Prime Minister Christopher Luxon took a swipe at the former Labour Government’s trade record, as he promised to get his own Trade Minister, Todd McClay, on a plane to India before Christmas to lay the groundwork for a future deal with the country.
This is despite India’s public misgivings about such a deal and NZ officials warning that a deal with India would be essentially impossible - mainly because India could not offer New Zealand dairy access and New Zealand could not agree to a deal that did not include dairy access.
But Luxon said his conversations with Indian counterparts suggested India was keen.
“In my conversations with the Indian Government and others, I think that we can build a deeper trading relationship with India. I have seen other countries do it and we haven’t,” Luxon said.
He said it was good to have McClay on a plane heading to India, but would not divulge what McClay might offer to induce India to the negotiating table.
“I don’t think it’s a good strategy in a negotiation to actually reveal what you’re going to do - why would make concessions before you’ve got into a negotiation?”
Two-way trade with India amounts to about $2.6 billion for the year ended September. By comparison, two-way trade with China amounts to $40b. Luxon said today that New Zealand undertraded with India “in the extreme”.
India is a famously protectionist economy, making the type of comprehensive agreement New Zealand has signed with the European Union and Britain very unlikely.
National has talked up the possibility of an “early harvest” deal with India, which countries like Australia and Britain had tried to pursue - although talks with the UK appear to have stalled. Early harvest deals focus on what the two nations might agree on, leaving the more thorny disagreements for later.
Earlier this year, Mfat’s (Ministry of Foreign Affairs and Trade) deputy secretary, trade and economic, Vangelis Vitalis, told a parliamentary select committee that New Zealand was in a difficult position when it came to trade agreements with India because of the significance of the dairy sector in both countries.
“India is a critical partner of ours and the Australians have a free trade agreement. That FTA does not include dairy … it is impossible for NZ to do an FTA that does not include dairy … because it is such a significant part of our export profile,” Vitalis said.
He said some of the highest trade barriers in India related to dairy and were in excess of 200 per cent.
An “early harvest” agreement would also represent a change from New Zealand’s longstanding position of signing comprehensive agreements that covered most of our trade. There is a fear that early harvest agreements would be a slippery slope, leading other trade blocs to think they too could ink low-quality, quick trade agreements.
The Mfat website says New Zealand’s “overall objective in any FTA negotiation is the establishment of a modern, high-quality, comprehensive, forward-looking, and commercially meaningful agreement that facilitates the growth and development of our trade and investment relationship with our trading partner[s]”.
Luxon said he wanted to boost New Zealand’s “literacy” in South Asian markets.
He took a swing at the former Government’s record on trade, saying “rightly or wrongly we have been perceived as being a little bit too inward-looking and not out in the world engaging enough” - including on the issue of trade.
The former Labour Government was quite proud of its record on trade, with former Trade Minister Damien O’Connor saying Labour had signed or upgraded seven FTAs since 2017 - although one of these was the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), which Labour had railed against in Opposition when the deal was known as the TPP (Trans-Pacific Partnership).
“These deals mean 74 per cent of New Zealand’s exports will go to markets covered by a legally enforceable FTA, up from just over 50 per cent six years ago,” O’Connor said earlier this year.
Luxon was also asked to take a firmer position on the tensions between the United States and China, and New Zealand’s potential interest in the Aukus deal, but did not give a firm view on either.
“We will continue to have strong relationships with our longstanding allies and friends, where we have common values, and we will look to build trade opportunities wherever we can,” Luxon said.
He said the Government would take advice on the likes of associating with the Aukus Pillar II deal, and China’s Belt and Road initiative.
Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.