Trading smart: On the India-New Zealand FTA

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The India-New Zealand Free Trade Agreement (FTA) , set to come into force on October 20 , is a good example of why India is right in simultaneously pushing for trade deals with smaller trade partners along with the major global economies. On the face of it, it would be easy to dismiss the $1.1 billion of bilateral goods trade between the two countries as being less than 1% of India’s total goods trade. A doubling by 2030, as envisaged under the deal, is still a minuscule amount. Yet, trade is not simply a macroeconomic indicator. It is also a source of livelihood for lakhs of businesses, nearly half of which are micro, small, and medium enterprises. These exporters need all the help that they can get in the current trade environment. Adverse developments related to tariffs or the closure of trade routes can be mitigated to an extent by a nimble rerouting of trade to other countries where Indian exporters receive an advantage. With 100% U.S. tariffs looming and a trade deal with Washington remaining elusive, India needs to open up as many alternative channels for its exporters as possible. The New Zealand FTA delivers — India has managed to receive duty-free access on 100% of its exports, a historic concession. India has a good mix of capital- and labour-intensive exports to New Zealand that stand to benefit. Textiles make up about 14% of India’s exports, while pearls and semi-precious stones constitute another 5% or so. On the capital-intensive side, one-third of India’s exports are pharmaceuticals, parts of nuclear reactors, vehicular parts, mineral fuels, electrical machinery, and iron and steel.

India has also done well in its handling of sensitive sectors. While the opening up of India’s dairy sector was a major demand by the New Zealand negotiators, India held firm and excluded it from the deal. In total, nearly 30% of India’s import lines have been kept outside the tariff concessions. On labour mobility, India has won some valuable concessions on visas for workers and students. At a time when several western countries are clamping down on foreign worker inflows, such alternative routes provide relief. India has also extracted a commitment from New Zealand to facilitate investments of $20 billion in India over 15 years, smaller but along the same lines as in the agreement with the EFTA bloc. India needs foreign investment not just for its economic growth but also to manage its balance of payments. This FTA is a good blueprint on how India can use its growing international heft to negotiate overwhelmingly in its favour.

India / New Zealand / trade agreements / economy (general) / trade policy / macro economics / business (general) / taxes and duties / labour / textile and clothing / pharmaceutical / nuclear policy / automobile / minerals / machine manufacturing / iron and steel / dairy / agriculture / students / Europe

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