Explained: This article explains the political background, key decisions, and possible outcomes related to Explained : NZ First says it will not support legislation for trade deal with India and Its Impact and why it matters right now.
He said the deal’s dairy access was bad and also criticised the visa access. It is not the first time Peters has deployed this tactic. During the Clark Government, in which Peters also served as foreign minister, Peters opposed Trade Minister Phil Goff’s trade deal with China. He told the Herald earlier this year he stands by that criticism.
The deal will be signed some time next year and examined by Parliament, implementation legislation would likely not be passed until after the election, meaning the deal could become a campaign issue.
The rest of the Government says the deal gives the best access of any Indian FTA, with recent Australian and United Kingdom deals including lower access.
The deal was finalised earlier this month but had to wait for Indian Prime Minister Narendra Modi to return to the country last week to hold a special Cabinet meeting to agree the deal.
Trade Minister Todd McClay said the deal was “historic” and puts NZ exporters on an equal or better footing to competitors across a range of sectors, and opens the door to India’s rapidly expanding middle class.
Almost 57% of exports are duty-free from day one of the deal coming into force, increasing to 82% once it is fully implemented. The remaining 13% are “subject to sharp tariff cuts”, the Government says.
However, there are questions with how well the deal will land with the dairy sector. India is notoriously protective of its domestic dairy sector and the deal has not managed to significantly increase access to NZ dairy exports.
This deal liberalises access in some areas: dairy that is imported in order to be re-exported gets in tariff free under this deal; infant formula will see the current 33% tariff eliminated over seven years.
Some of NZ’s higher value dairy exports, worth about US$15,000-$16,000 ($26,000–$28,000) a tonne would see tariffs reduced.
However, there is no change to some of the cheaper milk powder exports that NZ excels at, which tends to be priced at US$3000-$4000 ($5200–$6900) a tonne, which faces such high tariffs that it makes NZ milk products uncompetitive in India.
The deal includes a provision that means if India concludes a deal that offers better dairy access to a comparable economy, NZ can ask for the dairy access to be renegotiated.
The Government has conceded greater visa access to India, something to which NZ First had been resistant.
New Zealand will offer three-year visas to occupations on tiers one and two of the green list of skill shortages.
The Government will offer 1667 visas a year, which will be non-renewable and not offer a right to remain.
The Government will also expand the post-study work rights of some visas.
Getting a trade deal with India over the line this Parliamentary term was a key commitment of Prime Minister Christopher Luxon on the campaign trail in 2023.
He’d accused the then-Labour Government of neglecting India.
The last National Government had begun trade talks with India, but they fell apart. India is among the most protectionist economies in the world and NZ’s is among the most liberal – the two sides had very little on which they could agree.
Labour never restarted those talks, believing that a trade deal that had so little on offer for the dairy sector was not really worth it for a country whose exports were as heavily weighted towards dairy as NZ’s.
Announcing the deal, Luxon paid tribute to his trade minister.
“Since the election, Todd McClay has visited India seven times.
“The Foreign Minister has visited India twice. Earlier this year, I led NZ’s largest-ever trade mission to India. And NZ has hosted India’s President and two Ministerial visits from India.
“The result is a high-quality trade agreement with a trusted partner that will deliver deep and lasting benefits for NZ,” he said.
Trade deal highlights:
- Tariff elimination or reduction on 95% of our exports.
- Duty-free access on almost 57% of NZ exports from day one, increasing to 82% when fully implemented, with the remaining 13% being subject to sharp tariff cuts.
- Immediate tariff elimination on sheep meat, wool, coal and over 95% of forestry and wood exports.
- Duty-free access on most seafood exports, including mussels and salmon, over seven years.
- Duty-free access on most iron, steel and scrap aluminium, over 10 years or less.
- Duty-free access for most industrial products, over five to 10 years
- 50% tariff cut for large quota of apples – nearly double recent average exports.
- Duty-free access for kiwifruit within a quota almost four times our recent average exports, and tariff halved for exports outside of quota.
- Duty-free access for cherries, avocados, persimmons and blueberries, over 10 years.
- Tariffs on wine reduced from 150% to either 25 or 50% (depending on the value of the wine) over 10 years plus Most Favoured Nations (MFN) commitment.
- Tariffs on mānuka honey cut from 66% to 16.5% over five years.
- MFN status and liberalisation across services exports.
- 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 over seven years.
- 50% tariff cut for high value milk albumins within a NZ-specific quota equal to current export volumes.