NZ and India agree an FTA

I was sceptical when Christopher Luxon said prior to the election that he thought they could do a free trade agreement with India within three years. India has been a notoriously challenging country to do FTAs with, and the relationship between governments was quite poor under Labour. The thought of a comprehensive FTA so quickly was somewhere between ambitious and unlikely.

But Todd McClay, and no doubt many MFAT staff, have delivered and an agreement has been reached – in just two years. I have little doubt that the PM’s personal commitment to the FTA, alongside his trips to India, made a critical difference also.

Key aspects are:

• Tariff elimination or reduction on 95 per cent of our exports.
• Duty-free access on almost 57 per cent of New Zealand’s exports from day one, increasing to 82 per cent when fully implemented, with the remaining 13 per cent being subject to sharp tariff cuts.   
• Immediate tariff elimination on sheep meat, wool, coal and over 95 per cent of forestry and wood exports.
• Duty-free access on most seafood exports, including mussels and salmon, over seven years. 
• 50 per cent tariff cut for large quota of apples – nearly double recent average exports.
• Duty-free access for kiwifruit within a quota almost four times our recent average exports, and tariff halved for exports outside of quota. 
• Duty-free access for cherries, avocados, persimmons and blueberries, over 10 years. 
• Tariffs on wine reduced from 150 per cent to either 25 or 50 per cent (depending on the value of the wine) over 10 years plus Most Favoured Nations (MFN) commitment. 
• Duty-free access for dairy and other food ingredients for re-export from day one. 
• Duty-free access for bulk infant formula and other high-value dairy preparations over seven years.
• 50 percent tariff cut for high value milk albumins within a NZ-specific quota equal to current export volumes.
• An average of 1,667 skilled 3-year work visas per year for Indian nationals, focusing on priority jobs where New Zealand has skills shortages, including doctors, nurses, teachers, ICT and engineering.

The Indian economy will be around NZ$12 trillion in 2030. This is a tremendous achievement. Just like all our FTAs, it isn’t perfect. My ideal FTA would be one paragraph and just say “Country A can sell anything to Country B without tariffs or restrictions, and Country B can sell anything to Country A without tariffs or restrictions”.

It is worth noting that our experience with previous FTAs is that the benefits have often greatly exceeded the official projections. The increase in exports to China after our FTA with them was massively higher than expected. They are now $21 billion and in 2007 were just $2 billion.

It is no surprise that NZ First is opposed. They also opposed the China FTA in 2007, despite Winston again being Foreign Minister then also. If I recall they even ran adverts against it. History has shown them to have been 100% wrong on the China FTA, and they will be on this one also.

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