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Canada-India Joint Study Group Report: Exploring the Feasibility of a Comprehensive Economic Partnership Agreement

Chapter 7: Recommendations and Conclusion

Further to an announcement by Canada's Minister of International Trade and India's Minister of Commerce and Industry on January 21, 2009, a Joint Study Group was established on November 17, 2010 to examine the feasibility of a CEPA with the following objectives:

• broaden and deepen cooperation in all economic fields;

• encourage trade and investment flows, bilaterally and regionally;

• contribute to trade and investment facilitation through minimizing tariff and non-tariff barriers, reducing any administrative costs;

• improve business climate in the two countries; and

• enhance transparency of regulation and promote cooperation among relevant institutions.

The Joint Study Group also undertook economic modelling with a view to identifying the possible economic impact of trade liberalisation. Simulations using the GTAP were carried out by both Canada and India. The simulations covered a wide range of liberalisation issues such as trade in goods and services and trade facilitation, and they examined the implications of productivity gains and increases in the supply of labour and capital, and their consequent impact on the economies of the contracting parties. Estimates of GDP gains range from US$6-15 billion for Canada and US$6-12 billion for India. These results show that the potential gains from liberalising trade between Canada and India are substantial. Further, the gains are fairly symmetric. Bilateral trade increases significantly with export gains for Canada ranging between 39% to 47% and for India, between 32% to 60%.

With this understanding, the Joint Study Group proceeded to examine Canada's and India's trade policy approaches in goods, services and investment, as well as to define complementary issues and cooperation. The Joint Study Group found that, while Canada's and India's approaches sometimes differ, there is an overriding remarkable similarity in objective in the various areas that would comprise a CEPA. A set of common recommendations and objectives were identified that would permit Canada and India to pursue a comprehensive and ambitious CEPA to their mutual benefit. These recommendations are outlined below.

7.1 Summary of Recommendations

In the context of a possible Canada-India CEPA, the Joint Study Group makes the following recommendations with respect to trade in goods.

• Rules of origin should be clear and simple in design with low compliance costs, economically efficient; recognise the increasingly globally integrated nature of manufacturing process; acknowledge the principles of competitive and comparative advantage; and facilitate trade between the two countries.

• With respect to customs (origin) procedures, a Canada-India CEPA should include provisions that allow for the effective and transparent administration of the rules of origin. Such procedures should help ensure compliance with the rules of origin without creating unnecessary obstacles to trade. The broad objectives could include: simplify and harmonise customs procedures; ensure predictability, consistency and transparency in the application of customs laws, regulations and administrative policies and procedures; facilitate bilateral trade and ensure the security of such trade; provide a means for customs-customs consultation to enable early resolution of any issues affecting the movement of trade across borders; and rules of origin should be readily enforceable at the border without involving additional administrative costs. Based on previous agreements, Canada and India have different views in respect of certification and verification of origin. In the framework of a bilateral agreement, we may have an opportunity to find innovative solutions for customs procedures.

• Trade Facilitation provisions of a Canada-India CEPA should: facilitate trade between the two countries; build upon the WTO work with a view of avoiding duplication; support the objective of reducing cost for the trading community; support innovation and promote the use of new technologies where appropriate; be in accordance with the Parties respective confidentiality and protection of information requirements; and ensure that appropriate security measures are maintained.

  In the context of a CEPA, India and Canada should initiate negotiations related to Trade Facilitation as early as possible so as to improve customs efficiency through bilateral cooperation. Such cooperation could include: appropriate controls to combat offences against law administered by customs and facilitate legitimate trade; ensuring efficient, economical customs border administration and the expeditious clearance of goods; ensuring harmonised systems of customs valuation, in line with the Agreement on Implementation of Article VII of the GATT, 1994), duties and documentation may be evolved across all notified or authorised ports of entry in both the countries; and procedures of handling of goods at ports and customs clearance that may be simplified and made more efficient.

