New Zealand must build a trade relationship with India, whose economy is bucking the global trend by growing at 6 per cent-plus a year, but it is not an alternative market to China yet, says a leader of one of the biggest business delegations ever to head to India.
Stephen Jacobi, executive director of the NZ International Business Forum, responding to questions about next week’s visit by 50 businesspeople to India, said while New Zealand talks a lot about the need to diversify its markets and India has big potential, it is no China in access terms.
“...The Chinese market is open and they want to buy what we have. I know their economy is going through a rough patch and India on the other hand is bucking the trend but it’s not tomorrow that you’re going to change that around.
“We need to be looking at the world more generally, but I don’t think India is an alternative to China, anymore than the UK or Europe is an alternative to China.”
While the delegation, organised by five leading business advocate organisations, is heading to India on August 27 with high hopes of tapping an economy predicted to be the world’s third biggest within five years, Jacobi was clear the visit “is not about making progress on an FTA (free trade agreement)”.
The delegation follows an outspoken report earlier this year on the India-NZ relationship by the India-NZ Business Council, which called on New Zealand Inc. and the Government to “get serious about India”. It said 15 years of trying to negotiate a conventional trade agreement with India had “delivered nothing”, noting “India is different, accordingly it requires a different approach”.
One of the biggest barriers to a successful FTA or comprehensive agreement has been dairy trade. India is the world’s biggest milk producer.
Council chair Earl Rattray at the time told the Herald “you cannot copy and paste trade agreements typical of those with Europe, the UK and North Asia for India”, currently the world’s fifth biggest economy.
Jacobi said it would be the third time he had visited India in the past eight months, with more of his working time now focused on the country.
“Let me make this clear, this is not about making progress on the FTA. This is about making progress on the relationship as a whole, though New Zealand will always be interested in an FTA. But we have been down this track and it has not been for want of trying with (most recently) five years of negotiations that have shown us India is not interested in this sort of agreement at least not at this time, and I don’t think that has changed in the interim.”
Jacobi said India was doing trade negotiations around the world “but it tends to be with very large partners where it can see for itself a very large strategic advantage.
The delegation’s bid to “reprioritise” ties with India was in response to a perceived lack of understanding in New Zealand about the potential of two-way people, skills and product flow between the two countries.
“I’m not sure we have in place the necessary building blocks for getting a future FTA off the ground,” Jacobi said.
“We haven’t understood how New Zealand can make a contribution to India’s economic development . We haven’t nurtured the right sort of constituency, so we are starting again, to build the relationship first.
“Our relationship with India just does not reflect the strength and resilience and momentum of the Indian economy, nor does it reflect what New Zealand can offer.”
The India-NZ Business Council report said trade figures had declined since 2015.
Total services and merchandise exports to India in 2020 were worth $1.7 billion. Merchandise exports to India earned $430m in 2022, dominated by wood products, metals and wool, with contributions from high-value dairy ingredients such as whey proteins and lactose, kiwifruit, apples and pears, sheep meat and meat by-products.
Last year imports value from India, at $355m, exceeded exports value.
Businesses on the delegation include major exporters such as Fonterra, Zespri and Silver Fern Farms, but also representatives from a range of smaller sectors including education, travel, aviation, tourism, pharmaceuticals, technology, logistics and forestry.
Another delegation leader, Simon Bridges, chief executive of the Auckland Business Chamber, said New Zealand wasn’t “remotely” reaching the commercial potential in a country with 1.4 billion people.
New Zealand should be aiming to be in the high-quality, premium product market and “we shouldn’t neglect what India has to offer us,” he said.
Modern India was quite different from the New Zealand perceptions of 30 years ago.
“Today it is a very youthful, sophisticated, talented and highly skilled country. This is a mutual benefit situation here,” Bridges said.
Top potential market areas for New Zealand companies were considered to be aviation training - India had just purchased 500 aircraft as part of an infrastructure build - education, technology services, agritech, horticulture, food and beverage, horticulture and even, dairy.
“There could be deals even in areas that are complicated (by regulatory trade barriers). Let’s take dairy, there is a huge dairy processing industry in India....it doesn’t mean to say we can’t do anything within dairy,” Jacobi said.
“There are issues (barriers) in horticulture, there are issues in services that can be addressed in a comprehensive way which don’t necessarily foreclose the opportunity to negotiate a comprehensive agreement later on.”
Delegation leaders said aviation education representatives would be hoping to make progress with their offering. The absence of direct air services between the countries was an issue to be worked on with airlines.
Forum chair Michael Fox, a Zespri executive, said education services had “huge” potential for New Zealand with India’s big population of “very ambitious young people...”.
Bridges said there were commercial opportunities to be tapped despite the absence of an FTA.
“Indeed I hope there will be some dealmaking while we are there.”
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.