OTTAWA — Canada has reached a trade agreement with India, one of the world’s fastest growing economies, which will guarantee fair legal treatment for each other’s investors. The deal, which will encourage Indians and Canadians to invest more money in each other’s economies, reflects a deepening of ties with India, a country with economic growth that could one day outstrip China’s. Canada’s International Trade Minister David Emerson announced the agreement late Saturday in Toronto following a meeting with his Indian counterpart, Minister of Commerce and Industry Kamal Nath. “The Indian market offers tremendous opportunities for Canadian investors,” Mr. Emerson said. “This agreement will provide a stable environment for investors and will further stimulate trade an investment flows between our two countries.” An agreement like this is generally considered a stepping stone to a full-fledged free trade deal and Ottawa has already signalled it would like to eventually sign one with New Delhi. Saturday’s accord is the second Foreign Investment Protection and Promotion Agreement (FIPA) Canada has clinched since the Harper government joined the global scramble to sew up preferential trade deals with other countries. Two-way direct foreign investment between Canada and India is relatively low. Last year it grew by more than 17 per cent to $528-million. The FIPA should help encourage Canadian companies to invest in India and Indian firms to buy into Canada because it assures them that their businesses will not be arbitrarily injured by government decisions in each other’s country. India, the world’s second-most-populous country, has a 200-million strong middle class with a rapacious demand for goods and services — a market the Canadian Chamber of Commerce says will be worth an estimated $400-billion (U.S.) by 2010. It also needs engineers to help upgrade $420-billion of infrastructure over 10 years. The southeast Asian nation is one of Canada’s top trade priorities for new markets as the Conservative government assesses commercial potential around the world. India offers the Harper government an alternative emerging market partner to China, a country with which the Conservatives have had a chilly relationship because of concern over Beijing’s human-rights violations. Unlike China, India is a democracy and shares a legacy with Canada as a former British colony — one that left both countries with a legal system rooted in English common law. India also offers Canadian companies another cheaper-wage locale besides China where they can shift production to save money and remain competitive. The Harper government’s embrace of India comes in the wake of urgings by business groups – including the Canadian Council of Chief Executives – for Ottawa to cement stronger economic ties with New Delhi. The Canadian Chamber of Commerce has called on Ottawa to set up a government-business advisory group to study the potential for economic and business co-operation with India, a move that it says could lay the groundwork for a Canada-India free-trade agreement. Nations are scrambling to sign up free-trade partners as multi-country talks to liberalize international commerce flounder, from the World Trade Organization’s Doha round to the moribund Free Trade Area of the Americas project. Free trade with India would give Canada a boost in the global race to sew up preferential commercial deals and open more market opportunities for Canada’s lucrative service industry, from engineering to banking and insurance. As a free-trade partner, India would be an especially big fish for Canada compared to other bilateral market liberalization deals in its sights, including negotiations with South Korea. Last year, two-way trade between Canada and India grew to a record level of $3.6-billion, including a 55 per cent jump in Canadian merchandise exports to India – the highest increase in 14 years. The last FIPA Canada concluded before the Indian deal was with Peru. It was clinched in 2006 and signed last November. That was Ottawa’s first FIPA in about six years.

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