Context: India, New Zealand resume trade deal talks after decade

Source: The Hindu

India and New Zealand stated that they would resume discussions for a potential free trade agreement (FTA) to strengthen their economic ties after a lapse of almost ten years. In an effort to increase investment, commerce, and services, India and New Zealand started negotiating the Comprehensive Economic Cooperation Agreement in 2010. But in 2015, the discussions came to a standstill.

Christopher Luxon, the prime minister of New Zealand, is in town for four days. The goal of the FTA talks between India and New Zealand is to reach fair agreements that will strengthen market access and supply chain integration. The FTA talks seek to open up new opportunities for consumers and companies, promoting growth and prosperity for both parties, while bilateral trade continues to increase gradually and surpasses USD 1 billion between April and January 2025.

With more than half of its tariff lines now duty-free and an average import rate of just 2.3%, New Zealand already offers significant market access to Indian goods. Given that India’s average tariff of 17.8%, substantial reductions would be necessary, which would lessen the appeal of a classic free trade agreement for India. India now imports only $0.57 million worth of dairy products from New Zealand.

Model Question:

India and New Zealand share strong democratic values and growing economic and strategic ties. However, the relationship remains underutilized. Discuss the key areas of cooperation, challenges, and opportunities in strengthening India-New Zealand relations.

Model Answer:

India and New Zealand share historic ties as Commonwealth nations and partners in multilateral forums like the United Nations, WTO, and Indo-Pacific Economic Framework (IPEF). Despite strong people-to-people ties and economic exchanges, their bilateral relationship remains underdeveloped compared to other partnerships in the Indo-Pacific region.

Key Areas of Cooperation

1. Trade & Economy – Bilateral trade (~$2.5 billion) is growing, but no Free Trade Agreement (FTA) exists. India exports IT services, pharmaceuticals, while New Zealand supplies dairy, wool, and fruits.
2. Defense & Maritime Security – The 2022 MoU on Defense Cooperation promotes peacekeeping, intelligence sharing, and Indo-Pacific security collaboration.
3. Education & Skill Development – 30,000+ Indian students study in New Zealand, strengthening educational ties.
4. Climate Change & Sustainability – Both nations collaborate on renewable energy, carbon reduction, and agricultural sustainability.
5. People-to-People Ties – The 250,000+ Indian diaspora in New Zealand strengthens cultural and economic relations.

Challenges in the Relationship

1. Lack of High-Level Political Engagement – Few bilateral visits by top leaders.
2. Trade Barriers – New Zealand’s dairy industry conflicts with India’s domestic interests.
3. Geopolitical Differences – NZ’s soft stance on China contrasts with India’s Indo-Pacific approach.

Way Forward & Opportunities

1. Enhancing Economic Ties – Diversifying trade beyond dairy, boosting IT, fintech, and renewable energy investments.
2. Strengthening Defense Cooperation – Expanding naval exercises and Indo-Pacific coordination.
3. People-Centric Policies – More student exchanges, tourism promotion, and diaspora engagement.
4. Climate Change Collaboration – Partnering in green hydrogen, sustainable agriculture, and carbon neutrality.

India-New Zealand relations hold immense potential in trade, security, and education. Strengthening political engagement, diversifying trade partnerships, and enhancing defense cooperation can unlock new opportunities for both nations in the Indo-Pacific.