Free Trade Agreement (FTA) Signed by India and New Zealand New Zealand Trade Minister Todd McLay said on Monday it would create certainty at a time when the global trading system faces many challenges and would rapidly expand two-way trade from the current level of about $2 billion.
The FTA, which is expected to come into force by the end of the year, is unlikely to face any obstacles despite opposition from some political parties in New Zealand, McClay told HT in an interview shortly after. Signing the deal. He said the deal would also provide 5,000 temporary visas for Indian professionals in sectors such as ICT, healthcare and construction. Edited excerpts:
How will the FTA change trade and investment relations between India and New Zealand?
Well, quite significantly. If you look at both our economies, the trade that happens between us is small, it is modest, and I think we will see it strengthen from strength to strength. Whenever New Zealand signs an FTA, two-way trade increases rapidly. We signed an agreement with the United Arab Emirates (UAE) a year ago; In the first six months, our two-way trade grew by 34%. We have an FTA with the European Union (EU); An additional $2 billion of trade was generated in the first 18 months. I think our FTA with India is very high quality, comprehensive and balanced and recognizes the sensitivities of both sides. I think two-way trade and investment will grow very rapidly and can do nothing but bring our countries closer.
Do you have any exact figures for growing business in the next five years?
Well, we haven’t done that yet. The modeling on both sides is quite modest and is based on existing trades. But we know that when India did an FTA with Australia, exports from Australia increased between 50% to 100% in many sectors in the first 12 to 18 months. I can easily see this happening. However the most interesting thing would be the Indian exports to New Zealand. We are a country of only 50 lakh people. Our number one trading partner is China and we buy more than $20 billion worth of goods and services from China every year. From India, it is only about $1 billion or so. New Zealanders love choice, competition and competitive pricing. I think you will see an increase in exports from India to New Zealand, just as New Zealanders will look to come into this market and establish themselves and be able to build long-term relationships and business.
The FTA has been criticized by NZ First and the Labor Party, with concerns raised about commitments to private investment. Do you think this will hinder implementation of the agreement?
No, that won’t happen. New Zealand and India are both democracies. We are probably the world’s first democracy and we believe in the parliamentary process. We also believe in open communication and freedom of expression. The agreement is 700 pages long and is very detailed and complex. So this is right, the parties need to understand this well. This is some of the debate you’ve seen in New Zealand. But we have full majority in Parliament to pass FTA with India. Both major parties are bipartisan when it comes to trade. Like most of our agreements, it will be passed into law very quickly and very easily. It’s very simple – New Zealanders love trade, we are a trading country and New Zealanders have wanted a deal with India for a very long time. In just nine months, we have negotiated one of the highest quality FTAs ​​ever undertaken by any country. This will prove to be very beneficial for both the parties.
Are you looking at any timeline for implementing the deal?
We hope that it will be implemented before the end of this year. Today, we signed. Tomorrow this agreement will be presented in our Parliament and there will be a national analysis. It goes to a committee, where they ask for public opinion. They report very quickly, it’s a time bound period. Then we should enact implementing legislation, which would massively reduce tariff rates to zero on day one for everything that India can export or will export, and put in place some quota management system and some other things. This is not a very big legislation. We will move forward very fast. This is a public parliamentary process, but we believe we can implement it before the end of this year.
How will FTA help at a time when countries around the world are grappling with disruptions due to US trade and tariff policies?
Well, there is a lot of uncertainty globally regarding trade. The world trading system faces many challenges, but our FTA with India will help in two ways. Firstly, it gives certainty. Both governments today put pen to paper to fulfill their rights and responsibilities. We have said publicly that we like each other and trust each other. The business community in each of our countries can now take this as a commitment and this reduces the risk. If you invest efforts or product in India or New Zealand, the rules are very clear. You can trust them and so you have certainty, not uncertainty. Second, it gives options for both India and New Zealand. Our job as a government in New Zealand is to negotiate trade agreements and then let New Zealanders decide where they want to put their efforts, based on where they think they’ll get the returns or where they see the risks.
This is an ultimate strategy. We want to trade with many parts of the world. We have a lot of trade agreements, and with India. Today, this means that Indians and New Zealanders can make commitments, build lasting trade relationships and we will see two-way trade grow exponentially.
Prime Minister Narendra Modi has talked about FTAs ​​that will deepen global engagement. You have said that this will provide economic security. You mentioned that you have a fairly large trade partnership with China, and there are some who think that this FTA can help reduce dependence on a particular geography.
For many countries, China is a very important partner and it is an important economic relationship of ours. But we have had trade deals in the last few years with the UK, EU (and) UAE, completed (a deal) with the Gulf Cooperation Council (GCC) including Saudi Arabia, and we have a number of trade agreements and what that does is allow options. I don’t think New Zealand is dependent on any one part of the world, although sometimes due to geography we trade more with one part. This does not mean that we choose one country over another. We support New Zealanders making their own decisions, but ultimately trade agreements set very clear rules and if you respect them, economies grow. As economies grow and people become wealthier, they have more choices. This is the core premise of the India-New Zealand FTA – balanced, giving opportunities to businesses in both countries and you will see quite significant achievements as a result of what we have negotiated and accomplished today.
The deal includes 5,000 temporary visas for Indian professionals. Can you throw more light on this?
We have agreed to create a special visa for skilled Indian professionals, where they are needed in our economy, so that they can work in New Zealand for a period of three years. These are the areas where we are lacking. Some people have already come from India, but this is a special visa just for India. Now we are going to enter its details. For example, in the areas of health care or ICT, where India has a real advantage, and also around engineering and manufacturing – the opportunity for young, qualified Indians to work in New Zealand, gain some experience and return home to help build their economy. We see it as a win-win. It’s a modest number, although large for New Zealand, but we need these people (because) they help our economy grow. It brings people closer, breaks barriers and creates more friendships. We believe this is a very significant achievement.
Does New Zealand plan to work with India and other regional partners to deal with the disruptions caused by the Middle East conflict?
I think this trade agreement does that and we will implement it very quickly and then we should promote it, help our businesses understand it. Some commitments from both sides will make doing business much easier. We will bring many more trade missions to India but we are inviting Indian companies to come to New Zealand. Some organizations (and) companies are talking about what to do even before the agreement is signed. There is a real desire on our part and there are many areas in which we would like to work together with India. We are already doing very well in the WTO. In the Pacific, there will be opportunities in the area below. The conclusion of the FTA negotiations is really the beginning of a much bigger relationship and what you will see across the board is not only greater engagement, but also greater accomplishments together.
