Craig
McCulloch, Deputy Political
Editor
- Christopher Luxon is flying to
India on Saturday for a high-stakes charm
offensive - He earlier promised to
achieve a free trade agreement with India during his first
term - Delhi trade experts say that
would require New Zealand to give up on including dairy in
any deal for now
Prime Minister
Christopher Luxon is flying to India on Saturday, under
pressure to make progress towards a free trade deal given
his audacious pledge to strike such an agreement within his
first term of power.
The four-day
visit to Delhi and Mumbai comes a decade after the last
round of formal negotiations, and leaves Luxon with less
than two years to restart formal talks, iron out any
sticking points and then sign on the dotted line.
The
magnitude of the task may well be weighing on the prime
minister, who has shifted his language in recent days to
focus instead on a “more comprehensive economic partnership”
and says his “real commitment” is simply to deepen the trade
relationship.
Speaking to RNZ, two trade experts based
in Delhi expressed some mild optimism about Luxon’s chances,
but with a major caveat: they say New Zealand would have to
abandon hope of including dairy in any deal, a tough pill
for the sector to swallow.
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New Zealand is sending one
of its largest ever prime ministerial delegations, with top
businesspeople, community leaders, and a kapa haka group
packed across two 757s. Luxon himself will fly commercial to
Singapore before joining the entourage in New
Delhi.
Holding out hope for a free trade
deal
National has made no secret of its desire to
draw closer to India, labelling a trade deal a “major
strategic priority” during the 2023 election
campaign.
Luxon later elevated the pledge in the heat
of a television debate, promising to secure an agreement
before the end of his first term. As recently as October,
Luxon doubled down on the commitment, insisting: “we’ll
get it done“.
The choice of words has recently
become slightly more couched. Luxon insists he has not
abandoned the pledge but this week told media: “What I’m
looking for is just a much more comprehensive economic
partnership and how we can move that forward. You’ll have to
wait and see.”
The one-term deadline has been
described by the government as ambitious, and by the
opposition, implausible.
Speaking from Delhi, trade
expert Biswajit Dhar told RNZ he was “a bit sceptical”
partly because of the long list of negotiations India was
already engaged in.
“The calendar of all the trade
negotiators here looks pretty packed… but you never know,
realpolitik works in strange ways,” Dhar
said.
“There’s a saying here in India that life
depends on hope. I’m sure there’ll be something in Māori as
well.”
Dhar said previous attempts to reach agreement
between both countries had been thwarted by “a lack of
political will” and “a mismatch” between New Zealand’s
export interests and India’s sensitivities – most notably
over dairy.
“The two countries [have not been] looking
closely at each other… we have actually become victims of
this thing that, you know, New Zealand wants to export only
dairy and nothing else.”
New Zealand and India held 10
rounds of talks between 2011 and 2015 before negotiations
stalled.
A high energy trip by former Prime Minister
Sir John Key in October 2016 – the last time a NZ prime
minister visited India – ended
with a promise to work towards the “early conclusion” of
a deal.
But formal negotiations never resumed. Two
months later, Key resigned, after which National was turfed
from office, replaced by a Labour-NZ First coalition in
2017. By 2022, then-Foreign Minister Nanaia Mahuta had
bluntly declared that a trade deal with India was “not a
priority”.
India has long had a reputation as a free
trade sceptic and tough negotiator, but Dhar said India’s
position had thawed somewhat as it strived to rejuvenate its
economy post-Covid.
Dhar said “the Trump factor” had
also made new partnerships attractive given increased
uncertainty and protracted trade wars.
India signed an
interim deal with Australia in 2022, and with the European
Free Trade Association – a bloc made up of Norway,
Switzerland, Iceland and Liechtenstein – last year. Just
last month, India restarted negotiations with the United
Kingdom and was due to hold another round of talks with the
European Union in March.
A dairy-free
alternative?
The largest obstacle to progress will be
the same as in the past: dairy. India is home to millions of
small-scale rural farmers who fear disruption from New
Zealand’s industrialised producers.
Ajay Srivastava,
founder of Delhi-based research firm Global Trade Research
Initiative, told RNZ agriculture was viewed as a “livelihood
issue” in India and so usually hit a dead-end in
negotiations.
He said New Zealand’s best chance of
success would be to follow Australia’s lead and put dairy to
one side, instead pursuing an interim or “early harvest”
arrangement with a focus on other sectors.
“Both sides
needs a reality check,” Srivastava said. “The way to go is
to agree on… low-hanging fruit, and then deepen it
gradually, as we are doing with Australia.”
Srivastava
said it was possible such an interim agreement could be
negotiated within Luxon’s self-imposed deadline.
“We
did a deal with the UAE in less than three months. In
Australia, in less than four or five months. So suppose New
Zealand agrees to say, okay, whatever is extended to
Australia, extend the same things to us, plus or minus a few
things of our interest, the deal can go through very
fast.”
Dhar also advocated such an approach: pausing
talk on agriculture to instead focus on other areas, like IT
services, where trade was currently “pretty
dismal”.
