India agreement sets new foreign policy direction

New Zealand Trade Minister Todd McClay and his Indian counterpart, Piyush Gopal, last night in New Delhi signed the India Free Trade Agreement (FTA).    

McClay said the FTA supported New Zealand’s ambitious goal of doubling the value of exports in 10 years.  

The signing of the Agreement marks a new direction for New Zealand foreign policy.

In the long lead-up to yesterday, Indian Government officials have made it clear that this would be a political agreement as much as a trade agreement.

After all, India hardly needs to prioritise access to a country with a total population of 5.35 million when just its own capital, New Delhi, has a population of 34 million.

During a 2023 visit to Wellington, the Commandant of the Indian Defence Force, Lt General Sukriti Singh Dahiya, underscored the importance.

“From our perspective, New Zealand is a very important country in military terms,” he told POLITIK.

“I see it as a flank of the Indo-Pacific.

“Irrespective of its size. I think the location is very, very strategic when we finally talk of the common defence of the Indo-Pacific.”

For New Zealand, the FTA and a deeper relationship with India has the potential to act as a counterbalance against China.

But the irony is that despite its foreign policy implications, the Foreign Minister, Winston Peters opposes it and will vote against any of its provisions that come before Parliament.

Speaking last night before the Agreement signing ceremony, India’s Trade Minister Piyush Gopal recalled that Indian soldiers had also fought at Gallipoli alongside the ANZAC troops.

Then, India was a British colony.

Now, no longer a colony, India sees itself as a superpower.

“India today works with the rest of the world from a position of strength, full of confidence, to engage, expand the relationship, not worried, but looking to capitalise on the opportunities while also willing to open our doors to greater international engagement,” said Gopal.

“And we do that from a position where we have an economy of size and scale, an economy that is working with strong macroeconomic fundamentals, a young population under 30 years of age.

However, New Zealand’s relationship with India has historically been all over the place.

As recently as May 2022, a Ministry of Foreign Affairs and Trade (MFAT) official said concluding a full free trade agreement (FTA) between New Zealand and India was not a realistic short-term prospect.

New Zealand Ministers and officials seemed scarred by India’s last-minute pullout on the eve of the signing in 2019, after seven years of negotiations, from the Regional Comprehensive Economic Partnership (RCEP).

Even at a business forum hosted by the Indian High Commissioner in New Zealand in 2023, the prevailing mood was that a free trade agreement with India was a lost cause.

The former Governor General, Sir Anand Satyanand, put things in perspective when he said that for India, a trade deal with New Zealand would be like New Zealand prioritising a trade deal with Waiheke Island.

In 1982, then Prime Minister Sir Robert Muldoon closed our High Commission in New Delhi on cost grounds.

That led to a famous report in “The Dominion” by Richard Long profiling “our man in New Delhi”: Babu Gomez, the caretaker who lived in a hut on the site for a new High Commission.

David Lange, who had a deep affection for India, reinstated the High Commission and appointed Sir Edmund Hillary as High Commissioner.

Gomez kept his job.

In 1986, then Indian Prime Minister Rajiv Gandhi visited New Zealand.

He was the last Indian Prime Minister to come here, but the Government is hoping Prime Minister Narendra Modi will visit before the end of the year to mark the Free Trade Agreement signing.

Relations took another turn for the worse in 1998 when Prime Minister Jenny Shipley sharply attacked India’s testing of three nuclear devices.

“I hope other countries in the region will remain calm in response to these events< “she said.

“It is imperative that there should be no further steps which might weaken the international norm against nuclear testing.

“We will be making clear to the Indian authorities that New Zealand strongly objects to their actions.

“We shall also be consulting with like-minded countries on any other measures that can be taken to register the international community’s consideration of this provocative act by India.”

As a result of the tests and India’s refusal to sign the Nuclear Non-Proliferation Treaty, New Zealand refused to allow India to become a member of the Nuclear Suppliers Group.

New Zealand is a member and thus has the power to veto any applications to join.

The Nuclear Suppliers Group (NSG) is a 48-nation voluntary, non-legally binding cartel that controls the export of nuclear materials, equipment, and technology to prevent the proliferation of nuclear weapons.

However, it has been able to do bilateral deals with the United States and France to secure some of the technology it needs.

Former Otago University Professor and United Nations Assistant Secretary General Ramesh Thakur has argued that New Zealand lifting its veto could lead to an overall improvement in relations.

“India matters more to New Zealand than the other way round,” he said in 2022.

But in March, the joint statement issued after Prime Minister Christopher Luxon had met Modi suggested that New Zealand was ready to relax its ban.

Both Leaders emphasised the importance of upholding the global nuclear disarmament and non-proliferation regime and acknowledged the value of India joining the Nuclear Suppliers Group in the context of predictability for India’s clean energy goals and its non-proliferation credentials,” the statement said.

But last December, the Prime Minister denied there was any connection between the Free Trade Agreement and the Nuclear Suppliers Group.

“The two issues are not linked at all,” he said.

The free trade deal itself raises two big questions.

NZ First Deputy Leader Shane Jones, explaining his party’s opposition to it, said it would lead to a “Butter Chicken Tsunami” as a wave of Indian migrants arrived here.

The migration provisions allow for a quota of 5,000 visas for skilled Indians to stay up to three years in sectors of interest to India, including Indian iconic occupations (natural medicine, Yoga Instructors, Indian Chefs, and Music Teachers) and IT, Engineering, Healthcare, Education, and Construction.

When the agreement was announced in December last year, NZ First leader Winston Peters claimed that the provision would lead to 25,000 “or more” Indians coming here, as visa holders would bring their families.

But any holder of a Green List visa (which will include Indians) must apply to bring their family.

Peters has assumed that each applicant will apply to bring in four family members to arrive at his 25,000 figure.

The agreement also provides work opportunities for Indian students pursuing at least Bachelor-level degrees in Science, Technology, Engineering and Mathematics (STEM) subjects.

They may work up to 20 hours a week.

But the lack of interest among Indian students in coming here is evident in the makeup of the current business delegation in India.

Only eight per cent of New Zealand’s overseas student population is from India, and the University with the biggest number, Auckland, is not on the business delegation in New Delhi. Only the University of Waikato, which has just over 1000 international students, is there.

NZ First and Labour have both raised questions about New Zealand’s commitment to invest $33 billion in India over the next 15 years.

“It will be up to India to decide if New Zealand has seriously pursued its commitment to promote $20 billion investments at the end of 15 years. In case it is observed that most of the investments have been made and the shortfall is very little, it will be Delhi’s prerogative to grant some grace time,” a source tracking the matter told The Indian business news site, Businessline.

“If the investments are not satisfactory, India can take ‘remedial action’ such as withdrawing tariff benefits on certain items, which could be decided at that point in time, the source added.”

This was the sticking point with Labour.

McClay has insisted that New Zealand has only committed to “promote” the investment plan, not to set an absolute target.

In the meantime, the question is whether the India Free Trade Agreement can serve as a catalyst for trade with India, as the China Free Trade Agreement did with China.

That will be the real test.

What the Agreement delivers: