Leader in our April 1, 2025, Digital Edition
Venkat Raman
Auckland, April 1, 2025
Perceptibly, the visit of New Zealand Prime Minister Christopher Luxon to India last fortnight was a ‘complete success.’ How this would translate into fruitful, long-term benefits remains to be seen, but there are some positive indications.
The announcement of the commencement of negotiations for a comprehensive Free Trade Agreement (FTA) between New Zealand and India marks a significant milestone in the economic relationship between the two nations. This agreement has the potential to serve as a breakthrough, fostering economic growth, enhancing market access, and strengthening supply chain integration.
However, it also presents several challenges to the New Zealand government.
Economic Growth: The FTA is anticipated to boost trade and investment between New Zealand and India. By reducing tariffs and other trade barriers, both countries stand to benefit from increased economic activity. For New Zealand, this translates to greater access to one of the world’s fastest-growing economies, while India can leverage New Zealand’s expertise in sectors such as agriculture, dairy, and technology.
Market Access: One of the most substantial advantages of the FTA is improved market access.
New Zealand’s agricultural and dairy products, which are highly competitive globally, could find a larger market in India. Conversely, Indian goods and services, including textiles, pharmaceuticals, and IT services, could gain easier entry into the New Zealand market. This mutual access can lead to a more balanced and diversified trade relationship.
Supply Chain Integration: The FTA aims to enhance supply chain integration between the two countries. By streamlining customs procedures and reducing logistical barriers, businesses in both nations can operate more efficiently. This integration is particularly crucial in a globalised economy where supply chains are increasingly interconnected.
Protectionist Policies: One of the primary challenges in negotiating the FTA is India’s protectionist policies, particularly regarding the dairy sector. India has implemented measures to safeguard its domestic dairy industry from foreign competition, which could pose significant obstacles for New Zealand’s dairy exports. Overcoming these protectionist barriers will necessitate careful negotiation and compromise.
Regulatory Differences: Navigating the regulatory differences between New Zealand and India can be complex and time-consuming. Both countries have distinct regulatory frameworks that govern trade, investment, and business operations. Harmonising these regulations to facilitate smoother trade flows will be a vital aspect of the FTA negotiations.
Political and Economic Stability: Ensuring political and economic stability in both countries is essential for the success of the FTA. Political changes, economic fluctuations, or shifts in trade policies can impact the implementation and effectiveness of the agreement. Both governments must work towards maintaining a stable and favourable environment for the FTA to thrive.
Cultural and Social Considerations: Beyond economic and regulatory challenges, cultural and social factors also play a role in the success of the FTA. Building robust people-to-people ties and fostering mutual understanding between the two nations can enhance the overall relationship and support the implementation of the agreement.
The New Zealand-India Free Trade Agreement holds immense potential for both countries, promising economic growth, improved market access, and enhanced supply chain integration. However, the New Zealand government must remain vigilant and proactive in addressing the challenges posed by protectionist policies, regulatory differences, and political and economic stability. By carefully navigating these obstacles, New Zealand and India can forge a stronger, more resilient economic partnership that benefits both nations.
Some imponderables
The Indian government, led by Narendra Modi, is business-friendly, but it is doubtful if India would relent from its position relating to the removal of tariffs on agricultural imports. This has been the main thorn in the flesh of several non-starter FTAs, including those with the US and Australia. These countries anxiously await the successful conclusion of an FTA between New Zealand and India, without either country giving up its stand on the core sectors of agriculture, dairy and meat.
New Zealand should consider its alternative strategy of boosting individual sectors, the most important of which would be business, trade and investment.
Another thorn in the flesh will be the ‘Anti-India Sentiments’ issue that Mr Modi raised with Mr Luxon during his talks and later at a joint press conference. Mr Luxon had largely evaded the issue, but this may become a stumbling block at a later stage unless navigated diplomatically.
