After a gap of nearly 10 years, India and New Zealand on Sunday announced resumption of negotiations for a proposed free trade agreement (FTA) to boost economic ties.
The announcement came on the eve of the meeting between Prime Minister Narendra Modi and New Zealand Prime Minister Christopher Luxon, who is on a four-day visit to India from Sunday. The announcement came after a meeting between commerce minister Piyush Goyal and New Zealand’s minister of trade and investment Todd McClay.
“The India-New Zealand FTA negotiations aim to achieve balanced outcomes that enhance supply chain integration and improve market access,” a commerce ministry statement said.
“Wonderful to meet my friend Todd McClay, New Zealand’s trade minister. With bilateral trade continuing to grow steadily, surpassing $1 billion during April-January 2025, the FTA negotiations aim to unlock new avenues for businesses and consumers, fostering mutual growth and prosperity of our nations,” Goyal posted on ‘X’.
This is the second attempt by the countries to sign an FTA. The first one lasted from 2010 to 2015. During that period, 10 rounds of discussions took place. One of the key sticking points is New Zealand’s demand for an access to Indian dairy markets. Dairy, along with agriculture, is the most sensitive area to negotiations. In no FTA that India has signed so far, has it agreed to open the dairy sector.
Sensitivities remain and India’s resolve on dairy is being tested in negotiations with the European Union and the UK.
“Currently, India’s dairy imports from New Zealand are minimal (around $0.57 million). While India may consider limited imports of value-added dairy products, it remains firm against allowing raw dairy imports,” founder of Global Trade Research Initiative Ajay Srivastava said.
“India was also reluctant to lower tariffs on New Zealand’s meat and wine exports. Pressure from the US to open India’s dairy and agriculture sectors may also influence negotiations,” he said.
Another key issue was India’s demand for easier movement of its skilled professionals and better access for its IT and services sector. India wanted New Zealand to grant work opportunities similar to those given to Australia and China, but New Zealand did not agree, Srivastava added.
The situation was further complicated by negotiations around the Regional Comprehensive Economic Partnership (RCEP), which India eventually withdrew from in 2019 due to similar concerns over market access and protecting local industries.
“A major challenge in the renewed talks will be the disparity in tariff structures. New Zealand’s average import tariff is only 2.3%, with over half of its tariff lines already duty-free, meaning Indian goods already have substantial access to its market. In contrast, India’s average tariff stands at 17.8%, meaning it would have to make significant reductions, making a traditional FTA less attractive for India,” Srivastava said.
India-New Zealand trade in FY24 stood at $1.54 billion, highlighting a significant underperformance in economic ties. India’s goods exports stood at $538.3 million and New Zealand’s exports were at $335.1 million.
