New Zealand Minister for Trade and Investment Todd McClay is slated to pay a reciprocal visit to India this week, following his Indian counterpart Commerce and Industry Minister Piyush Goyal’s recent sojourn to New Zealand as part of a renewed push towards clinching a Free Trade Agreement between the two countries.

In terms of optics and camaraderie, the two sides are on a positive trajectory towards closing the long-awaited FTA. It  is noteworthy, however, that both sides are coy about  specifying a timeframe.
 
New Zealand’s National-led coalition government is motivated by its election pledge to sign an FTA with India before the next election cycle in 2026.
 
Free Trade negotiations between the two countries have stalled in the past, with India remaining intractable on dairy and agricultural tariffs.

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After the current round of talks, it’s not clear whether those barriers have been surmounted. There is no indication that New Zealand is willing to sign a free trade deal with India that excludes dairy and agriculture.
 
But sentiment on both sides is buoyant.

From the Indian side, Commerce Minister Goyal was circumspect during his landmark visit to New Zealand last week, saying only that a trade agreement between New Zealand and India would demonstrate to the world that two “strong democracies that believe in the rule of law are willing to work together in a spirit of partnership and cooperation for global good.”
 
The negotiations are proceeding with a “deep understanding of each other’s sensitivities and economies,” leading to a “very fair, equitable and balanced agreement.”

 
A moot question is whether New Delhi has shifted its focus from reaching specific industry agreements and business collaboration, rather than an FTA, between the two countries, a position articulated by India’s Minister of External Affairs S. Jaishankar during his visit to New Zealand in October 2022.                

But any ambivalence around that question, at least on the part of   New Zealand, was laid to rest when Prime Minister Christopher Luxon embarked on his promised visit to India, with a large business delegation in tow, in March this year.

Luxon was picking up the thread from former Prime Minister John Key, who kick-started the process for a free trade deal with India back in 2010. Those talks came to a grinding halt in 2016.

But one dichotomy persists: India has shown it is not willing to make concessions in the dairy sector. And New Zealand is wary of concluding any FTA which excludes dairy, its prime competitive sector.

Other products in New Zealand’s export mix include apples and sheep meat. To incentivise India to sign an FTA, New Zealand must include products within the scope of negotiations that add value to India.

One such opportunity is in the area of agri-tech. There is also potential in opening up pathways for skilled workers and business visitors from India by relaxing visa and immigration regimes. There is also the longstanding demand for direct air connectivity between the two countries, which will boost tourism.

The New Zealand government is under pressure to reset its vision and look past dairy as the main stumbling block to reaching a trade agreement with India.

But in June, the New Zealand Parliament’s select committee on Foreign Affairs, Defence and Trade heard the country’s chief trade negotiator, Vangelis Vitalis, observe that “high levels of protectionism” remain the biggest obstacle to closing a trade agreement with India.

Tariff levels stood at 60% on dairy products, 30% on sheep meat, 50 - 60% on horticulture products and 60% on honey, as per figures presented before the NZ parliamentary committee.

The two-way trade between India and New Zealand stands at $3.14 billion.

India has done away with tariffs on lamb meat while signing a trade deal with Australia recently, but without granting concessions on dairy products or apples. The same tariff pattern applies to dairy products imported by India from the UK, Norway and Switzerland.

Those trade accords will provide the template for any  prospective FTA between New Zealand and India.
 

Venu Menon is a senior journalist based in Wellington. He was Consulting Editor of The Hindu in India prior to moving to New Zealand