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By Mohammad Akbar
In light of news that China has overtaken Canada as the number one exporter to the U.S., it makes more sense than ever that we stop putting all our eggs into one basket.
Canada should seek to diversify its trade for the same reasons that an investor diversifies his or her portfolio—to get better gains and reduce risk.
Canadian businesses are concerned by the potential upheaval in North American trade amid the emergence of a “Buy American” mentality and the likelihood that NAFTA may be placed back on the negotiation table.
This is an opportune time for Canada to rethink its approach towards international trade. We can and should open as many doors around the world as possible for our businesses by moving toward free trade with the world’s largest and fastest growing economies.
Preferential trade agreements or free trade agreements are becoming very popular around the world as many countries become increasingly disenchanted with the multilateral trade regime established under the World Trade Organization.
I would suggest this is a very good time to be thinking of building a stronger trade relationship with India.
The Indian economy has grown by more than nine percent for three years running—growth that has been supported by economy-wide reforms, huge inflows of direct foreign investment, rising foreign exchange reserves, and a flourishing capital market.
Furthermore India is interested in building regional and bilateral trade relationships and has entered into in number of them with the zeal of a new convert. It is currently negotiating a free trade agreement with the European Union and has signed an agreement to cooperate in trade, investment, and energy issues with the U.S.
The Indian government is looking at alternative energy sources and has also signed a wide-ranging nuclear treaty with the U.S.—an area that can be exploited by Canada due to its comparative advantage in the energy sector.
The Indian services sector, which accounts for more than 50 percent of its GDP, is another tremendous opportunity for Canada .
Canada also has strong immigration ties with India that are currently not reflected in trade relations. Over the last five years, trade between the two countries has only amounted to about US$4 billion.
In this age of globalization, economic relations are a key to strengthening political and foreign relations. A bilateral agreement with India could yield meaningful strategic benefits.
India is an important country for Canada because of its geographical location and its emerging role in global politics. Greater market access to India and its one billion people will also help reduce Canadian businesses’ vulnerability to the ups and downs of the U.S. market. That will expand production here at home and create more jobs while at the same time providing a cheap source of imports for both goods and services.
In short, free trade with India would not only be a tremendous benefit to Canadian business but would also establish Canada’s presence politically and socially in one of the world’s great emerging markets.
Mohammad Akbar is a professor of economics in the school of business at Kwantlen Polytechnic University.