Explained: This article explains the political background, key decisions, and possible outcomes related to Explained : India FTA: Labour has more questions and Its Impact and why it matters right now.
The Labour Party says it needs to see more detail about the government’s US$20 billion investment pledge before it will agree to support its free trade agreement with India.
Labour leader Chris Hipkins has written to Prime Minister Christopher Luxon with a list of questions and demands.
Labour has said these need resolving before it would be willing to give the government the parliamentary majority it needs for enabling legislation. Without the legislation the deal cannot enter into force and tariff reductions commence.
Hipkins and his trade spokesperson, Damien O’Connor, received further briefings from Trade Minister Todd McClay and his officials last week.
O’Connor said many of the party’s questions about changes to immigration and education settings under the agreement have now been answered.
“We are moving in the right direction but the question remains around the aspirational investment target and what are the consequences when that is reviewed by both governments in 10 or 15 years,” O’Connor said.
McClay has said he has merely committed future governments to promote investment by New Zealand firms in India in the hope they would hit the US$20bn target. Tariff reductions would continue so long as the NZ government could prove it had used its best efforts to help firms hit the target even if the amount was not achieved.
However, O’Connor said the agreement includes no specific criteria to judge whether future NZ governments have fulfilled their obligations to promote investment in India.
“The only thing written down is the amount, US$20bn,” he said.
Asked whether he is proposing more watertight language be included, O’Connor said it is impractical to rewrite the agreement now negotiations have closed.
“This government included this in the agreement. They must have had ideas on how they will deliver this.”
While the investment target appears to have been critical to getting India’s agreement for tariff reductions for key NZ exports, it also risks trashing NZ’s credibility in future trade negotiations if it cannot be delivered, O’Connor said.
“NZ has a reputation internationally for delivering on its trade commitments and we have to ensure in the hasty sign-up to this trade agreement that we haven’t put that reputation at risk,” he said.