India is booming, trade with Canada isn't

Talks with India on a deal to allow Canadian companies to supply the Asian country’s booming nuclear industry are bogging down, and formal negotiations have not yet begun.

The delay – one year after Canada officially changed its long-standing non-proliferation policy so it could help India join the international trade in nuclear supplies – is perhaps a symbol of Canada’s still-meagre economic ties with the booming emerging power: its vast potential always seems a step away from being tapped.

The Conservative government hoped that Canada’s nuclear-policy shift, which immediately improved political ties with India, would bring deals for Canadian uranium and nuclear-engineering companies. But the United States, France and Russia have moved faster to sign nuclear agreements to allow their companies to sell to India.

In May, Trade Minister Stockwell Day said Canada was “very close” to a civil nuclear co-operation agreement with India.

But several sources familiar with the discussions said that Canada and India are a substantial distance apart and have not yet cleared hurdles that would lead to the start of formal negotiations.

The Canadian government submitted a new draft – its third in a year – of what it believes the agreement should be and is waiting for New Delhi’s response to start another round of discussions.

Mr. Day’s office has had deep differences with negotiators from the Foreign Affairs department’s non-proliferation branch, the sources said.

Mr. Day’s team and some other Conservatives feel the bureaucrats who specialize in nuclear safeguards want to impose excessive restrictions while companies from other countries are signing deals.

“It’s over and above what the international community may be content with. [The bureaucrats are saying] what if the International Atomic Energy Agency and their guidelines, what if all that fails, for whatever reason? We want to have our own system,” said one source.

The obstacles include potential limits on Indian nuclear scientists moving between civil and military projects. Many work in both areas, but Canadian visa rules bar them from entering Canada on national security grounds. According to a government source, Immigration Minister Jason Kenney has promised the Indian government he would issue special permits to the scientists.

Mélisa Leclerc, a spokeswoman for Mr. Day, said in an e-mail that Canadian and Indian officials had “encouraging” discussions in May and more talks “are expected to follow in the near future.”

Non-proliferation activists have pushed for Canada to include tough restrictions. They are concerned the world let India join the civilian nuclear trade even though it did not sign the nuclear non-proliferation treaty, and that it tested nuclear weapons in 1974 and 1998.

Those tests cast a long chill over relations between Canada and India because Canadian nuclear technology from the 1950s and 1960s was used to develop weapons.

Last year, hoping to spark trade with India, Canada reversed its non-proliferation policy, and its support at the International Atomic Energy Agency and the Nuclear Suppliers Group helped India join the civilian nuclear trade.

“That was not only a huge historical step, but it also gave some shape to this idea that the Conservatives claim that India’s a priority,” said Ryan Touhey, a University of Waterloo and Canadian International Council researcher who yesterday released a paper on Indo-Canadian relations.

But Canada has yet to act boldly to make relations a real priority, he said. Ottawa puts paltry sums into bilateral initiatives, while countries like Australia spend far more on aggressive efforts to promote themselves in India. Australia now has 40,000 Indian students compared to 4,000 in Canada.

Mr. Touhey said the government should finance a Canada-India council to deepen ties. Others call for a bilateral trade organization.

India is an aggressive buyer of energy, metals and other resources, and is heading into an infrastructure boom – but Canada’s trade with India was $4.6-billion in 2008, one-tenth the size of trade with China. Australia’s India trade was $10.9-billion (U.S.).

Canada and India have floated the possibility of a limited free-trade deal, but it is unclear if there is enough political will to press ahead, Mr. Touhey said.

Yuen Pao Woo, president of the Asia-Pacific Foundation, noted that some Canadian companies are making promising deals in car parts, biotechnology, engineering and other areas, and he warned that Canada should not pin its trade hopes on the nuclear industry.

“The civil nuclear co-operation is just a symbol of Canadians and Indians paying more attention to each other, and finding opportunities in the nuclear industry, but well beyond that,” he said.