Sun sets on India free-trade deal
Officials in both India and New Zealand seem to have abandoned the prospect of a free trade agreement, and that may not be a bad thing. By
Indian officials were relieved they survived a panel discussion in New Zealand without hearing the words ‘‘free trade’’. India’s Auckland-based honorary consul Bhav Dhillon told the audience he was ‘‘experiencing a moment of joy’’ having a discussion in front of a New Zealand audience which did not revolve around ‘‘transactional’’ issues like trade. The Indian high commissioner, Muktesh Pardeshi, was pleasantly surprised too.
Their hopes were premature. The audience at the India-New Zealand Business Summit in Auckland had not forgotten, it was just that nobody had asked them if they had any questions.
Foreign Minister Nanaia Mahuta’s speech ate into the time allocated for questions to her, and then a panel discussion went on so long there was only enough time for one question. The person from the crowd lucky enough to wield it soon got down to business.
‘‘My question for Indian High Commissioner is: are we going to have any free trade in future please? . . . The trade what we’re doing with India and New Zealand is only $2.7 billion trade, when you compare to China we’re doing $32b trade. So we are less than 10 per cent.’’
Pursuit of a free trade agreement with the second most populated country on Earth has been at the core of New Zealand’s approach to India for much of the past decade, but now people on both sides appear willing to admit defeat.
Not just willing, they seem almost relieved.
Former foreign and trade ministers Winston Peters and David Parker led the last big push for a free trade agreement just before New Zealand went into lockdown last year.
A delegation of businesspeople accompanied Peters and Parker to set up business-to-business relations, alongside more hard-headed trade negotiations.
India-New Zealand Trade Alliance general secretary Surinder Ogra was part of that business delegation and says they all started to realise how far-off, and unlikely, a comprehensive free trade agreement was as they met officials and businesspeople over there.
India New Zealand Business Council head of strategic partnerships Sunil Kaushal argues we are wrongly superimposing a template we followed with China.
It is wrong because of the different circumstances both countries were in when free trade negotiations started.
Back then China was hunting for a partner to demonstrate its trade chops to the rest of the world, but India has plenty of free trade suitors while its politicians today are more concerned about protests on the street and the opinions of voters.
Which makes meeting New Zealand’s core demands for a free trade agreement a difficult ask. Especially if a comprehensive agreement is being used to start a major diplomatic relationship rather than coming at the end of a push to improve relations.
Former National Party prime minister Sir John Key visited India in 2016 to kickstart free trade negotations, but Ogra says it is telling there were no subsequent major visits by New Zealand ministers until Peters went.
‘‘Australia, as an example, they actually take a delegation every two years to India . . . so obviously the relationship is
not going as well as we would like.’’
Agriculture is at the core of why both countries have not been able to strike an agreement. In India, agriculture is the primary source of income for 58 per cent of its population, and the sector accounts for almost 8 per cent of global agricultural output. Ogra says New Zealand is too small to worry Indian agricultural producers. However, it will not look this way to voters over there, and perception is primarily what India’s politicians are worried about.
From an Indian perspective, mass outrage within the voting base seems an extreme price to pay for access to a small market like ours.
Especially when other countries like Britain , Australia and the United States are knocking on India’s door to set up stronger trade and defence relationships to hedge against their own deteriorating relations with China.
‘‘We do not figure in their pecking order . . . so it is in our own interest that we actually make the effort,’’ Ogra says.
There are things New Zealand is not willing to budge on either. Easier peopleto-people movement between countries is a big priority for India, like it was for China when their FTA was signed.
As part of the China and New Zealand FTA, negotiators agreed for a certain quota of people to be allowed in across selected professions.
New Zealand is somewhat less keen to have a trade agreement with India bleed into a negotiation on the rights of people to move between countries again.
India looks at this negotiating position and sees a double standard.
Some people spoken to say relations between New Zealand and India also soured over its bid for a permanent seat on the United Nations Security Council. The idea was floated by former US president Barack Obama in 2010, but New
Zealand initially said it was in favour of intermediate seats at the security council for larger countries like India.
A further setback came at the end of 2019, when India also pulled out of the Regional Comprehensive Economic Partnership.
All of this is why some are questioning whether a single-minded pursuit of a free trade agreement might have actually hurt the relationship between India and New Zealand rather than helped grow it.
