India-NZ Free Trade Talks: What To Expect?

Analysis: India and New Zealand say they are launching talks to strike a free trade deal. Don’t beat yourself up if that news left you more befuddled than euphoric. Haven’t we already been trying to do that for more than a decade? What’s new? Lots.

On Sunday, India’s commerce and industry ministry announced the country is officially launching talks for a comprehensive trade deal with New Zealand. 

It’s important to note the language. Launching. India didn’t say they are restarting negotiations, which could have made sense because it won’t be their first such rodeo with New Zealand. 

The two countries were trying hard when negotiations fell through back in 2016 after 10 rounds of discussions. So why make it sound like it’s some kind of a new endeavour? 

During a media conference at ITC Maurya hotel in Delhi, a couple hours after India made the announcement, Luxon was prodded on that question. Was he picking up the discussion from where it was left a decade back? 

The prime minister says since 2017, the Labour government had put free trade talks with India pretty much in cold storage. That’s why he needs to start afresh, though Labour leaders would like to believe they kept the plate hot for future trade talks. Luxon doesn’t find any steam in that claim, and therefore he says it’s a blank slate.

So what’s going to happen now? No doubt Luxon and Trade Minister Todd McClay are in an overdrive in their India journey. McClay has met Indian counterpart Piyush Goyal more than half a dozen times in about 16 months. 

Last year, Luxon met Indian Prime Minister Narendra Modi on the sidelines of ASEAN-India Summit in Vientiane. It’s no mean feat the government has managed to get an economy the size of India back on the negotiating table, and that too so quickly.  

India seems to be playing ball too, for now. Its announcement on Sunday about free trade talks would have been music to Luxon’s ears. It demonstrated that the feeling to do something substantial is mutual, that he isn’t dancing in the dark. But it would take some serious commitment from both the sides, especially New Zealand, to kick things into gear. 

The discussions will begin on firmer ground than last time, which is an upside. Dairy, the main sticking point in any free trade deal between India and New Zealand, is less of a sticking point this time around. 

In 2023, goods made up 70 per cent of New Zealand’s exports. Nearly 60 per cent of that came from agriculture products like dairy and meat. It’s not a surprise that New Zealand has traditionally kept that industry front and centre in any talks of a trade deal. 

But millions of Indians live off small farms with two to three cows, and opening the market to sophisticated overseas producers will disrupt those livelihoods. India has traditionally been reluctant to discuss that possibility.

The upside, this time, is that Luxon is keen on having trade talks without the hard pre-requisite of dairy. It will be great to get something for dairy producers, but that shouldn’t keep the country from exploring ways to benefit other industries–perfection is the enemy of good, he says.

Over this week, as Luxon meets Modi and later visits Mumbai, expect MoUs and agreements in aviation, education, technology and others.  

Ultimately, it will boil down to what does success look like on this trip? Nobody is expecting Luxon to come back with a free trade deal, or even massive tariff concessions for New Zealand producers. Getting relations going with the world’s biggest consumer market, laying a strong foundation and identifying green shoots would be a good starting point.