The last time Canada found itself in a tense geopolitical confrontation with an Asian economic power, it had the support of its allies in the United States, Britain and Europe against China’s belligerence.
Today, Canada is locked in an escalating diplomatic row with India over allegations that Indian agents were involved in the killing of a Canadian citizen on Canadian soil.
But as Canada confronts India over the accusation and watches the collapse of a trade relationship that only months ago promised to end decades of disappointment, Ottawa is unlikely to found a receptive audience in Western capitals, all of which had come to view India as a country. a vital force in containing China’s global influence.
“I have no doubt that Canada’s intelligence is strong, but if these countries still view India as a counterweight to China, then this episode may not change that momentum and Canada will find itself excluded from the geopolitical alliances that are forming said Rohinton Medhora, former president of the Center for International Governance Innovation.
“It will be Canada versus India and we cannot count on our allies to do anything to India to support us.”
This has only increased uncertainty about the possible consequences of this dispute on economic relations between Canada and India.
Few would say the relationship reached its potential.
What we know about the assassination of Sikh leader Hardeep Singh Nijjar
The Murder of Hardeep Singh Nijjar: A Timeline of Events
Although India is Canada’s eighth-largest trading partner, the $5.6 billion in exports to India over the past year – largely comprised of fossil fuels, fertilizers, wood and agricultural products – represented less than 19 percent of what Canada exported to this country. China and less than 1 percent of exports to the United States.
Foreign investment from Canada in India is also relatively paltry, despite the significant sums deployed by Canadian institutional investors and certain companies. Over the past decade, approximately $21 billion in investment has been directed to India, but this represents only 0.2 percent of Canada’s total foreign investment abroad.
Nonetheless, a number of Canadian industries and sectors will be closely monitoring the dispute, which has so far led to the cancellation of Canada’s planned trade mission to India in October, as well as the suspension of negotiations in view of a much-delayed trade deal.
Among them is Canada’s pulse industry, which produces crops such as lentils and chickpeas.
“One potential area of vulnerability would be the imposition of arbitrary phytosanitary measures on agri-food products to exert pressure, as this has happened in the past,” said Jeff Nankivell, president and CEO of the Asia Pacific Foundation.
In a statement, Pulse Canada, a national association that represents pulse producers, traders and processors, said about $400 million worth of Canadian lentils have been shipped to India annually over the past three years.
However, Jeff English, a spokesperson for Pulse Canada, said the organization would not comment on the “current bilateral relationship” between Ottawa and New Delhi.
All companies and business groups with exposure to India that were contacted by the Globe and Mail also declined to comment, a sign of the unusual circumstances that have brought this dispute to the forefront.
The Canadian mining sector is also preparing for the possible impact of Indo-Canadian tensions.
India accounted for 7.5% of Teck Resources Ltd’s revenue. in 2022 and was the fifth largest market for Canada’s largest diversified mining company. The Vancouver-based mining company is holding an auction for its metallurgical coal business and among the bidders is Indian conglomerate JSW Steel.
If Teck reaches an agreement with JSW, the transaction would be subject to both a net benefits review and a national security review by the federal government.
Asked whether the current tensions would lead Ottawa to block JSW from purchasing Teck’s coal operations, Laurie Bouchard, a spokesperson for Industry Minister François-Philippe Champagne, declined to comment, citing the provisions of confidentiality of the Investment Canada Act.
For Saskatoon-based fertilizer giant Nutrien Ltd., India is an important export market for its potash production. India has no domestic production of potash and is entirely dependent on imports.
Steve Hansen, an analyst at Raymond James Ltd., said India imports about 2½ to three million tonnes of potash a year, representing about 4 percent of the global market, and is a major customer of Canpotex Ltd., the Nutrien-owned export organization, and Tampa-based Mosaic Co. represent its third-largest international market.
Several of Canada’s largest pension funds are investing large sums in India, and asset management giant Brookfield Asset Management Ltd. also holds investments in infrastructure and real estate.
Most often, large pension funds are key financiers for the construction and operation of infrastructure such as toll roads and cell towers, with an increasing emphasis on development renewable energy to help decarbonize India’s economic development.
Among the largest institutional investors in India is the Canada Pension Plan Investment Board, the $575 billion fund that had invested more than $21 billion in India as of last September and which has an office in Mumbai. The pension fund holds investments in Indian companies spanning banking, transport logistics, e-commerce and other sectors; invests in the country through private equity funds; and holds interests in office and industrial buildings.
Some pension funds have focused more on opportunities in India to diversify their exposure to Asia as geopolitical tensions with China have increased.
The Montreal-based Caisse de dépôt et placement du Québec had invested around $8 billion in India by the end of 2022, led by a team based in New Delhi. The Caisse’s investments are focused on infrastructure, particularly roads and renewable energies.
And a year ago, the Ontario Teachers’ Pension Plan also opened an office in Mumbai with the aim of accessing more investment opportunities and building long-term relationships in the country. At the time, CEO Jo Taylor highlighted India as one of the growth markets for pension fund managers over the next five to 10 years, citing its “large, growing and dynamic, open economy to foreign capital.
In 2014, insurer Fairfax Financial Holdings Ltd. began making significant investments in India through its subsidiary Fairfax India Holdings Corp., which it IPO’d in 2015. Fairfax India’s assets include a 57% stake in Bangalore International Airport . The holding company listed on the Toronto Stock Exchange has a market capitalization of $1.4 billion.
Yet even as the dispute plays out, optimism about the future of Canada-India trade ties remains.
Although federal Trade Minister Mary Ng last week postponed the trade mission to India that was supposed to mark the ambitious start of Canada’s Indo-Pacific strategy, another trade mission was underway by Yukon officials.
As a result, Yukon Premier Ranj Pillai and his entourage, including Victor Thomas, president of the Canada-India Business Council, were in New Delhi on Monday evening when news broke that Prime Minister Justin Trudeau had accused the Indian government for helping to kill Hardeep Singh Nijjar, a Canadian citizen and supporter of an independent Sikh state in Punjab.
Mr. Pillai said his team was not warned by the federal government that he would make his explosive allegations during their stay, although he thanked the Office of the Canadian High Commission in New Delhi for supporting his team.
“My role here has shifted from investing and attracting talent to ensuring my team is comfortable and anxiety levels are reduced,” he said in a telephone interview as his flight back to Canada was awaiting departure Tuesday evening.
Despite the tense end to the trip, Mr. Pillai continues to welcome the opportunity that India presents as a large market for the Yukon’s critical minerals sector and a potential source of investment as well as workers to meet shortages in the health care sector.
“Even tonight, the business community here is working to ensure that business continues to be done with Canada,” he said. “They see what is happening as a significant and serious distraction.”
With reporting by Andrew Willis in Toronto
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