The deal everyone supports that nobody will pass
The India free trade agreement is, by almost any measure, the kind of deal New Zealand’s export economy is built to chase. It eliminates or reduces tariffs on 95 percent of New Zealand exports to a market of 1.4 billion people. Exporters of wood, sheep meat, wool, coal and hides would see tariffs drop to zero immediately, generating estimated annual savings of $45-62 million over the next five to ten years. Manuka honey tariffs would fall from 66 percent to 16.5 percent over five years, with export volumes potentially growing from 14 to 200 metric tonnes annually.
India is the world’s fastest-growing major economy at US$4.2 trillion GDP, projected to contribute 17 percent of global economic growth in 2026. Export NZ, the Forest Owners Association, the Meat Industry Association, Beef + Lamb NZ, Horticulture NZ, the Timber Industry Federation and Wools of NZ have all backed the deal. These are the sectors with the most direct financial stake. They want it passed. And yet here we are.
NZ First vetoed the deal before it was even finished
Winston Peters’ NZ First invoked the coalition’s agree-to-disagree clause and announced it would vote against the enabling legislation. Peters claims the deal gives too much on immigration and too little on dairy. The dairy point has some substance. India’s dairy sector is politically protected and the FTA does not crack it open.
But the immigration objection is harder to sustain. The concession Peters objects to is 1,670 Indian nationals on temporary three-year work permits drawn from green-list occupations, with no right of extension and mandatory return home. Trade Minister Todd McClay has been explicit: “They have no right of extension under the FTA.” Workers cannot bring family members under the agreement.
More revealing is the timing. McClay confirmed NZ First pulled support before the deal was even concluded. This was not a considered response to a completed text. It was a pre-emptive veto, which makes the policy objections look more like political positioning.
Labour has legitimate grievances and is milking them
With NZ First out, National needs Labour’s votes. Labour leader Chris Hipkins has some fair points. He received the full agreement text only a month after negotiations concluded, despite the government knowing his party’s support was essential. Hipkins called this a “fait accompli” that “falls short of best practice.”
Labour’s substantive concerns are not trivial. The agreement text expressly prohibits capping student visas issued to Indian nationals, a provision that matters given New Zealand’s history of student visa exploitation. Hipkins has also alleged the agreement text contradicts government statements to Parliament, noting that Luxon and Peters had “basically been calling each other liars” on the deal’s terms. McClay declined to correct the parliamentary record.
Labour also wants stronger protections against migrant worker exploitation before committing support. These are reasonable asks. But Labour is also extracting maximum political leverage from a procedural misstep that National handed it on a plate.
National created its own problem
The government concluded a deal it knew required opposition support without involving the opposition in negotiations. That is a self-inflicted wound. McClay has been consistent in his defence, calling it “a high quality agreement that is better than almost every other agreement India has negotiated” and invoking the tradition that every previous significant trade agreement had bipartisan support.
He is right on the precedent. But precedent requires process, and the process here was botched. As of mid-February, McClay reported political support was getting closer after constructive meetings with Hipkins. Further talks are expected.
Exporters are paying for someone else’s fight
Hipkins offered an interesting read on why the deal happened when it did: “Everything changed in India as a result of recent developments around Trump”, with countries suddenly gaining access to negotiate trade agreements. Competitors who secured deals in the same window are already entering the market.
Indian PM Narendra Modi is expected to visit New Zealand with a high-level business delegation. Failing to ratify a signed agreement ahead of a head-of-state visit would be diplomatically damaging and commercially embarrassing.
Economist Rahul Sen frames this as a test of “strategic realism”, describing a deal that goes beyond traditional goods-for-goods arrangements to encompass cross-border movement of skills, technology and investment. New Zealand cannot credibly talk about growth and diversification while its political class holds market access hostage. Every month of delay is a month of foregone contracts, foregone savings and foregone first-mover advantage in a market that is not waiting around.
Sources
- RNZ: FTA with India – bad deal or strategically significant milestone?
- RNZ: NZ First pulled support for India FTA before it was secured, Todd McClay reveals
- The Conversation: Labour-National standoff aside, the India-NZ trade deal is a blueprint for real growth
- NZ Herald: Labour sets its price for supporting India trade deal
- NZ Herald: Trade Minister Todd McClay standing by his India FTA claims as others point out contradictions
- RNZ: Political support for NZ-India FTA getting closer – trade minister
- RNZ: Government needs to sit down and have a conversation with us on India trade deal – Hipkins
- Indian Weekender: Labour cautions Govt not to sign India-NZ FTA yet, citing contradictions