New Zealand and India have signed a landmark free trade agreement expected to slash tariffs on Kiwi exports to the world’s most populous country.
Trade and Investment Minister Todd McClay and India’s Minister for Commerce and Industry Piyush Goyal signed the “once-in-a-generation” deal tonight before an audience of business leaders from both nations in New Delhi.
Negotiations on the agreement concluded late last year after nine months of talks.
The deal will eliminate or reduce tariffs on 95% of New Zealand exports to India. Eventually, 82% of exports will be tariff-free, with 57% becoming duty-free from the day the deal comes into effect, the Government said.
Immediate tariff elimination will apply to exports including sheep meat, wool, coal and 95% of forestry and wood products.
Other products, including seafood, industrial goods, mānuka honey and some fruit, will receive phased tariff cuts, elimination or quota-based access.
Tariffs on wine will also fall sharply from as high as 150% to between 25% and 50% over time.
New Zealand did not secure full access to India’s tightly protected dairy market, long one of the biggest hurdles in trade talks.
While core dairy products are excluded, tariffs on bulk infant formula and other high-value dairy preparations will be eliminated over seven years.
Prime Minister Christopher Luxon said the benefits of the deal were “widespread” and would put “more money in Kiwis’ pockets”.
“Our business community is excited to see the doors of opportunity open to 1.4 billion people whose economy is set to become the third largest in the world.”
Luxon pointed to a “Most Favoured Nation” clause for wine and services as one example of how New Zealand exporters could benefit.
The clause provides that if India later gives the European Union better market access for wine or services, the same terms would automatically apply to New Zealand exporters.
Luxon said the provision alone could be worth “tens of millions of dollars in extra exports for the New Zealand economy”, adding two-way trade between New Zealand and India is currently worth about $3.95 billion.
“The deal we have struck and the relationship we have built will grow this exponentially and deliver deep and lasting benefits for generations to come,” he said.
The deal has attracted broad political support, with Labour only signalling its backing last week despite earlier criticism of the Government’s handling of the negotiations.
The party flagged a clause which required the Government to promote New Zealand private sector investment in India, with a goal of increasing that investment by about $34b over the next 15 years.
Labour’s concern was that if New Zealand did not fulfil this obligation, India could claw back concessions to New Zealand exporters.
“There is an ability for India to step in and basically remove all the benefits this FTA provides,” Labour’s spokesman for trade Damien O’Connor said.
“We aren’t able to change the agreement. What we do have to do is look at what this agreement might mean in 15 years’ time.”
Labour leader Chris Hipkins said last week his concerns about the “very unrealistic” investment target remained.
“All of our exporters who seek to take advantage of the opportunities this trade agreement provides need to do their own due diligence,” he said.
New Zealand First leader Winston Peters and deputy leader Shane Jones have been among the strongest critics of the agreement.
Jones previously warned of a “butter chicken tsunami”, remarks Hipkins condemned as racist.
The party has also argued the deal could lead to excessive immigration, a claim dismissed by McClay.
Peters took to social media to question how Labour could back the deal while raising concerns about the investment clause.
“Labour themselves have said this FTA is ‘high risk’ because if we don’t meet that threshold to India’s satisfaction India will CLAW BACK whatever gains New Zealand thinks it has achieved,” he wrote.
McClay said the deal would open significant opportunities for New Zealand exporters.
“Creating opportunities for our businesses to diversify and build strong trading relationships provides economic security for New Zealanders,” he said.
“This deal will deliver thousands of jobs and billions of dollars in additional exports.”
The agreement will now be examined by Parliament’s Foreign Affairs, Defence and Trade Committee before legislation is introduced to bring it into force.