NZ international business forum executive director Stephen Jacobi tells the summit on its second day that we have a policy of pursuing big comprehensive multilateral trade agreements, but this approach might need to change with markets like India.
‘‘I think we have to ask ourselves: why do we negotiate trade agreements? The answer is absurdly simple, it’s to do more trade.’’
The idea behind this approach was to use comprehensive agreements as a way of luring larger economies into trade negotiations.
‘‘It is clear that this traditional approach is not going to work in the short-term [with India], but I come back to the main point of an FTA; they’re only worth doing in the first place if they lead to more trade and more business,’’ Jacobi says.
‘‘FTAs aren’t just the only solution we can bring to bear. With India, and with some other partners, we should be thinking about making progress where we can at different levels.’’
Jacobi says we should not abandon the prospect of bringing India into an FTA eventually, or of reducing trade barriers by persuading them to enter an arrangement like RCEP, but we could build up to it a bit better.
Perhaps we could accumulate a series of wins by striking up other agreements to reduce trade barriers and costs, or by making it easier for New Zealand companies to do business in India.
Asia New Zealand director of research and engagement
Suzannah Jessep says it is not just about trade relationships.
We need to think about building a relationship of trust
We need to realise the value of diversifying in case of a potential breakdown of trade relations with China. Suzannah Jessep Asia New Zealand director of research and engagement
with like-minded countries who follow international rules and value international institutions too.
We also need to look across to Australia and realise the value of diversifying in case of a potential breakdown of trade relations with China. India is a natural market to look to for some of this, she says.
‘‘It’s a tough market and a highly competitive one, and without any formal trade architecture it’s ultimately going to be up to the private sector to decide whether India is a market it wishes to invest in.’’
Plunging ahead is exactly what private businesses like Jo Pennycuick’s company Redesign are doing.
After finishing a set of retail redesigns at Auckland and Christchurch airports she turned to their foreign partner and asked if they had any airport redesigns going spare around the world. Redesign had run out of airports to work on in New Zealand.
India’s Hyderabad airport was it. Pennycuick says the airport was spectacular, and the job there led to another, and another, as she started to make connections with the major Indian companies connected to the country’s airports.
Ten years ago Redesign set up an office in India. Staff numbers hit 12 at one stage and prior to Covid-19 she was flying to the country every two months. An in-person presence is essential for doing business over there, which is why loving the country itself is essential too.
She says New Zealand Trade and Enterprise did help a lot with getting the business set up over there, but she does see the difference in the way Australia and New Zealand have chosen to embrace India.
‘‘From Australia’s point of view they would invest to actually get ministers into territory to understand the country and to understand what they actually want and need.
‘‘In saying that, if a company wants go and do business in India it’s not up to the minister to build those relationships, it’s actually up to the person and the company to do that.’’
Foreign Minister Nanaia Mahuta and others within the Government have started embracing the phrase ‘‘Indo-Pacific’’, a term which more subtly includes India than one like ‘‘Asia Pacific’’ does.
Speaking to the summit via videolink, Mahuta says she wants to pursue deeper defence ties with India, much like Australia and the US are chasing.
For Kaushal, there are moves which can be made on the business front to better tie our country to India. India is Australia’s fifth-largest export market, but they are a far less important trading partner of ours.
We could do more than just try to sell milk to them. We have world-class expertise in other areas India wants to be better at. New Zealand companies are also seeing more software sales to India, he notes.
Kaushal says India is a ‘‘touch and feel’’ kind of an economy where you have to put effort into building relationships to really get anywhere. Which is why trade relationships are going to have to be built business-to-business or person-to-person rather than from the top-down.
Ma¯ ori businesses could be a potential way to crack into these and it is why he says the role of Ma¯ ori comes up frequently during the summit.
Kaushal hopes Ma¯ ori businesspeople might prove more capable at putting in the time and effort needed to understand Indian cultural norms and build those relationships.
He believes respect is likely to flow in the other direction as well, because there is a lot of common ground between both cultures. Kaushal knows this personally, he credits discovering their culture, through a friend, with his decision to stay in New Zealand.
‘‘To me, he looked just like an Indian right? And he was talking about his culture and all . . . it was sort of a softener, you can say . . . [they] are all about wha¯ nau and family.’’