“Is it possible to focus on the other 70
percent [of New Zealand’s exports that aren’t dairy] and
then see what can be done? Are there low-hanging fruits to
be plucked?
“And for the time being, we can leave
dairy on the back-burner.”
In the past, MFAT officials
have suggested it would not be worth excluding agriculture
from a deal – “impossible” to consider – given the
significance of dairy to New Zealand’s economy.
That
was also the position of former Trade Minister Damien
O’Connor – now Labour’s trade spokesperson in opposition –
who described Luxon’s deadline as “completely
unrealistic”.
O’Connor told RNZ it remained his
position that any deal which excluded dairy would be
“sub-optimal” given the industry was the country’s single
biggest exporter.
“The door should always be left
open. You know, other sectors say, ‘let’s do a deal and
forget about dairy’. That’s not very realistic under the
current structure of our economy.”
The coalition, on
the other hand, seems more open to a dairy-free proposition,
with Luxon telling RNZ: “perfection is the enemy of
good.”
MFAT officials last year acknowledged that
Australia’s deal had seen it overtake New Zealand’s share of
the Indian market in sectors like sheepmeat and
wood.
A dairy-free deal could see New Zealand reclaim
that ground but would disappoint the likes of Fonterra or
the wider Dairy Companies Association of New Zealand
(DCANZ).
DCANZ executive director Kimberley Crewther
told RNZ that would be a “lost opportunity” to look for
win-win opportunities where New Zealand could complement
Indian local dairy supply, such as through specialist dairy
ingredients.
“We acknowledge that dairy can be a
sensitive item, but there are a range of interesting
sensitivities for both sides of the negotiation, and they’re
actually best worked through at the negotiating
table.”
Crewther said the Australian context was much
different given dairy accounted for just a sliver of its
exports. In New Zealand, dairy exports make up about 25
percent of total export value.
“Australia did not
enter an agreement setting aside its major exports,”
Crewther said.
Do the mahi, get the
treats
India NZ Business Council chair Bharat Chawla
told RNZ he was optimistic about New Zealand’s chances of
striking a deal given “high momentum” over the past year and
India’s increased appetite.
“If India wants a trade
deal, they can do it in 90 days,” Chawla said. “They have
1.4 billion people. They have manpower. They’re not short on
that, for sure.”
Chawla disagreed with suggestions New
Zealand should give up on dairy altogether, advocating that
any deal could include a “staggered or staged
approach”.
But he said the government needed to put
the countries’ relationship ahead of transactions and focus
its pitch on ways it could help grow India.
“It is
just not the race to an FTA. It’s taking the time to invest
in the relationship, to come up with something
meaningful.”
The new coalition has made a sustained
effort since taking office. Trade Minister Todd McClay has
already visited India four times this term and met his
Indian counterpart seven times.
As well, Luxon sought
to build a strong rapport with Modi when meeting
on the sidelines of the East Asia Summit in Laos last
year.
Beyond business: building bonds in uncertain
times
Though much focus has centred on the prime
minister’s trade pledge, Luxon’s visit to India will have a
broader focus, as New Zealand also seeks to elevate its
presence in the Indo-Pacific region.
It comes after
some alarm in New Zealand after China sent three navy
vessels into the Tasman Sea to conduct live-fire
exercises.
David Capie, director of the Centre for
Strategic Studies at Victoria University, told RNZ it was in
New Zealand’s interest to better understand India’s
interests and priorities given its growing
influence.
“India is the largest, most populous nation
in the world. It’s a fast-growing economy, and it’s turning
a lot of its economic and demographic heft into power and
influence.
“India’s voice on a whole range of issues,
whether you’re talking about international trade or climate
change, security, it matters.”
Capie said building a
diverse set of relationships was all the more important
given the “huge flux and huge unpredictability” across the
world right now.
He said India would resonate with New
Zealand’s concerns about “a more assertive China and…
strategic upheaval in the Indo-Pacific region.”
“They
will look for opportunities for doing more together in the
security space, perhaps on peacekeeping, on maritime
security, on disaster response.
“We might see… a
sort of formalisation of the defence cooperation
relationship that looks for ways to do more on exercises,
exchanges, leadership meetings and so on.”
Luxon will
find less alignment with India when it comes to the war on
Ukraine. India has adopted a mostly neutral stance, having
never explicitly criticized Russia’s invasion.
The
prime minister said he would make New Zealand’s position
clear during conversations: “No change for us. We stand with
Ukraine.”
Luxon will also be the chief guest at this
year’s Raisina Dialogue, India’s flagship geopolitics
conference, which he describes as a “tremendous
honour”.
Capie said Luxon’s attendance was a “big
deal” and a “high-profile opportunity” to address a diverse
audience, including representatives from Russia.
The
prime ministerial delegation was due to leave Whenuapai
Airbase on Saturday morning. They were expected to stop off
in Singapore for a night before travelling on to land in
Delhi late Sunday
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