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NEWS: India’s tax on corporate mergers could derail Canada-India free trade talks

Punjab Newsline reports, “The latest Indian annual budget for 2012-2013, revealed by India’s Finance Minister Pranab Mukherjee last Friday, takes India a step backward toward its previous economic protectionist policies and could derail its discussions for free trade agreements with the European Union as well as Canada. The government proposed to levy a heavy retrospective tax on some international mergers that would allow it to tax any overseas merger dating back to 1962 when an underlying Indian asset was transferred.”

In late-January, a Wall Street Journal-affiliated newspaper in India reported, “India is likely to exclude in bilateral trade pacts a clause that permits a foreign investor to sue the host country at an international dispute settlement agency. The department of industrial policy and promotion (DIPP) has in principle decided not to include such a condition, an official said on condition of anonymity, which allows firms of the partner country investing in India to take legal action against the government at a global forum in case of any dispute.”

Canada has completed three rounds of talks with India for a free trade agreement (more specifically a Comprehensive Economic Partnership Agreement, or CEPA). In his speech to the World Economic Forum in Davos, Stephen Harper stated, “We will work to complete negotiations on a free-trade agreement with India in 2013.”

The Punjab Newsline article notes, “The announcement in India’s budget comes at a time when India and Canada are in talks to finalize the Comprehensive Economic Partnership Agreement (CEPA) or Free Trade Agreement by 2013. The bilateraltrade is likely to touch $20 billion by 2020. Since 2007, India and the European Union have also been negotiating a free trade agreement, officially known as the Bilateral Trade and Investment Agreement (BTIA), that covers trade in goods and services aside from rules pertaining to cross-border investments, competition policy, government procurement and state aid.”

For a campaign blog about the Canada-India CEPA talks, please see http://canadians.org/blog/?p=12821.