India is New Zealand’s 17th-largest bilateral trading partner. In 2011, overall goods trade between the two countries was worth NZ$1.3 billion. Of that total, NZ$938 million were New Zealand exports going to India, making India our seventh-largest export destination. Even this figure understates the importance of the Indian market, with exports having increased rapidly from just NZ$366 million five years earlier, reflecting India’s emerging economic power. It is predicted that by 2025, India will be third-largest economy in the world.
India is also a key services market. India has quickly become New Zealand’s third-largest source of foreign students. There were 12,358 international fee-paying students from India in New Zealand in 2011, nearly double the number in 2008. Over 28,000 Indians visited New Zealand in 2011, preferring to come during their summer (April to June) making them a valuable source of visitors for New Zealand's autumn shoulder season. This is in addition to the vibrant Indian community of more than 100,000 residents throughout New Zealand.
In recognition of these trade trends as well as its political influence on the world stage, India is a priority relationship for New Zealand and is our most developed relationship in South Asia. The New Zealand Government is implementing an interagency strategy that is working towards India being a core trade, economic and political partner for New Zealand by 2015. The NZ Inc India Strategy, launched by Prime Minister John Key in October 2011, has several broad economic goals that a Free Trade Agreement (FTA) will help achieve. These are:
Negotiations towards an FTA with India were announced by New Zealand Trade Minister Tim Groser and Indian Commerce Minister Anand Sharma in January 2010.
The first round of negotiations took place in Wellington in April 2010 and subsequent rounds have continued at intervals of six months or less. Reports on each of the rounds can be found below:
A joint feasibility study (PDF 2.1MB), completed in February 2009, concluded that the Indian and New Zealand economies were largely complementary and considerable potential exists to substantially develop the bilateral trade and economic relationship. It found that an FTA would deliver a broad range of benefits to both countries.
For New Zealand, an FTA will enable us to improve our businesses’ access to a potentially vast market for consumer and industrial products. Indian processors are demanding raw materials and intermediate products and India’s growing middle class is demanding goods (and services). Coal and log exports have led the increase in trade with India in recent years, but dairy products, apples and machinery are becoming significant trade items. India’s overall average Most Favoured Nation applied tariff is 12.9 per cent, with the average tariff on agricultural goods 34.4 per cent. The high tariffs on agricultural and value-added items make New Zealand products less competitive in the market. Negotiators will target the currently high barriers facing New Zealand exporters to India so that trade can flourish.
We would expect an FTA would also phase out tariffs on Indian imports – particularly in textiles, clothing and footwear, and industrial manufactured goods – which would benefit Indian businesses and New Zealand consumers.
The greater interaction and co-operation that flows from an FTA will also help address non-tariff barriers that constrain trade with India. Negotiators are particularly focused on establishing robust frameworks for dealing with sanitary and phytosanitary (quarantine) measures, technical barriers to trade, customs procedures, and rules of origin. This will lead to greater diversification of the range of goods being exported to India.
There is significant potential for growth in the services trade with India underpinned by New Zealand’s growing Indian community and India’s outreach to its diaspora. Negotiators are seeking commitments that will allow our providers to take advantage of opportunities available in the areas of tourism, education, and consultancy services such as professional and business services, environmental services, engineering and construction services, and services incidental to agriculture and forestry.
New Zealand has a weak record of attracting investment from India, while investment by New Zealand companies in India is sparse but growing. An FTA with a comprehensive, high-quality outcome in this area would give greater certainty to businesses and encourage increased inward and outward investment flows.
India has existing trade agreements that give limited preferential treatment to: Sri Lanka, Nepal, Afghanistan, Chile, Singapore, Malaysia, ASEAN, Japan, the Republic of Korea, and MERCOSUR (Argentina, Brazil, Paraguay & Uruguay).
Along with New Zealand, India is also engaged in various stages of negotiations with: Australia, Canada, the European Union, Thailand, Malaysia, Indonesia, and ASEAN (services and investment), Sri Lanka (services and investment), Israel, the Gulf Cooperation Council, and the Common Market for Eastern and Southern Africa (COMESA).
Negotiators need to have detailed information on business interests relevant to an FTA with India to ensure that we have the full picture of New Zealand’s market access priorities for pursuing in the negotiations and areas of domestic sensitivity.
Preliminary discussions were held with a range of business organisations in 2009 and a call for information from goods and services exporters as to the barriers they encountered doing business in India was made in 2011.
We are still keen to hear from interested businesses or individuals about any barriers they are facing in the Indian market. This includes companies that are not exporting to India now, but see medium to long-term prospects for entering this market. Examples of the common sorts of barriers New Zealand businesses face offshore are:
We are also interested in hearing from New Zealand companies that may be concerned about an increase in imports from India as a result of New Zealand agreeing to eliminate our tariffs.
If you would like further information about the NZ-India FTA negotiations, please contact Brody Sinclair
by: Post: Trade Negotiations Division Ministry of Foreign Affairs and Trade Private Bag 18-901 Wellington
Phone: +64 4 439 8345
If you would like to find out more about doing business in India then please visit the NZTE website.