New Zealand and India are rekindling their efforts to establish a bilateral free trade agreement (FTA) after a decade of stalled negotiations. The renewed momentum comes as both nations aim to unlock untapped trade potential and address existing barriers in their economic relationship.
A Long Journey Back to the Table
The journey toward an FTA between India and New Zealand began in April 2010, with the launch of the Comprehensive Economic Cooperation Agreement (CECA). Over the course of five years, nine rounds of negotiations took place, but talks were abandoned in 2015 due to unresolved disputes in key sectors, particularly dairy and agriculture.
However, diplomatic and economic developments in recent years have breathed new life into the prospect of an agreement. High-level visits by New Zealand Trade Minister Todd McClay to India, as well as the hosting of Indian President Droupadi Murmu in New Zealand in August 2024, have signalled a strong intent to reinvigorate ties.
New Zealand’s Foreign Affairs Minister Winston Peters confirmed the renewed focus during a December 2024 event organised by the India New Zealand Business Council (INZBC). “I think there’s a chance that we will be announcing the beginning of negotiations on that [trade deal] matter,” he said, adding that the current government has adopted a more vigorous approach to strengthening relations with India.
Shifting Trade Dynamics and Evolving Strategies
New Zealand’s softened stance on dairy, a significant sticking point in earlier negotiations, is seen as a crucial factor in the revived discussions. Following India’s recent trade agreements with Australia under the Economic Cooperation and Trade Agreement (ECTA), New Zealand appears to be recalibrating its approach to align with India’s trade priorities.
In 2023-24, bilateral trade between the two countries stood at just USD 1.54 billion, highlighting significant underperformance. India exported goods worth USD 538.3 million, including pharmaceuticals, textiles, and machinery, while New Zealand’s exports, valued at USD 335.1 million, were dominated by agricultural products like dairy, kiwifruit, and timber.
According to a report by the Global Trade Research Initiative (GTRI), India and New Zealand could double their trade volume within five years by focusing on key sectors and addressing market access issues. The report emphasised the need to prioritise early tariff relief and improve connectivity, such as increasing direct flights and simplifying visa processes.
Opportunities in a Comprehensive Agreement
A revitalised FTA could provide significant economic opportunities for both nations. The GTRI report highlighted sectors such as IT, pharmaceuticals, agriculture, education, and tourism as potential areas for collaboration. Recognising Indian professional qualifications in fields like IT, healthcare, and aviation could also help fill skill gaps in New Zealand’s labour market, the report suggested.
For India, improving market access for products such as textiles and refined petroleum remains a priority. Tariff disparity between the two countries—New Zealand’s average import tariff stands at just 2.3%, compared to India’s 17.8%—underscores the importance of securing favourable terms.
Persistent Challenges and Political Sensitivities
Despite the optimism surrounding the renewed talks, several challenges persist. India’s reluctance to open its dairy market—a sector critical to New Zealand’s economy—remains a contentious issue. Small-scale Indian dairy farmers have long been a politically sensitive constituency, and concessions in this area are unlikely, according to GTRI.
Similarly, New Zealand has expressed concerns about the limited benefits of an FTA, given that 58.3% of its tariff lines are already duty-free. Some experts argue that without significant gains in agriculture or other high-value sectors, the appeal of a trade pact for New Zealand may be limited.
On the other hand, India is pushing for commitments on professional mobility, seeking terms similar to those granted by New Zealand to Australia and China. This includes provisions for temporary employment of Indian workers, which New Zealand has yet to agree upon.
Diplomatic Momentum and the Path Forward
As the two countries work to resolve these challenges, high-level diplomatic engagement continues to build momentum. Trade Minister Todd McClay has visited India multiple times in recent months, meeting with Indian officials to lay the groundwork for negotiations, and Prime Minister Christopher Luxon is scheduled to visit India early this year.
The private sector has also played a pivotal role in driving discussions. Bharat Chawla, chair of the INZBC, highlighted the active involvement of Indian businesses in pushing for an agreement. “The Indian Government has started a discussion with the trade bodies to test the market or test the areas of FTA between New Zealand and India … It’s a bit of a journey. There’s a lot to be done,” Chawla said.