October 26, 2006
TORONTO, Ontario
2006/22

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NOTES FOR AN ADDRESS BY


THE HONOURABLE PETER MACKAY,


MINISTER OF FOREIGN AFFAIRS AND


MINISTER OF THE ATLANTIC CANADA OPPORTUNITIES AGENCY,


TO THE CANADA-INDIA BUSINESS COUNCIL




I am pleased to join you at a time of great significance to Hindus—on the occasion of Diwali, the Festival of Lights—and of great significance to Muslims, who have just observed the Eid, marking the end of the Ramadan fast.


They are both an inextricable part of India: part of its strength and its future, and, I’m happy to add, increasingly part of the Canadian fabric.


I have attended Diwali celebrations in Ottawa in the past—always accompanied by Deepak Obhrai, my parliamentary secretary, who has tremendous knowledge and reach into the Muslim community. He is also a great friend.


Canadians have enjoyed a long and substantial relationship with India, dating back even before India’s formal independence. Like every mature relationship, we’ve had our ups and downs. That said, I am pleased that we are now clearly on a positive trajectory, working our way to a more stable relationship built upon a true spirit of partnership and mutual respect.


India’s emerging global power status and growing influence on the world stage is clear and is talked about at the highest levels of G8 nations and beyond.


And in the time you have allowed me, this is what I would like to address tonight.


Let me begin with India’s rising economic power.


Measured at market exchange rates, India has the world’s 12th largest economy, and is projected to be the 7th largest by 2020. It will break into the top 10 in less than five years.


Its growth remains robust in the face of shocks, including the impact of natural disasters and the recent sharp increases in energy prices. Stability, despite volatile political and socio-economic changes and in a world focused on security is a sure sign of India’s strength.


High growth also means an increasing need for natural resources. Canada is blessed with a lot of natural resources—and last time I checked, we are ready to sell!


Let’s look also at the political dimension.


India is already the world’s largest democracy. It will surpass China as the world’s most populous country by 2050 with a billion and a half people. A billion and a half people living in a democracy—now that’s a market! You don’t want to go through a recount in India.


Although India suffers from immense poverty, it is growing and is expected to be a market worth more than $400 billion by 2010, as measured in terms of purchasing power parity.


Its population is young, its workforce expanding and its urban-based upper and middle classes are fluent English speakers. MTV and mobility are big factors in the consumer workplace. In other words, we have goods and services in high demand in India.


Perhaps most importantly, it is indeed a democracy—a democracy that encourages new thinking, entrepreneurship and individual success; a democracy that shares Canada’s values to a very large degree.


But there is another side.


While India’s economy is large and growing, there are a number of significant challenges to future growth, and foreign access to the Indian market remains heavily restricted. I mentioned unequal distribution of wealth, and poverty.


As many of you know first hand, a significant challenge is India’s infrastructure, which is poor and over-burdened.


More important, from a Canadian perspective, are the many obstacles to gaining access to Indian markets.


While tariffs in India have been significantly reduced since reforms began 15 years ago, India still has the fifth highest average tariff rates in the world. A number of barriers remain in the agri-food and agriculture sectors.


Foreign direct investment opportunities exist in a variety of sectors such as manufacturing, services and infrastructure. But important constraints remain in areas of key interest to Canada.


For example, foreign direct investment is not permitted in agriculture, legal services and retail sectors. In the financial sector, there is a 26 percent cap on foreign equity in the insurance market. State-owned banks control 80 percent of the banking system, and foreign banks are heavily regulated. This is a highly competitive sector of our economy with our Big Five doing more and more expansion into foreign markets. India is not one we have penetrated yet.


So where do we stand from a commercial and foreign direct investment perspective?


Clearly, the potential is there, and growing. With such economic growth, opportunities are bound to arise, and we should be prepared to seize them.


Groups like the Canada-India Business Council have an important role to try and improve this record and truly seize opportunities for closer economic, political, and cultural cooperation.


And it is the work of the Government of Canada to work with you to assist in opening up access and removing obstacles where possible. It is our goal to one day establish a free trade agreement with India, and we are optimistic that we will get there.


This is an exciting prospect. But let’s not kid ourselves—it will require hard work.


These days, Canada is just one of many countries competing for India’s attention.


So what do we do? How do we bring our countries closer for everyone’s best interest?


I see action on three main fronts.


