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Wake up and smell the chai

xTra

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Feb 4, 2011
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In the wake of growing debt and falling value of its currency, the United States is preparing to follow a more restricted trade policy. A few signs of this impending change can be seen in the recent budgetary proposals being contemplated by the Obama administration. The proposed imposition of $5.50 US passenger inspection fee and a 0.075-per-cent import duty, notwithstanding NAFTA, is an indication of the direction that the U.S. is likely to pursue in the future.

With close to 75 per cent of total Canadian exports going to the U.S. and more than 16 million Canadians visiting the U.S. by air in a year, these proposed fees and duties will have a significant impact on Canadian travellers and businesses. Doing business with the U.S. is becoming increasing difficult and cost ineffective. The U.S. economy is still caught in the mire of the 2008/09 recession and recovery is fragile. The country is losing its prosperity and leadership role in the world because of the poor management of both its economy and politics. Canada, as a major trade-and investment-dependent country, cannot afford to continue to bank on the U.S. markets alone. It is high time for both government and businesses in Canada to work together to find more diverse and long-term trading partners around the world. Over the past couple of years Canada has increased its direct engagement with China, the EU, a few Latin American countries, and more recently with Japan. This is the way forward, but much more needs to be done to further diversify Canada's international trade and investments.

As the world's economic powerhouses are rapidly shifting toward emerging markets like China, India, Brazil, ASEAN countries and Russia, Canada needs to continue exploring new markets. There is considerable scope to build on Canada's existing bilateral political and economic relations with South Asia. Canada has been an important donor in Bangladesh, Pakistan, and Sri Lanka. It is currently playing an important role as a peacekeeper and donor in Afghanistan. It is home to a large and growing immigrant population from India, Pakistan, and Bangladesh. The current population projections show that immigration from Asia would be the driving force for population growth in Canada and in B.C. for many years to come.

After East Asia and Pacific, South Asia is the fastest growing region in the world. GDP growth rates for South Asian economies stood at six per cent in 2009 against -1.9 per cent for the world. Recent economic growth in South Asia has been based on strong demand, good performance of the good-producing sectors, and exports. Despite the worldwide recession, India's GDP growth stood at 7.4 per cent in 2009 and Pakistan's at 3.6 per cent. The World Bank forecasts strong economic growth of around eight per cent for South Asia during 2011-12.

Canada's trade and investment ties with South Asia are weak. The share of South Asian countries in Canada's Asia-Pacific exports is less than one per cent and is only three per cent in imports. India and Pakistan together accounted for only $3 billion Cdn trade in 2010 or 0.4 per cent of Canada's merchandise trade. Although there has been some growth in recent years, yet Canadian direct foreign investment in South Asia is also quite modest.

Canada can build trade and investment ties with the rapidly growing South Asian economies in areas of its comparative advantages, e.g. infrastructure development; oil and gas; mining; power equipment; engineering goods; environmental technology; and financial and insurance services. South Asia's large and growing middle class could be a target for a range of Canadian consumer good exports, including telecommunications, transportation, agriculture/agri-food, and education services. Let's take a quick look at the prospects for some of South Asia's biggest economies.

India is one of the most promising economies in the world. India's competitiveness is based on its large market size, mature financial markets, business sophistication, and innovation. It has a large pool of educated workers and an increasingly savvy middle class striving to buy upscale consumer products. Being primarily an energy importing country, India's demands for energy-products is growing rapidly. Areas where India needs improvements are upgrading public infrastructure, especially the quality of roads, ports, electricity, green energy, and environmental projects. There could be considerable scope for Canada-India trade and investment ties in such areas.

Sri Lanka's GDP has been steadily rising and the country is now transitioning from the basic factor-driven economy to a more sophisticated efficiency-driven one with good quality human capital. Sri Lanka's public institutions are improving. Among other things, the perceived level of security is increasing, although threat of terrorism still remains serious. Sri Lanka also continues to benefit from impressive business environment. The potential for Canada-Sri Lanka trade and investment could be quite high in many efficiency enhancing areas. Pakistan has been in the throes of political and terrorism-related turmoil for the past few years but is a country with lots of potential. There could be a range of areas where Canada and Pakistan can develop trade and investment relations in both resource-based and manufactured goods, as well as important services.

How can Canada grow its trade and investment linkages with South Asia? The first step is to create awareness about the potential scope of business ties between Canada and South Asian economies. Understanding the diversity within South Asia and the potential for economic ties within each country by good country-level analysis will also be quite useful.

Chai or cha (tea) is one of the most popular drinks throughout South Asia. Masala chai (spiced tea) is made by brewing tea with a mixture of aromatic herbs and spices that generates a strong and refreshing aroma. It is about time Canadians explore South Asia for trade and economic linkages - wake up and smell the chai!

Dr. Zareen Naqvi teaches at the British Columbia Institute of Technology and Dr. Mohammad Akbar teaches at Kwantlen Polytechnic University.

© Copyright (c) The Vancouver Sun


Read more: Wake up and smell the chai
 
Chai or cha (tea) is one of the most popular drinks throughout South Asia.

What? Do South Asians also refer to tea as "Cha"?

In the wake of growing debt and falling value of its currency, the United States is preparing to follow a more restricted trade policy. A few signs of this impending change can be seen in the recent budgetary proposals being contemplated by the Obama administration.

This kind of protectionism is sure to backfire.

But it would be a big mistake, to underestimate the USA.
 

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