll by the Angus Reid Institute last year found that almost 70 per cent of Canadians admitted to knowing little or nothing about India.

Vina Nadjibulla, co-founder and CEO of the Centre for Strategic Statecraft, wrote in an essay earlier this year that this lack of awareness is a strategic weakness, especially given India’s growing importance to Canadian interests. Nadjibulla’s statement highlights the need for Canadians to better understand India and its economy.

The Canadian Chamber of Commerce’s Business Data Lab recently unveiled a new web tool that makes real-time estimates for where Canadian merchandise exports have the most potential to grow. The lab’s principal economist, Andrew DiCapua, was surprised to find that slow-growing Europe came out ahead of Asia in terms of potential for growth.

Craig Johnston, chief economist at Farm Credit Canada, noted that any trade agreement with India should create incentives for Canadian industry to turn raw materials into food ingredients, which capture more value and make Canada less vulnerable to Indian politicians’ tendency to protect farmers from import competition. Johnston’s comment suggests that Canada’s approach to trade with India needs to be more thoughtful.

Rapid economic growth only matters if Canada can supply the Indian market with what it wants. The discovery that Europe has more potential for growth than Asia tracks Export Development Canada research, which used a trade gravity model to estimate where Canadian exports underperform. For goods, India was only 12th.

According to Export Development Canada’s gravity model, only the U.S. ranks higher than India in terms of potential for services exports. This suggests that companies like Sun Life, which has a significant presence in India, might have more to teach Canada about trade with India than Saskatchewan’s cash croppers.

Carmichael’s observation is supported by the fact that Gary Comerford, the executive who led Sun Life’s expansion to India, has visited the country more than 90 times since the mid-1990s. This level of commitment to building relationships in India is likely to be more successful than relying on short-term trade agreements.

The Canadian government’s approach to trade with India will be put to the test as International Trade Minister Maninder Sidhu travels to India this week with a delegation of executives.