India and New Zealand have just concluded negotiations on a comprehensive Free Trade Agreement (FTA), marking a significant milestone in their economic partnership. The negotiations, finalised on 22 December, aim at doubling the bilateral trade over the next five years, synergising the respective strengths of both countries. Union Minister for Commerce, Piyush Goel, with his New Zealand counterpart, Todd McClay, with their respective teams, closed the negotiations in New Delhi.
To mention the key highlights of the Agreement, India will gain zero-duty access for all goods exports to New Zealand, while New Zealand will receive duty concessions on 70 per cent of India’s tariff lines, covering 95 per cent of its exports to India.
On investment, New Zealand has committed to facilitating investments amounting to 20 billion USD in India over the next 15 years. Such investments will focus on manufacturing, infrastructure, services and innovation. In the service sector, in which India has a competitive advantage owing to its large base of manpower, New Delhi has secured commitments across 118 services, including IT, professional services, education, financial services, tourism and construction. On people’s mobility, again, one of India’s top priorities, the Agreement includes a dedicated quota of 5000 temporary employment visas for Indian professionals and 1000 on work and holiday visas.
If we look at sectoral opportunities, four major sectors may receive a boost out of this Agreement. They are textiles, apparel, pharmaceuticals, agriculture, IT and services. Zero-duty access in textiles and apparel improves India’s price competitiveness in the 1.9 billion USD textiles import market of New Zealand.
Pharmaceuticals will have increased access to New Zealand’s 1.4 billion USD pharmaceutical import market. Cooperation in agricultural productivity will benefit India, with New Zealand establishing Centres of Excellence for apples, Kiwi fruit, and honey. India’s IT sector is poised to benefit from enhanced access to New Zealand’s growing service market.
The strategic significance of the FTA between India and New Zealand is part of New Delhi’s broader strategy to diversify its exports and strengthen ties with countries in the Indo-Pacific region. The Agreement is most likely to enhance economic growth, create jobs and increase people-to-people connections. Furthermore, it aligns with India’s Act East Policy and New Zealand’s Indo-Pacific Strategy.
While it sounds all good, the Agreement might come across some challenges during its implementation. These include the usual Non-Tariff Barriers (NTBs) on account of divergent regulatory standards, exclusion of India’s dairy sector, implementation capacity constraints of MSMEs and service providers and potential competition for Indian industries. However, both countries are working on addressing these potential challenges through continued dialogue and cooperation.
New Delhi safeguarded the interests of its farmers and dairy producers, which is considered politically sensitive. That is why India made no concessions on the import of dairy products, onions, sugar, spices, edible oils and rubber. No wonder New Zealand’s Foreign Minister Winston Peters criticised the deal, saying it gives too much away, especially on immigration, and does not benefit New Zealand’s dairy farmers.
According to an official statement from the External Affairs Ministry, the FTA would significantly deepen bilateral economic engagement, enhance market access, promote investment flows, strengthen strategic cooperation between the two countries, and also open up new opportunities for innovators, entrepreneurs, farmers, MSMEs, students and youths of both countries across various sectors.
Specifically, on the economic impact, the FTA is projected to double the bilateral trade within five years which is largely due to India’s exports to New Zealand availing zero-duty access on almost all tariff lines.
The Agreement will help Indian exporters, reeling under the impact of unexpected 50 per cent tariffs imposed by the Trump Administration on Indian goods. Since then, Indian exporters have been diversifying their shipments to the Indo-Pacific region. India has already signed a trade pact with Australia. Commerce Minister Goel assured that the Agreement with New Zealand will provide a fillip to labour-intensive sectors such as textiles, apparel, leather, rubber, footwear and home décor. It will also encourage export of automobiles, auto components, machinery, electronic goods and electrical and pharmaceutical products.
The employment visas, although temporary, will cover AYUSH practitioners, Yoga instructors, Indian chefs and music teachers, as well as those from high-demand sectors like IT, engineering, healthcare, education, and construction, strengthening professional and semi-professional mobility and services personnel.
The India-New Zealand FTA is expected to be signed in the coming months, paving a new way for its implementation. Both countries are working on addressing the possible challenges while maximising the benefits accruing from this Agreement. At any rate, with the FTA, India and New Zealand are set to take their bilateral trade to the next level. This Agreement should also deliver concomitant political and strategic benefits. Credit for having another FTA with a country in the Indo-Pacific region must be given to the current Indian government.
The writer is Professor of Practice, NIIS Group of Institutions
