Early signs India free trade deal back on: Groser

Trade Minister Tim Groser says a free trade deal with India appears to be back on the agenda. Photo / Richard Robinson

The newly elected government in India is giving cautious signals that the stalled free trade agreement with New Zealand will come back onto the agenda, although it will have to include a commitment to competitive markets and the agricultural sector if it's to succeed, Trade Minister Tim Groser says.

Speaking to a one day India-New Zealand Business Council summit in Auckland, Groser's is the first substantive commentary since the landslide victory in May for Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) ushered in the prospect of the Asian giant's stalled economic reform agenda being revived. Prime Minister John Key and Economic Development Minister Steven Joyce are both scheduled to speak at the conference.

Groser said since May, he had had "very private and informal discussions on exactly this topic with Ministers and senior officials of some of the most important countries in the world."

"We are all in full listening mode," said Groser. "Depending on what answers we receive from New Delhi - and no-one is expecting clarity soon - New Zealand, and countries far more important than us in international affairs, will maintain or re-calibrate their own agendas and negotiating positions."

Acknowledging that he was presuming to advise the new Indian administration, Groser said he was doing so only because of the signals the New Zealand government has been getting from New Delhi on the prospects for opening India's relatively heavily protected economy.

"We have already had some preliminary and friendly conversations with the new Indian Government on these matters," said Groser. "I would not be making the quite blunt views ... expressed in this speech about competition and the need for new thinking on trade policy if I thought such views were completely out of tune with emerging thinking in New Delhi. I am not that reckless.

"Having said that, we fully understand that the new policy of the government is not yet settled. Important industry still needs to better understand the benefits of FTAs and their link to economic growth. There is also an internal review of trade policy taking place in New Delhi that needs to be completed."

The New Zealand and Indian governments began negotiating an FTA in 2009, following a Prime Ministerial business delegation to India, but it lost momentum after the then Congress Party-led party backtracked on broader reforms that would have opened up retail and supply chain competition in India.

Groser said there was no way around the need "to introduce more competition into the Indian economy."

"Today, the evidence that competition through trade liberalisation helps your country is literally overwhelming," he said. "If you seek to protect your country or sector with heavy insulation from import competition, you have to accept the corollary - the country or sector in question is not going to cut it internationally."

However, only political decision-makers could drive a ship to "open up, incrementally and intelligently, to trade."

New Zealand an 'ideal test case'

Using the ground-breaking FTA with China as his example, Groser said New Zealand's size meant "we are an ideal test-case for a progressive approach to liberalisation and explains our strategic role when China was looking for its first outward-looking FTA partner."

The China FTA had led to New Zealand developing "astonishing ties" with China, with the potential for a relationship of the same order of magnitude or greater with India.

"New Zealand is committed to rapidly progressing the FTA negotiation to its conclusion if the Indian Government desires," said Groser, announcing New Zealand's chief negotiator would travel to New Delhi this month to pick up the talks.

"However, if we receive the green light from New Delhi, we will come hard up again on the central problem New Zealand has not only with India but with every country we negotiate with: agriculture liberalisation, without which NZ cannot enter into any FTA," said Groser.

"Somehow, we have yet to convince some of our negotiating partners that there are not secret convoys of NZ milk tankers, hidden behind the Bombay Hills near Auckland, and just waiting to flood their country with milk, given half a chance through trade liberalisation."

Instead, the New Zealand dairy industry would need to invest globally for much of its future, with Indian farmers currently accounting for 14 per cent of total world dairy production, with potential for efficiency gains to increase that share.

"New Zealand companies could play a role in the process of modernisation of Indian agriculture. We have already seen New Zealand companies play this role in China," said Groser. "I am therefore convinced that we can chart a pathway through the agricultural political minefield to conclude an FTA with India that includes agriculture. In those areas where NZ is absolutely cutting edge, I am sure NZ agricultural technology and, longer-term, NZ investment can be part of the India's agriculture answer, not part of the problem."