Fran O'Sullivan: Hint to NZ - Look outside negotiation box

Kiwis are noticeably chilly about signing up to quick free trade deal especially if agriculture is ignored.
Trade negotiator for India, Arvind Mehta. Photo / Supplied
Trade negotiator for India, Arvind Mehta. Photo / Supplied

"The best is the enemy of the good" was the mantra that India's chief trade negotiator repeatedly trotted out as he tried to persuade New Zealand to sign up to a quick - but underwhelming - bilateral free trade deal this week.

Arvind Mehta is a sophisticated player and knows how to push buttons - particularly those of the Indian diaspora here who want to see New Zealand and India notch a deal so their homeland can be put on a path to "equal status" with China in NZ's trading arena.

"If you could tell your negotiators that here is a man in front of you who is giving you a very good deal" he told the prime minister.

The reality is that free trade talks between the two countries had effectively stalled. To some extent this is because India's trade negotiators have had bigger fish to fry and because the gains to India from an NZ deal are not of sufficient magnitude to elevate it to the top of the negotiating queue.

From India's perspective, New Zealand's desire for comprehensive agricultural liberalisation sits in the too hard basket.

But at multiple meetings in Auckland, Mehta said India could make a generous offer to New Zealand and move immediately to free trade in the services sector.

The top Indian trade official had probably taken the punt that with John Key scheduled to go to India for an official meeting with Indian Prime Minister Narendra Modi later this year, the prospect of being able to unveil a deal - or at least significant progress towards one - would have proved too tempting for Key to reject.

But as the prime minister made clear to Mehta, New Zealand is not after a piecemeal deal.

The negotiator's message flew directly contrary to New Zealand's free trade doctrine : High quality, comprehensive trade deals are the gold standard as far as the NZ Government and its trade negotiators are concerned.

That means agriculture must be included.

Mehta was officially in Auckland for the 13th round of negotiations on the Regional Comprehensive Economic Partnership (RCEP), a regional trade deal that includes the 10 Asean nations plus India, China, Japan, Korea, Australia and New Zealand.

RCEP is important to New Zealand because it brings India into the "noodle bowl" of free trade deals that New Zealand has been negotiating since the World Trade Organisation (WTO) talks stalled.

Mehta's presence was doubly important as far as NZ is concerned.

He kicked off the first round of negotiations on a bilateral free trade deal with New Zealand.

The talks are now into the 10th negotiating round - and after a period of absence working on the bigger game leading India's WTO positioning - Mehta recently picked up the NZ deal again.

At events hosted by the India New Zealand Business Council and another by the rival India Trade Alliance, Mehta made a compelling argument for India's positioning.

He said he had become frustrated by repeated calls from negotiating partners for India to lower its tariffs and also by the many complexities that had crept up in trade negotiations.

So he vented his frustrations to a "guru" - a former Commerce Ministry boss - who said high tariff barriers were now a thing of the past (including for India) after the impact of joining the WTO. India's trade intensity as a percentage of GDP is almost 50 per cent; higher that that of the US or China.

"But more important than that, some of our most dynamic trade is happening with countries with which we do not have free trade agreements.

"So the point this guru of mine is making is 'Don't be such a pessimist ... keep working but keep looking outside the trade negotiation box'."

Obviously, the FTA path could happen two ways: One through RCEP itself and then through a "RCEP Plus" agreement with New Zealand.

But Mehta's other compelling argument is the difficulty of getting progress in the Indian political system.

He said he was a "fanatical negotiator" ... "I know what is the best from one point of view but I also know what is possible."

There will have to be concessions all round if NZ is to notch this deal.

- NZ Herald

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Head of Business for NZME

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

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