India, New Zealand begin FTA negotiations to strengthen trade ties

New Delhi: India and New Zealand on Sunday announced the launch of talks for a Free Trade Agreement (FTA) as part of efforts to deepen economic cooperation amid the threat of a global tariff war sparked by US President Donald Trump.

The decision was formalized during the visit of New Zealand Prime Minister Christopher Luxon, who is in India from 16 to 20 March, the commerce ministry said in a statement on Sunday. The discussions, led by commerce and industry minister Piyush Goyal and New Zealand’s trade and Investment minister Todd McClay, mark a step towards strengthening bilateral trade relations.

Mint was the first to report on India exploring renewed negotiations with New Zealand for new FTA deals on 26 June 2024.

The strategic move is part of India’s broader effort to diversify its trade partnerships and reduce its dependency on traditional markets.

“The India-New Zealand FTA negotiations aim to achieve balanced outcomes by enhancing supply chain integration and improving market access. This milestone reflects a shared commitment to strengthening economic ties, fostering resilience, and promoting mutual prosperity,” the ministry said.

“With bilateral trade continuing to grow steadily, surpassing $1 billion during April-January 2025, the FTA negotiations aim to unlock new opportunities for businesses and consumers, fostering mutual growth and prosperity for both nations,” said Goyal in a post on the microblogging site X on Sunday.

New Zealand’s trade is primarily centered around agricultural products, education services, and technology. The country exports dairy products, wool, and fruits to India, while India exports pharmaceuticals, textiles, and information technology services to New Zealand.

Since 2010

Talks originally began in April 2010 to boost trade in goods, services, and investment. However, after ten rounds of negotiations, discussions stalled in February 2015 due to disagreements over market access and trade priorities.

“The key issues both nations would face while negotiating a comprehensive free trade agreement include New Zealand’s push for dairy access, which India resisted to protect its farmers. India also opposed lowering tariffs on dairy, meat, and wine, while New Zealand denied India’s request for better access for its professionals,” said Ajay Srivastava, founder, Global Trade Research Initiative (GTRI).

Currently, India’s dairy imports from New Zealand are minimal (around $0.57 million). While India may consider limited imports of value-added dairy products, it remains firmly against allowing raw dairy imports.

India also sought easier movement for skilled workers and better terms for its IT and services sector, but little progress was made.

“Pressure from the US to open India’s dairy and agriculture sectors may also influence negotiations. With India’s tariffs averaging 17.8% and New Zealand’s at 2.3%, finding common ground remains crucial as talks resume,” said Srivastava.

India-New Zealand trade in FY 2024 stood at just $1.54 billion, highlighting a significant underperformance in economic ties. With India’s goods exports at $538.3 million and New Zealand’s exports at $335.1 million, both countries have yet to tap into their true trade potential.

New Zealand would like to expand its trade relationship with India, particularly in dairy, food processing, and technology, while India would seek greater access for its agricultural products, textiles, and information technology services.

“Negotiators are expected to focus on reducing tariffs, easing investment restrictions, and developing a framework for deeper economic engagement,” said Abhash Kumar, assistant professor of Economics at Delhi University.

Towards strengthening

The two countries have worked towards strengthening their trade and investment ties over the years, but negotiations for a trade pact had not gained momentum earlier due to concerns over market access and regulatory challenges. The fresh push for an FTA comes at a time when India has been recalibrating its trade strategies to boost exports and diversify supply chains.

India has already signed FTAs with several countries, such as Japan, South Korea, Australia, and the European Free Trade Association (EFTA) in the past few years. These deals have facilitated increased trade flows, investment, and economic cooperation between the signatory countries.

New Delhi is also negotiating FTAs with Oman, and economic blocs Asean and the European Union, among others.

According to data from the commerce ministry, India’s exports to New Zealand dipped by 1.73% to $538.33 million, while imports from New Zealand dropped by 29.89% to $335.14 million in FY2023-24. Consequently, the total bilateral trade between the two countries decreased by 14.82% from the previous fiscal to $873.47 million.

In FY23, India’s exports to New Zealand stood at $548 million, while imports were recorded at $478 million, bringing total trade to $936 million. In FY25, up to December, exports stood at $496 million and imports at $463 million, taking total trade to $959 million, as per the commerce ministry data.

On 12 August 2024, Mint reported that India had sought early market access for its grape exports to New Zealand, along with approval for vapour heat treatment (VHT) facilities in Delhi and Lucknow, which are used to eliminate pests.