Explained : Next hurdle for India FTA: domestic politics and Its Impact

Trade Minister Todd McClay has hit back at claims he rushed negotiations for a trade deal with India, saying the agreement may have been at risk if he didn’t conclude it when he did.

The deal is in question anyway after NZ First invoked the “agree to disagree” provision of its coalition agreement with the National and ACT parties and said it would not support enabling legislation.

The support of the opposition Labour Party would give the government the parliamentary majority needs, but its position is unclear after it joined NZ First in criticising the deal when it was announced before Christmas.

NZ First leader Winston Peters told Farmers Weekly the deal does not deliver enough for the dairy industry and gives away too much – including what he believes are major concessions on immigration and a pledge for NZ to invest US$20 billion in India within 15 years or lose market access gains.

Peters said Prime Minister Christopher Luxon had erred before the last election by promising he would conclude an Indian trade deal before the end of the current parliamentary term.

“I thought to myself you have never played cards – the last thing you do is show people your hand,” he said.

Concluding the talks with nearly a year till it hit its self-imposed deadline was the government’s second error, Peters said.

NZ needed that time to convince India that opening its dairy markets to imports was in its national interest.

“When they examine their food requirements for their population then there is an opportunity of persuading them, but you had to put in the work on the ground with the Indian dairy industry,” Peters said.

But McClay told Farmers Weekly he had judged the timing was right to do a deal now.

“India has elections this year and that will bind up a lot of their ability to make decisions.

“Secondly, they have been negotiating with seven or eight other countries and it became increasingly clear should we miss the opportunity to do the high-quality deal that we agreed to then, we might have ended up going to the back of the queue.”

United States President Donald Trump’s 50% tariff on Indian exports to the US had also provided a tailwind for the talks.

The negotiations were conducted over a short time relative to other trade deals, McClay said, but he denied they were rushed.

Intensive engagement with the Indian side meant “we have taken what would normally take three to four years and undertaken it in 12 months,” he said.

Furthermore, claims the deal would open the floodgates to Indian immigration and committed NZ to an unrealistic investment target were inaccurate. The US$20bn investment pledge only committed the government to use its “best endeavours” to promote NZ investment in India. It was not automatic that India would revoke market access gains should NZ not hit the target, McClay said.

McClay said he was hopeful Labour would eventually swing in behind the deal as it had for every other major trade agreement.

The FTA reduces tariffs on some dairy, sheepmeat, wool, apples, wine, seafood, apples, forestry products and kiwifruit, and is “an agreement worth putting in place”, he said.

“While it is for Labour to make a decision for themselves … I believe that [bipartisan] support for trade in our parliament will continue.”