• A technical barriers to trade chapter should build on the foundations of the WTO TBT Agreement and seek to improve its implementation; ensure that standards, technical regulations, and conformity assessment procedures do not create unnecessary obstacles to trade, primarily by establishing enhanced transparency disciplines; seek to reduce transaction costs for exporters by exploring methods to facilitate the recognition of conformity assessment; enhance joint cooperation between the Parties; and create a bilateral mechanism to address specific TBT issues. In addition, in order to facilitate trade in goods, both sides could explore opportunities for mutual recognition in the area of technical regulations, standards and conformity assessment procedures.

• A Canada-India CEPA should include provisions on sanitary and phytosanitary issues that affirm that SPS trade-related measures shall be governed by the WTO SPS Agreement; and ensure an effective bilateral mechanism to provide a forum for ongoing cooperation and information exchange, as well as facilitate discussion on bilateral SPS issues in order to avoid disputes, taking into account existing mechanisms.

• If necessary, a Canada-India CEPA could include an emergency action chapter that provides for a transitional, tariff-based emergency action mechanism that covers all goods and establishes clear parameters for any resulting actions, the conditions under which they may be imposed, and limits the length of time for which the action may be maintained.

• Trade remedies could be discussed with the objective of maintaining appropriate protection from unfair trading practices, including a potential discussion of global safeguard measures, while ensuring that the benefits of trade liberalisation are not undermined and allowing potential exports to be realised, in accordance with the rights and obligations established by the WTO Agreement.

In respect of services, the Joint Study Group arrived at the following recommendations.

• A Canada-India CEPA should include a Trade in Services Chapter that provides for: liberalisation of trade in services with substantial sectoral coverage, measured in terms of numbers of sectors, volume of trade and modes of supply, including sectors and modes with trade potential and complementarities; a considerably higher level of ambition than the current WTO commitments, with the aim of achieving market access, non-discrimination and compliance with Article V GATS; disciplines in domestic regulation that would be a useful complement to market access and non-discrimination and would play a positive role in facilitating trade in services; and provisions to facilitate the mutual recognition of professional qualifications.

• The Canada-India CEPA should include a stand alone chapter for financial services. Specific modalities, such as approach and level of commitments, will be discussed in the context of formal negotiations.

• A Canada-India CEPA should include a chapter on telecommunication services, with the goal of promoting a pro-competitive regulatory environment that is vital to trade in telecommunication services.

• Recognising the mutual interest in facilitating the legitimate temporary movement of natural persons for enhancing bilateral trade and investment, a separate chapter on temporary entry for natural persons should be included.

In regard to investment, the Joint Study Group recommends that the bilateral investment agreement should be concluded and ratified. Consideration of additional investment provisions in a CEPA can take place thereafter.

Chapter 5 examines Canada's and India's approaches with respect to other areas of economic cooperation, which will continue to be discussed in the context of a CEPA.

• Canada and India agree to address intellectual property within the context of a comprehensive CEPA that would lead to clear benefits for both sides.

• Canada and India agree to exchange information on electronic commerce in the context of CEPA negotiations.

• Consultations between India and Canada may be undertaken in the CEPA context as appropriate on various matters relating to competition policy and monopolies and state enterprises.

• In relation to the area of Government Procurement (GP), Canada and India have differing points of view, but have agreed to continue to discuss government procurement as we progress toward a bilateral CEPA.

• In the areas of Trade and Labour and Trade and Environment, Canada and India have different points of view, but have agreed to continue to discuss these issues as we progress toward a bilateral CEPA.

• Any agreement should include institutional provisions for its effective administration, including a binding state-to-state dispute mechanism.

The Joint Study Group also considered a list of existing agreements and areas of cooperation, including Trade Policy Consultations, the Air Transport Agreement, the Science & Technology Agreement, Aerospace, the Social Security Agreement, Education, Agricultural Cooperation, and Energy Cooperation.

The recommendations and findings presented in the report are without prejudice to the final outcome of negotiations for any future comprehensive economic partnership agreement.

7.2 Conclusion

The Joint Study Group finds sufficient common ground to recommend moving ahead with next steps towards negotiation of a comprehensive agreement covering substantially all trade in goods and services; investment; trade facilitation; and other areas of economic cooperation, as a 'single undertaking', leading to additional trade flows and economic gains.