India has implemented protectionist policies to support its dairy industry from imports. Photo: Supplied / Livestock Improvement Corporation
A Cabinet paper released by the Ministry of Foreign Affairs and Trade in December highlights the challenges the coalition government faces in sealing a free trade agreement with India over the next three years.
The National Party's coalition deal with New Zealand First singled out India in a reference to pursuing free trade agreements with other nations.
National Party leader Christopher Luxon also pledged to clinch a free trade deal with India on the campaign trail in the run-up to the election, promising to visit the South Asian nation within a year of taking office.
And yet several obstacles need to be overcome in order to make this pledge a reality.
The Cabinet paper released by MFAT before Christmas said New Zealand needed to foster regular dialogue with India, particularly at senior political levels.
The paper also said the government should cooperate with India in areas of mutual interest and collaborate with other trade partners when facing issues of disagreement with India.
FTA aspirations
The Cabinet paper said a free trade agreement with India was the "ultimate goal".
It noted that India, now the world's fifth-largest economy, could be second only to China in terms of economic scale by 2050.
"For New Zealand itself, India has been the largest source of skilled migrants and second-largest source of international students in recent years," the paper said. "The country's Indian-origin diaspora of around 300,000 people now makes up at least 5 percent of our population, contributing significantly to social, political and economic life here."
What India wants
MFAT believes that India views New Zealand as a key strategic partner in the Pacific as the South Asian nation seeks to expand its sphere of influence.
"It is in our interest to support India to engage as a constructive partner in the region and to work through existing regional architecture," the paper said.
"As India wants a broad-based relationship with New Zealand incorporating political, defence and security, people-to-people as well as economic links, it is important to continue to show progress in these areas as we look to re-energise discussions on the trade relationship."
The ministry acknowledged recent cooperation between the two countries in priority sectors such as horticulture, agriculture and education.
While it was important to continue a business-focused track of cooperation, this approach alone would not transform New Zealand into a more compelling trade partner for India, the paper said.
India is currently New Zealand's 19th-largest export market, accounting for 1 percent of all exports shipped abroad.
New Zealand provides just 0.1 percent of India's import market and is ranked 75th on the list of the South Asian nation's trade partners.
"There is scope for us to significantly lift this performance," the Cabinet paper said. "There are few markets over the coming decades which offer a greater growth at scale opportunity for New Zealand business than India, as we build our economy, grow our trade and diversify our export markets."
What New Zealand can do
The Cabinet paper called on the government to elevate and maintain regular high-level political discussions across a range of portfolios, including trade, foreign affairs, defence, education, agriculture, food safety and customs.
The India-New Zealand Memorandum of Arrangement for Defence Corporation currently under negotiation would also be important for bilateral ties, the paper said.
The paper said New Zealand should increase its presence both in terms of scale and seniority at the annual Raisina Dialogue (India's equivalent of Singapore's Shangri-La Dialogue) as well as prioritise engagement with India on the sidelines of regional and multilateral forums.
The paper confirmed the ministry was exploring opportunities for Foreign Affairs Minister Winston Peters to meet his Indian counterpart, Subrahmanyam Jaishankar, in the first quarter of 2024.
Such visits and interactions between New Zealand ministers and their Indian counterparts would form policy settings and pave the way for the prime minister's visit with a trade delegation in the second half of 2024, after India's general elections, the paper said.