India, New Zealand FTA to be operational by year-end

The Prime Minister of New Zealand Christopher Luxon termed the FTA as a “once in a generation” agreement which both sides expect to operationalise by the end of this year after the ratification process goes through. The agreement was signed by Commerce and industry Minister Piyush Goyal and New Zealand’s Trade and Investment Minister Todd McClay.

While the ratification process in India is in the domain of the executive, in New Zealand the ratification process requires approval of parliament. Coalition partner of the PM Luxon’s National Party, the New Zealand First party  has publicly opposed the deal. The Prime Minister has, however, secured backing of the main opposition Labour Party for the agreement. 

“Well, we have a majority in our Parliament to pass this agreement. All the trade agreements that have been presented to our Parliament have enjoyed a super majority of the two largest parties in Parliament,” McClay said.

Modi’s comments on the FTA

Commenting on the investment commitment of $20 billion by New Zealand, Prime Minister Narendra Modi said in a social media post that it would further strengthen cooperation in agriculture, manufacturing, innovation and technology, paving the way for a more prosperous and dynamic future for both countries. 

While India gets duty free access on all its exports to New Zealand, it also gets to protect its sensitive sectors. Dairy items like milk, cream, whey, yoghurt and cheese. Animal products (other than sheep meat), vegetable products, sugar, artificial honey, animal, vegetable or microbial fats and oils, gems and jewellery, copper and its articles, aluminium and its products are out of the pact.

India has offered market access in 70.03% of the tariff lines while keeping 29.97 % tariff lines in exclusion. Immediate Elimination on 30%, phased reduction in 35.60%,  tariff reduction in 4.37% and Tariff Rate Quotas (TRQs) or limits on the quantity that can be imported at lower duties has been offered in 0.06 % of Tariff Lines.   

TRQs would be applicable on apples, kiwi fruit and manuka honey. Tariffs on wine will be reduced from 150% to either 25 or 50 % by India over 10 years depending on the value of the wine plus a Most Favoured Nation (MFN) commitment. Cherries, avocados, persimmons  and blueberries will also get duty reduction over 10 years. 

India will also immediately remove tariffs on wood, wool, sheep meat, leather and raw hides. On petroleum, machinery and some milk derivatives like peptones the tariff elimination will be in phases. On some iron and steel, polymers and aluminium the duties will be reduced but not eliminated.  

According to a New Zealand government statement, India will allow duty-free access for dairy and other food ingredients for re-export from day one. Duty-free access for bulk infant formula and other high-value dairy preparations would be spread out over seven years, the release added.

“It is a part of our Foreign Trade Policy (FTP) in which any project or any product which is meant for re-export can be brought to India, processed or further bought abroad and re-exported, but not sold in the Indian market,” Goyal said while clarifying on dairy sector trade under the FTA.

New Zealand has offered to open up 118 services sectors and sub-sectors and Most Favoured nation treatment in 139 services sectors and sub-sectors. India will open up 106 services sectors and sub-sectors and provide MFN treatment in 45 services sectors and sub-sectors.

On mobility no numerical cap on the number of students from India will be imposed. Post study work visas will be available to students of science, technology and mathematics. A quota of 5000 visas will also be given at any time for Indians in skilled occupations like IT, engineering, healthcare, education, and construction, AYUSH practitioners, yoga instructors, Indian chefs, and music teachers. This visa will be for up to three years.