Canada trades billions in goods with India. As tensions rise, what are the stakes?

Claims that there is evidence that Indian government agents may have been involved in the k*****g of a Canadian citizen in June call into question relations with the future superpower, including trade.

Prime Minister Justin Trudeau dropped a bombshell in the House of Commons on Monday, citing “credible” intelligence that agents of Indian Prime Minister Narendra Modi’s government may be linked to the murder of 45-year-old Hardeep Singh Nijjar.

Nijjar, a prominent Sikh leader who championed the Khalistan movement, was shot dead on June 18 in front of the Guru Nanak Sikh Gurdwara in Surrey, British Columbia.

Trudeau did not provide further details on what evidence Canadian intelligence agencies may have.

India has strongly denied the allegation, accused Canada of harboring “Khalistan terrorists and extremists” and warned its citizens in Canada to “exercise extreme caution” due to what it calls ” anti-Indian activities” in the country.

The two countries, which have traded billions of dollars in goods over the years, expelled their respective diplomats. A former Trudeau foreign policy adviser says this could be the start of a months-long diplomatic row with India.

Here are the trade issues.

Before the allegation was made public on Monday, trade relations with India were beginning to deteriorate.

On September 1, Indian High Commissioner Sanjay Kumar Verma said Ottawa had requested a pause “over the last month” in ongoing preliminary negotiations for a trade deal.

The two countries have been negotiating an agreement since March 2022 that would be limited to certain sectors, instead of extending to the entire economy.

The talks follow a five-year hiatus. The countries began negotiations in 2010 for a comprehensive agreement, but abandoned their plans in 2017.

Then, on September 15, Trade Minister Mary Ng’s office said a planned “Team Canada” trip to India was being postponed, without providing details on when it would take place.

Ng was scheduled to lead a five-day “Team Canada” trade mission to Mumbai with Canadian business and provincial leaders, scheduled to depart Oct. 9.

The trade mission, the first to Asia as part of Canada’s Indo-Pacific strategy, aimed to boost Canadian clean technology companies to help meet India’s renewable energy needs.

The Trade Commissioner Service said the trip would also have aimed to increase trade in sectors such as automotive, agriculture and value-added foods, digital technology, infrastructure and life sciences.

This would also have involved networking with Indian business leaders, briefings from senior officials and key industry players, as well as roundtable discussions with industry and local experts.

A description of the trip posted on the Trade Commissioner Service website said India was the fastest growing major economy in 2022.

Last year, India was Canada’s 10th largest trading partner, Global Affairs Canada said on its website, adding that India would be a “key partner as Canada strengthens its economic ties with the Indo-Pacific as part of a new global strategy for the region.

Last year, exports to India totaled $5.4 billion in goods and $6.2 billion in services to India, according to the Trade Commissioner Service.

Imports from India accounted for $6.4 billion in goods and $2.9 billion in services.

Canada’s top export to India in 2022 was fossil fuels and related products worth almost $1 billion, followed by fertilizers worth almost $748 million, and wood pulp and plant fibers worth about $384 million, according to data from Trading Economics/UN Comtrade.

Pharmaceutical products, worth around $418 million, accounted for the bulk of India’s exports last year, followed by steel products worth around $328 million and machinery, nuclear reactors and boilers worth approximately $287 million.

Certain parts of the Canadian economy depend on trade relationships.

As of 2018, India is the largest source country for international students in Canada. In 2022, their numbers increased by 47 percent to nearly 320,000, representing about 40 percent of total international students, according to the Canadian Bureau for International Education.

The increased reliance on international students and their high tuition fees comes as the amounts universities and colleges can charge domestic students have been limited and funding for higher education has slowed.

India is also important to the Canadian pulse industry, with approximately $400 million worth of Canadian lentils shipped to the country annually over the past three years.

In fashion now

Saskatchewan accounts for about a third of Canadian exports to India, which are worth more than $1 billion to the provincial economy. The trade includes products like lentils, which India has sometimes blocked or delayed due to its pest control policies.

Saskatchewan also has a trade and investment office in New Delhi.

The agricultural sector is hoping for calmer tempers, said Keith Currie, president of the Canadian Federation of Agriculture.

“Given the amount of product we have shipped, this could have an impact,” he said.

“But we are also optimistic that the Indian government will understand that ‘this is a product we need’.”

Trudeau said Tuesday that Canada was not seeking to “provoke or escalate” tensions with India and wanted his government to cooperate with the RCMP investigation.

However, given India’s outright refusal and frozen trade negotiations, the row carries the risk of arbitrary trade measures, said Jeff Nankivell, president of the Asia Pacific Foundation of Canada.

“The agricultural sector is the most vulnerable… Usually when governments want to express their displeasure through trade measures… it has to do with the number of inspections required, the type of chemicals you are allowed to apply on the cultures and that sort of thing,” he told PKBNEWS.

“This is the go-to game to influence business interests as a means of expressing diplomatic displeasure, and this would be an area we need to pay attention to to see if any action is taken by the Indian government.”

Nankivell added that a long-running dispute could potentially impact the number of Indian international students in Canada.

“This would affect many different economic interests in Canada, both in higher education institutions and in the local economies where these institutions are located,” he said.

Canada could also impose sanctions targeting sectors or individuals, said John Boscariol, head of the international trade and investment law group at McCarthy Tetrault LLP, but he added that it was a delicate situation .

“Canada should be very careful in how it proceeds, to ensure that it does not shoot its own companies in the foot,” he said.

However, as many allied countries seek to move away from communist rule in Beijing, India may not need Canada that much, said Rohinton Medhora of the Center for International Governance Innovation.

PKBNEWS has learned that while Canada’s allies are concerned and supportive of Nijjar’s allegations, they have taken a more cautious approach than the Trudeau government in their interpretation of the intelligence and how far they are willing to push it.

In fact, Britain said on Tuesday it would continue trade talks with India, although it called the development “serious allegations.”

“Work on trade negotiations will continue as before,” a government spokesperson told reporters.

“When we have concerns about countries we negotiate trade deals with, we raise them directly with the relevant government. But as far as the current negotiations with India are concerned, these are negotiations on a trade agreement and we are not seeking to confuse them with other issues.”

Treasury Board President Anita Anand told reporters Tuesday that Canada’s efforts to ease its trade dependence on China in the Indo-Pacific region continue despite the dispute with India.

— with files from The Canadian Press and Reuters