"Canada-India free trade agreement, which is officially called as Comprehensive Economic Partnership Agreement (CEPA) has been put on back burner due to several issues between both countries."Analyse the reasons for the same.
Published: March 17, 2016
The negotiations for the Canada-India free trade agreement, which is officially called as Comprehensive Economic Partnership Agreement (CEPA), have been put on back burner due to several issues between both countries. There could be several reasons to this issue.
The bilateral Foreign Investment Promotion and Protection Agreement (FIPPA) is not ratified between both the countries. Also Canada is focussing on ratification of the Trans-Pacific Partnership (TPP) which is a US led mega regional FTA of 12 Pacific rim nations. India is not a party to the TPP.
With respect to FIPPA, Canada has concerns about Investor-State Dispute Settlement (ISDS) mechanism, wherein in case of disputes, India wants the investors to exhaust the domestic remedies before going to international tribunals. But Canada is worrying about the judicial delays in India and it prefers international tribunals.
The other issue is that Canada wants assurance from India for investment protection in case of any roll-back or changes in the policy. But India has not agreed with Canada as it may lead to losing its policy space.
The negotiations for a free trade agreement were started in 2010. There have been several differences from both sides. The main unresolved issues in the FTA are clauses proposed by Canada namely “MFN-forward” and “ratchet”. Under ‘MFN-forward’, any future concessions given by India to its other trading partners would automatically be extended to Canada.
But India says its relations with each trading partner are unique and it cannot extend the concessions given to one country to other countries.
Under ‘Ratchet’, all the benefits from the future liberalisation policies of India would automatically be extended to Canada and vice-versa. India is opposing this clause as it will reduce its policy space. India is also against Canada’s proposals to include labour and environment standards as well as competition and government procurement in the FTA.
Therefore, all these past standing issues are standing as hurdles for completion of CEPA between both the countries.
Model Questions Category: 054 - Bilateral Regional and Global Groupings and Agreements