Prime Minister Christopher Luxon. Photo: Lawrence Smith / Stuff
- Christopher Luxon is flying to India on Saturday for a high-stakes charm offensive
- He earlier promised to achieve a free trade agreement with India during his first term
- Delhi trade experts say that would require New Zealand to give up on including dairy in any deal for now
Prime Minister Christopher Luxon is flying to India on Saturday, under pressure to make progress towards a free trade deal given his audacious pledge to strike such an agreement within his first term of power.
The four-day visit to Delhi and Mumbai comes a decade after the last round of formal negotiations, and leaves Luxon with less than two years to restart formal talks, iron out any sticking points and then sign on the dotted line.
The magnitude of the task may well be weighing on the prime minister, who has shifted his language in recent days to focus instead on a "more comprehensive economic partnership" and says his "real commitment" is simply to deepen the trade relationship.
Speaking to RNZ, two trade experts based in Delhi expressed some mild optimism about Luxon's chances, but with a major caveat: they say New Zealand would have to abandon hope of including dairy in any deal, a tough pill for the sector to swallow.
New Zealand is sending one of its largest ever prime ministerial delegations, with top businesspeople, community leaders, and a kapa haka group packed across two 757s. Luxon himself will fly commercial to Singapore before joining the entourage in New Delhi.
Holding out hope for a free trade deal
National has made no secret of its desire to draw closer to India, labelling a trade deal a "major strategic priority" during the 2023 election campaign.
Luxon later elevated the pledge in the heat of a television debate, promising to secure an agreement before the end of his first term. As recently as October, Luxon doubled down on the commitment, insisting: "we'll get it done".
The choice of words has recently become slightly more couched. Luxon insists he has not abandoned the pledge but this week told media: "What I'm looking for is just a much more comprehensive economic partnership and how we can move that forward. You'll have to wait and see."
The one-term deadline has been described by the government as ambitious, and by the opposition, implausible.
Speaking from Delhi, trade expert Biswajit Dhar told RNZ he was "a bit sceptical" partly because of the long list of negotiations India was already engaged in.
"The calendar of all the trade negotiators here looks pretty packed... but you never know, realpolitik works in strange ways," Dhar said.
"There's a saying here in India that life depends on hope. I'm sure there'll be something in Māori as well."
Dhar said previous attempts to reach agreement between both countries had been thwarted by "a lack of political will" and "a mismatch" between New Zealand's export interests and India's sensitivities - most notably over dairy.
"The two countries [have not been] looking closely at each other... we have actually become victims of this thing that, you know, New Zealand wants to export only dairy and nothing else."
New Zealand and India held 10 rounds of talks between 2011 and 2015 before negotiations stalled.
A high energy trip by former Prime Minister Sir John Key in October 2016 - the last time a NZ prime minister visited India - ended with a promise to work towards the "early conclusion" of a deal.
But formal negotiations never resumed. Two months later, Key resigned, after which National was turfed from office, replaced by a Labour-NZ First coalition in 2017. By 2022, then-Foreign Minister Nanaia Mahuta had bluntly declared that a trade deal with India was "not a priority".
India has long had a reputation as a free trade sceptic and tough negotiator, but Dhar said India's position had thawed somewhat as it strived to rejuvenate its economy post-Covid.
Dhar said "the Trump factor" had also made new partnerships attractive given increased uncertainty and protracted trade wars.
India signed an interim deal with Australia in 2022, and with the European Free Trade Association - a bloc made up of Norway, Switzerland, Iceland and Liechtenstein - last year. Just last month, India restarted negotiations with the United Kingdom and was due to hold another round of talks with the European Union in March.
A dairy-free alternative?
The largest obstacle to progress will be the same as in the past: dairy. India is home to millions of small-scale rural farmers who fear disruption from New Zealand's industrialised producers.
Ajay Srivastava, founder of Delhi-based research firm Global Trade Research Initiative, told RNZ agriculture was viewed as a "livelihood issue" in India and so usually hit a dead-end in negotiations.
He said New Zealand's best chance of success would be to follow Australia's lead and put dairy to one side, instead pursuing an interim or "early harvest" arrangement with a focus on other sectors.
"Both sides needs a reality check," Srivastava said. "The way to go is to agree on... low-hanging fruit, and then deepen it gradually, as we are doing with Australia."
Srivastava said it was possible such an interim agreement could be negotiated within Luxon's self-imposed deadline.
"We did a deal with the UAE in less than three months. In Australia, in less than four or five months. So suppose New Zealand agrees to say, okay, whatever is extended to Australia, extend the same things to us, plus or minus a few things of our interest, the deal can go through very fast."
Dhar also advocated such an approach: pausing talk on agriculture to instead focus on other areas, like IT services, where trade was currently "pretty dismal".
