Key to lead mission to India; ASEAN FTA review announced

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India is reluctant to open its highly protected agricultural, including dairy, sector (Photo: P.Casier/Flickr)

BusinessDesk | 17 October 2016

Key to lead mission to India; ASEAN FTA review announced

By Pattrick Smellie

Oct. 17 (BusinessDesk) - Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we’re going" but playing down the likelihood of early progress.

In his statement on the Oct. 24 to 28 visit, Key made no mention of New Zealand’s five-year ambition to sign an FTA with India, which is reluctant because of its highly protected agricultural, including dairy, sector and lack of appetite to compromise because New Zealand represents a small opportunity for Indian businesses.

Key said in his statement that in meetings with Prime Minister Narendra Modi and President Pranab Mukherjee that he would be exploring "how New Zealand can be part of India’s growth".

Asked at his post-Cabinet press conference whether that meant New Zealand had abandoned the FTA push, he said: "No, that’s the main reason we’re going."

However, the objective was "a little bit less about whether there could be an FTA than about what the quality" of any deal, with the China-led Regional Comprehensive Economic Partnership (RCEP) an alternative route to closer trading ties.

The visit will be Key’s first for five years, when the government committed considerable resources to making a trade push with India, making the country the subject of the Ministry of Foreign Affairs’ first NZInc strategy and put up a challenge to grow merchandise exports to India to $2 billion by last year, grow services trade by 20 percent a year, and attract and retain skilled migrants.

Migration from India has boomed since, with political and bureaucratic tensions building over the large numbers of Indian international students arriving in New Zealand, a proportion of whom are as interested in becoming residents and working here as gaining qualifications. But merchandise exports to India in calendar 2015 totaled just $639 million.

“Along with further strengthening New Zealand’s political, security, and economic connections with India, my meeting with Prime Minister Modi will be an opportunity to discuss his efforts to reform India’s economy and how New Zealand can be part of India’s growth,” said Key in his statement.

India’s desire to join the Nuclear Suppliers Group, an international grouping seeking to control the proliferation of nuclear weapons, was also likely to be discussed, he said. New Zealand did not support India’s inclusion in the group, first established in 1974 in response to a nuclear bomb test in India, but Key said the issue was separate from trade talks.

A former New Zealand international trade negotiator, Crawford Falconer, said New Zealand was probably being realistic in taking a cautious approach to an FTA agreement.

"They won’t be abandoning it, but there’s no need to create the possibility of a breakthrough if there isn’t going to be one."

The government may have more luck pushing India to engage more actively in the negotiations on RCEP, which is being advanced by China and is seen as an alternative to the Trans-Pacific Partnership, which is also in danger of failing, Falconer suggested. India is a member of RCEP with New Zealand, but not part of TPP.

"The leverage in RCEP is likely to be somewhat greater than in the bi-lateral relationship."

Meanwhile, Trade Minister Todd McClay has announced a review of the six-year-old ASEAN-Australia-New Zealand FTA (AANZFTA) agreement.

Despite trade with the region increasing by 25 percent in that time, McClay said he was concerned New Zealand companies were "leaving money on the table" either by failing to exploit the agreement or because of remaining non-tariff barriers that could be preventing export growth to the fast-growing countries of southeast Asia.

"It is not clear that all businesses use the FTA when exporting to South East Asia and this means they could be paying unnecessary tariffs," said McClay. “Exporters of both goods and services also face an increasing number of non-tariff barriers in South East Asia, such as import quotas, subsidies, customs delays and technical barriers, which are holding them back."

The local review is occurring ahead of a full review by the 12 signatories to the FTA, which include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam as well as Australia and New Zealand.

source: Business Desk