NZ-India FTA 'on life support'

India's "sensitive" dairy sector is one of the impediments to a bilateral free trade agreement with New Zealand. Photo: Lynn Grieveson.

A free trade agreement (FTA) between India and New Zealand has stalled, with one official describing the deal as surviving on “life support”.

While the focus is currently on the looming TPP deal and how New Zealand’s decision to ban foreign property buyers will affect it, it had been hoped some progress could have been made towards a deal with India, the world’s second most populous country.

Last year, then-Prime Minister John Key visited India and after meeting his counterpart Narendra Modi said great progress had been made.

"They were the most forward leaning statements around a free trade agreement we've heard from the Indian government. (Modi) wants to make progress relatively rapidly and he wants it to be comprehensive," Key said at the time.

"Prior to coming here we weren't really going anywhere on the FTA - now you've got some very clear direction."

Despite that direction, no progress appears to have been made in the year since.

Several diplomatic and trade officials spoken to by Newsroom in India said there had been no movement and work was barely sputtering along on “life support”.

Dairy was the issue, with Indian businesses wary of letting New Zealand into the market and little chance of a change in stance.

A more plausible scenario was working towards a bilateral or multi-country deal involving Sri Lanka, and sending New Zealand goods to India through the close neighbour which had its own FTA with India.

Speaking to Newsroom in New Delhi, New Zealand’s High Commissioner to India, Joanna Kempkers, said there had been 10 rounds of negotiations between the two countries but admitted the deal was a “slow boil”.

“It would be fantastic for New Zealand and it’s one of our key objectives but we’re realistic to the difficulties of that because, while New Zealand ourselves, might not be a problem we do have some sensitive sectors, dairy being one of them.”

While there were some “commonalities” between the New Zealand and Indian industries, there were areas where New Zealand could be of particular value.

“When I’m trying to explain it to Indian officials, I say this is what cooperation with NZ could look like...and also talk about high-tech NZ dairy products going in as ingredients.

“India is predominantly a vegetarian society and vegetarian here, I learned, means no eggs, so how do you bake a cake with no eggs? With high-quality dairy protein powder that New Zealand can supply.”

The benefits to India would be access to a small but wealthy country who were early adopters of technology and could be a great test bed for Indian systems.

For New Zealand, the benefits were obvious; with a population of 1.2 billion people, Kiwi businesses would only need access to one percent for good market sales.

Other countries were also keen for an FTA with India and the country was wary of setting any precedents, but just like with China, New Zealand could be a good first option to test the waters, Kempkers said.

It was up to Indian officials to explain to their farming industry how New Zealand could fit into the market with its high-end products and technology, and that it was not a threat.

“If New Zealand was to send every single drop of dairy exports to India, forget about sending anything to the States or China or anywhere else where we sell a lot, if we sent everything to India we would still only be able to meet 10 percent of their consumption, so we’re never going to be a threat but we could help them upscale production.”

Kempkers also noted it was likely the RCEP trade deal, involving ten Southeast Asian countries and Australia, China, India, Japan, South Korea, and New Zealand, would be completed before any bilateral FTA.

India Trade Alliance general secretary Sunil Kaushal said the New Zealand-India relationship had to move beyond “little things like cricket, the Commonwealth and Bollywood” to cover a wider range of areas.

Kaushal said Kiwi officials needed to look at an Indian FTA with its own lens, rather than comparing it to the current trade agreement with China.

New Zealand had to build trust with India, potentially through RCEP, before it could make significant progress on a bilateral FTA.

“That can be the platform for us to build trust with India, along with the other countries.

“Once that happens, that gives India that feeling that, yes, we’ve got a relationship with New Zealand, let’s talk about an FTA.”

While dairy access was a difficult issue to negotiate, there would be enough benefits for New Zealand in other sectors even if it was unable to make major dairy gains.

“If this is a non-negotiable, yes I understand...but if you want to have an FTA with India and it’s a sticking point, you might as well just have a separate agreement on dairy and let’s not worry about an FTA.”

Trade and Export Growth Minister David Parker was circumspect about the state of free trade talks with India, saying an India FTA was “one of many priorities”.

Shane Cowlishaw travelled to India with the assistance of Asia New Zealand.