First, on the commercial front.


Last year, two-way trade reached about $3 billion—roughly the level of our annual trade with Switzerland. India is Canada’s 18th largest export market, while Canada is India’s 24th largest export market.


Our investment relationship is relatively small—$145 million of Indian foreign direct investment into Canada in 2005, and $204 million of Canadian direct investment into India.


We can do much better.


Canada has exportable energy and raw materials. We are world leaders in certain areas of science and technology. For example, green technology—environmental technology is a hot ticket item.


Our Asia-Pacific and our Atlantic Gateways dramatically enhance Canada’s transportation network throughout the country, getting our products and services to India even more efficiently.


On the flip side, we need improved access to certain areas of the Indian market for Canadian businesses, as well as increased foreign direct investment flows to Canada from India.


That is why Canada has a commercial strategy in place to boost the trade and investment relationship. The priority sectors identified in the strategy are those where we are world leaders: agriculture and agri-food, infrastructure, information and communications technology, extractive industries, life sciences and enabling services, including financial.


We intend to encourage more export-ready Canadian companies to pursue opportunities in India and increase knowledge of Canada’s commercial capabilities and strengths in India’s corporate and private sector. Trade missions and business exchanges are areas where the Council could play an important role.


We will implement the Science and Technology Agreement, which will assist in building new partnerships and in the commercialization of research and development.


Furthermore, we will increase our capacity to address India’s trade, investment and economic policies and regulations to overcome barriers to Canadian trade and investment in India – and thus maximize the benefits of India’s growth for Canada.


Second, the political front.


India and Canada are parliamentary democracies. In fact, the Indian system is modelled not on Westminster, but on Canada’s own federal parliamentary system. We share the same values. We are both Commonwealth countries.


Canada has a global interest in sustainable development, democratic development, good governance and respect for human rights—and so does India.


CIDA [Canadian International Development Agency] maintains programs delivered through civil society that seek to improve health and nutrition and treat those afflicted with HIV/AIDS. Funds are also employed to support the India-Canada Environment Facility, a joint project based in Bangalore working to improve India’s environmental management capacity, especially in the energy and hydro sectors. In addition, our Canada Fund for Local Initiatives is the largest in Asia.


When we look for the two-way street, it can be found in enhanced people-to-people links through an expanding Indo-Canadian community, increased academic and cultural linkages between our two countries, and an immigration program that recognizes Canada’s economic needs.


We benefit from a large Indian diaspora living and working successfully in Canada. Indeed, within the next two years, it will become the number one source country of immigrants to Canada.


Third, the security front.


We live in a dangerous age. Democracies—whether we like to hear this or not, we must acknowledge it—are under threat. On September 11, terrorists came to our continent: 24 Canadians died in the attack. In this city, 18 were arrested and charged with plotting. Let us never forget the worst terrorist bombing in Canadian history, the Air India bombing.


Canada and India, and other democracies, must continue to stand firm against those would-be terrorists inspired by an ill-defined version of Islam. We will continue to strengthen our joint efforts toward keeping our democracies safe and expanding democracy to those dark places where it does not yet exist.


I would like to leave you this evening with the following thought.


The purpose of Canadian foreign policy is to advance our national interest: the security and prosperity of Canada and of Canadians. The work of Canada’s foreign policy is to advance those national interests effectively and in accord with our values, which allows for greater engagement of the private sector. Canadians are generous by nature.


Canadians want our country to have influence in the world, to have the capacity to help shape the international environment in ways that serve this country’s needs and aspirations. To do so requires that certain fundamental principles be followed.


Inserting values in a nation’s foreign policy is essential, and even integral. The human values that individuals around this world share—freedom, democracy, human rights and the rule of law—will be the guiding principles for this government’s foreign policy.


We want to be judged by our actions, and not just by our words. We want to bring greater focus to our activities and make sure our policies and priorities serve clear Canadian interests and values. The Harper Government is results-based and involves clear thinking and decisive action.


I believe that Canada must continue to partner with India in support of our economic and security interests.


We know that as we pursue our relationship with India, we do so with a country that shares our fundamental values. Our relationship has its roots in these common principles, and they will continue to guide us as we work to strengthen this relationship.


These are high standards, but they are worth pursuing, because our two countries, grounded in democracy, have a great deal to offer to each other and the world.


Thank you.