"Is it possible to focus on the other 70 percent [of New Zealand's exports that aren't dairy] and then see what can be done? Are there low-hanging fruits to be plucked?
"And for the time being, we can leave dairy on the back-burner."
Ajay Srivastava, founder of Delhi-based research firm Global Trade Research Initiative. Photo: Supplied
In the past, MFAT officials have suggested it would not be worth excluding agriculture from a deal - "impossible" to consider - given the significance of dairy to New Zealand's economy.
That was also the position of former Trade Minister Damien O'Connor - now Labour's trade spokesperson in opposition - who described Luxon's deadline as "completely unrealistic".
O'Connor told RNZ it remained his position that any deal which excluded dairy would be "sub-optimal" given the industry was the country's single biggest exporter.
"The door should always be left open. You know, other sectors say, 'let's do a deal and forget about dairy'. That's not very realistic under the current structure of our economy."
The coalition, on the other hand, seems more open to a dairy-free proposition, with Luxon telling RNZ: "perfection is the enemy of good."
MFAT officials last year acknowledged that Australia's deal had seen it overtake New Zealand's share of the Indian market in sectors like sheepmeat and wood.
A dairy-free deal could see New Zealand reclaim that ground but would disappoint the likes of Fonterra or the wider Dairy Companies Association of New Zealand (DCANZ).
DCANZ executive director Kimberley Crewther told RNZ that would be a "lost opportunity" to look for win-win opportunities where New Zealand could complement Indian local dairy supply, such as through specialist dairy ingredients.
"We acknowledge that dairy can be a sensitive item, but there are a range of interesting sensitivities for both sides of the negotiation, and they're actually best worked through at the negotiating table."
Crewther said the Australian context was much different given dairy accounted for just a sliver of its exports. In New Zealand, dairy exports make up about 25 percent of total export value.
"Australia did not enter an agreement setting aside its major exports," Crewther said.
Do the mahi, get the treats
India NZ Business Council chair Bharat Chawla told RNZ he was optimistic about New Zealand's chances of striking a deal given "high momentum" over the past year and India's increased appetite.
"If India wants a trade deal, they can do it in 90 days," Chawla said. "They have 1.4 billion people. They have manpower. They're not short on that, for sure."
Chawla disagreed with suggestions New Zealand should give up on dairy altogether, advocating that any deal could include a "staggered or staged approach".
But he said the government needed to put the countries' relationship ahead of transactions and focus its pitch on ways it could help grow India.
"It is just not the race to an FTA. It's taking the time to invest in the relationship, to come up with something meaningful."
The new coalition has made a sustained effort since taking office. Trade Minister Todd McClay has already visited India four times this term and met his Indian counterpart seven times.
As well, Luxon sought to build a strong rapport with Modi when meeting on the sidelines of the East Asia Summit in Laos last year.
Beyond business: building bonds in uncertain times
Though much focus has centred on the prime minister's trade pledge, Luxon's visit to India will have a broader focus, as New Zealand also seeks to elevate its presence in the Indo-Pacific region.
It comes after some alarm in New Zealand after China sent three navy vessels into the Tasman Sea to conduct live-fire exercises.
David Capie, director of the Centre for Strategic Studies at Victoria University, told RNZ it was in New Zealand's interest to better understand India's interests and priorities given its growing influence.
"India is the largest, most populous nation in the world. It's a fast-growing economy, and it's turning a lot of its economic and demographic heft into power and influence.
"India's voice on a whole range of issues, whether you're talking about international trade or climate change, security, it matters."
Capie said building a diverse set of relationships was all the more important given the "huge flux and huge unpredictability" across the world right now.
He said India would resonate with New Zealand's concerns about "a more assertive China and... strategic upheaval in the Indo-Pacific region."
"They will look for opportunities for doing more together in the security space, perhaps on peacekeeping, on maritime security, on disaster response.
"We might see... a sort of formalisation of the defence cooperation relationship that looks for ways to do more on exercises, exchanges, leadership meetings and so on."
Luxon will find less alignment with India when it comes to the war on Ukraine. India has adopted a mostly neutral stance, having never explicitly criticized Russia's invasion.
The prime minister said he would make New Zealand's position clear during conversations: "No change for us. We stand with Ukraine."
Luxon will also be the chief guest at this year's Raisina Dialogue, India's flagship geopolitics conference, which he describes as a "tremendous honour".
Capie said Luxon's attendance was a "big deal" and a "high-profile opportunity" to address a diverse audience, including representatives from Russia.
The prime ministerial delegation was due to leave Whenuapai Airbase on Saturday morning. They were expected to stop off in Singapore for a night before travelling on to land in Delhi late Sunday NZT.
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