India & Canada’s Trade Reset: Can Diplomacy Keep the Deal Alive?

After months of serious frost, India and Canada are finally warming up to each other again and not just with polite nods. They’ve essentially signaled they are ready to dive back into negotiating a big, full-on trade deal: the Comprehensive Economic Partnership Agreement (CEPA). Remember that “diplomatic chill” that totally stopped the progress? Well, both sides are keen to put the brakes on the political issues and hit the gas on trade, focusing on everything from physical goods and services to investment and making their supply chains far more resilient.

CEPA Back on the Table

What stopped this momentum in the first place? Political tensions, plain and simple, especially after a few high-profile incidents really soured the diplomatic vibe. But things are thawing out. Thanks to high-level meetings at places like the G7, the ice seems to be breaking. Now, there’s a real window—and a genuine drive—to convert that political goodwill into a solid trade pact. It looks like both governments are motivated to make it happen, and soon.

EPTA, Pause, and What CEPA Could Bring

You might recall the Early Progress Trade Agreement (EPTA). That was meant to be the warm-up act, the stepping stone to the full CEPA. It covered key early areas like goods, services, investment, and technical barriers, just to get both countries comfortable and build confidence.

Those talks were moving along nicely since about 2022, but then Canada hit the pause button hard in September 2023 because of—you guessed it—those political and diplomatic snags. Now that they’re finally tackling those issues (or at least addressing them enough to talk business), it’s time to restart the clock.

When CEPA finally gets signed, the scope is going to be massive. Think huge tariff cuts on tons of products, wide open service sectors, easier investment, and generally less regulatory headache. Who wins? Canada’s big exports—agriculture, raw materials, forestry, and services like medical and education—will get a better shot at India’s massive market. Meanwhile, India’s powerhouse exports like pharmaceuticals, gems & jewellery, textiles, engineering goods, and digital services will see major benefits going into Canada. It’s a classic win-win situation, theoretically.

Recent Developments: Diplomacy and Trade Data

What makes us think this time is different? Several things:

1. Diplomatic Reset: During a recent G7 summit, both countries made it absolutely clear that restoring trade dialogue is a priority. Reappointing High Commissioners, for instance, is a small but important step toward normalization.
2. Trade Held Up: Bilateral trade has actually continued to grow despite the diplomatic mess! Indian exports to Canada for FY2024-25 reportedly jumped by almost 10% year-on-year. While some Canadian imports saw a slight drop, the overall trade relationship is clearly resilient.
3. Future Focus: Both governments aren’t just talking about shipping widgets. They’re keen on expanding cooperation in crucial modern areas like clean energy, critical minerals, digital transformation, and food security. CEPA could provide the regulatory framework needed to make that cooperation easy.

Potential Gains: Why CEPA Could Be Big

The economic potential of a properly structured CEPA is huge for both economies:

• Market Access: Cutting tariffs means exporters in both countries will be more profitable and competitive. Canada gets to tap into India’s vast, growing consumer base.
• Investment Confidence: CEPA signals safety, which should lead to more Canadian dollars flowing into India and vice versa. Cross-border business becomes easier when the legal framework is clear.
• Supply Chain Integration: Companies could more easily build integrated supply chains, leveraging India’s strength in tech and manufacturing and Canada’s expertise in raw materials and clean technology.
• Services & Education: India’s dominant digital and software services could see wider official channels for expansion in Canada. Simultaneously, Canadian universities and professional services get easier access to the Indian market.
• Risk Mitigation: Diversifying trade partners is just smart. Relying less on any one region helps both economies weather global trade storms and geopolitical volatility.

Challenges & Risks: What Holds CEPA Back

While the opportunity is huge, let’s not pretend it’ll be easy. Several hurdles remain:

• Political Sensitivities: Every trade deal has them. India’s agricultural and dairy sectors are famously resistant to liberalization. Canada has its own sensitive domestic sectors. Safeguards or phased entry in these areas will be a must-have in the final text.
• Diplomatic Stability: Given that talks stopped before due to politics, maintaining mutual trust and consistent communication is non-negotiable. Without a steady diplomatic handshake, trade commitments could easily fall apart again.
• Non-Tariff Barriers (NTBs): This is the real killer. Even if tariffs disappear, things like complex regulatory approvals, customs interference, and mountains of paperwork can choke trade. Overcoming these NTBs is absolutely crucial for the deal to work on the ground.
• Public/Industry Opposition: Some domestic industries in both countries are going to feel threatened. Balancing the interests of, say, India’s small manufacturers against the benefits of market opening will be a major political tightrope walk.

Economist Insight: Growth, Gains and Caution

Economists are generally bullish but cautious. They say execution is everything.

One Canadian report estimated that a full CEPA could pump an extra US$8.8 billion into two-way trade annually and add about 0.25% to Canada’s GDP by 2035, if the barriers are lowered in a sensible way.

Analysts also note that for India, the biggest win isn’t just selling more T-shirts; it’s gaining stable market access in a major economy that has strong regulatory frameworks. That offers a lot of security.

However, the consensus warns: you must protect vulnerable sectors and you have to actually fix the non-tariff deterrents—the confusing licenses and customs delays—otherwise, the agreement will look fantastic on paper but under-deliver in reality.

What’s Next: Timeline and Watchpoints

So, what are we watching for?

1. The Roadmap: They need to formalize a plan, starting with the resumption of EPTA negotiations, and set firm deadlines.
2. Defining Scope: Which goods and services are in? What exactly do the investment protections look like?
3. Ratification: Once negotiated, the agreement needs legal ratification in both countries, which means political debate and industry feedback.
4. Implementation: They need to set up the mechanisms to monitor compliance and, more importantly, put money into trade infrastructure (ports, logistics) to ensure the benefits actually reach the businesses doing the work.

Final Thought

The proposed India-Canada CEPA is more than just a trade deal; it’s a reset button for the entire economic relationship, and a huge signal of political reconciliation. It’s a chance for both nations to secure their position in future global supply chains.

If they manage the political differences and share the benefits fairly, the agreement could unlock massive gains. But without strong execution, sensible safeguards, and consistent bilateral trust, CEPA risks becoming just another ambitious piece of paper that ultimately disappoints.