Indian Prime Minister Narendra Modi arrives in Canada for his first official visit on Tuesday, drawing attention to the opportunity that India offers for the Canadian economy -- and for Canadian politicians.
A number of recent projections have forecast that India will soon become the world's third largest economy -- after only the United States and China. The United States is a mature economy, with a strong appetite for Canadian exports but limited growth potential. India's rise will likely mirror China's, with steadily rising demand for Canadian natural resources. In today's globalized economy, the next step will be the establishment of linkages between Canadian firms and those in India in supply chains that allow Canadian and Indian firms to build things and provide services together.
To realize that potential, Canadian governments must continue to develop the infrastructure to support trade with India: ports, air linkages, and most important of all, a framework of trade and investment rules, compatible standards and customs and traveler facilitation. These are things that even longtime trade partners like the United States and Canada continue to work at, and will be a major challenge for Canada and India. Rising numbers of Indians are immigrating to Canada and the Canadian government has worked to facilitate family reunification with a "super-visa" program. These new Canadians can be a catalyst for growing economic ties between the two countries.
Prime Minister Modi has raised expectations for India's growth with a pro-business outlook and a reform agenda for the economy. A widely-cited analysis by the McKinsey Global Institute estimates that India's middle class will include more than 250 million in the next ten years.
Canadian Prime Minister Stephen Harper and his Conservative government have made global market access a priority, and India, a Commonwealth cousin, is at the top of the list. Free trade agreement negotiations between Ottawa and New Delhi recently began their ninth round of substantive talks. The Harper government has brought Canada into the Trans Pacific Partnership negotiations, and recently concluded a major trade agreement with the European Union. Canada already has secured market access to the United States and Mexico thanks to the 25-year-old Canada-United States Free Trade Agreement and the 20-year-old NAFTA -- both negotiated by Conservative governments led by former prime minister Brian Mulroney.
With a Canadian general election expected in the Fall of 2015, Canadians themselves will likely view Harper's trade agenda and the Modi visit through the lends of pre-electoral politics. The Liberal Party, led by Justin Trudeau (son of former prime minister Pierre Trudeau) has long cultivated the political support of immigrant communities, and will not cede the Indo-Canadian electorate to the Conservatives. The New Democratic Party, led by Thomas Mulcair, has been critical of trade liberalization, but will also stress its support for good relations with India in appeals to voters. India is good politics in Canada.
The United States should pay attention to the Modi visit to Canada, and to what follows. India has resisted U.S. overtures to launch bilateral market access negotiations, despite strong support for talks from the Obama administration and opposition Republicans. Canada has been nimble in pursuing market access deals when the United States stumbled, concluding trade agreements with Columbia, South Korea, and now Europe before the United States and gaining first-mover advantage in some sectors for critical investment and supply chain participation.
And Canada is sending a signal as it diversifies its mix of export markets, too. In the 1970s the Richard Nixon administration's economic nationalism led Pierre Trudeau's Liberal government to launch a "Third Option" outreach to other countries to become less heavily reliant on the United States economically and politically. While that effort largely failed, the Harper government has been far more successful.
Even good friends of the United States like Canada will seek new partners when the United States acts unreliably, and even in an unfriendly way. The assertion of Buy American privileges on public infrastructure projects, arbitrary country of origin labeling requirements on beef and pork, and the moving goalposts for the Keystone XL pipeline permit have had an effect.
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