What is the India-New Zealand Free Trade Agreement? | Explained

The potential Free Trade Agreement (FTA) between India and New Zealand represents a crucial step in India's evolving trade strategy and its 'Act East' policy. While the specifics of the deal are still under negotiation, understanding the broader context of such agreements is vital for competitive exam aspirants. India's recent push for FTAs with various countries, including the Comprehensive Economic Partnership Agreement (CEPA) with the UAE in 2022 and the Economic Cooperation and Trade Agreement (ECTA) with Australia in the same year, signals a proactive approach to integrate into global supply chains and boost its export-led growth.

Historically, India has pursued trade liberalization cautiously, especially after its withdrawal from the Regional Comprehensive Economic Partnership (RCEP) in November 2019, citing concerns over domestic industry protection, particularly agriculture. However, the post-pandemic economic landscape and geopolitical shifts have led India to recalibrate its strategy, focusing on bilateral agreements with strategic partners. New Zealand, a developed economy with a strong agricultural base and advanced technology, presents an attractive partner for India to diversify its trade basket and gain access to high-quality goods and services.

The key stakeholders in this potential FTA are diverse. On the Indian side, the Ministry of Commerce and Industry is the primary negotiator, guided by the broader economic objectives set by the government. Indian labour-intensive sectors such as textiles, leather, gems and jewellery, and processed foods are keenly interested in securing zero-duty access to the New Zealand market, as highlighted in the article. These sectors are significant employers and contribute substantially to India's exports. However, domestic agricultural and dairy sectors might express concerns about increased competition from New Zealand's highly efficient and subsidized agricultural produce, necessitating careful negotiation of sensitive lists and rules of origin. On the New Zealand side, the Ministry of Foreign Affairs and Trade leads the discussions. Sectors like dairy, horticulture, and forestry are major export earners for New Zealand. While they would welcome greater access to India's vast market, certain New Zealand industries might criticize the deal due to potential competition from Indian goods or specific regulatory challenges. Consumers in both countries stand to benefit from a wider range of goods at competitive prices.

This FTA matters significantly for India for several reasons. Economically, it can provide preferential market access for Indian goods, boosting exports and potentially creating jobs in key manufacturing sectors. New Zealand's commitment to Foreign Direct Investment (FDI), possibly targeting specific sectors or a cumulative figure by 2030, would bring in much-needed capital, technology, and expertise, contributing to India's 'Make in India' initiative. Strategically, strengthening economic ties with New Zealand, an important country in the Indo-Pacific region, aligns with India's broader foreign policy objectives of expanding its influence and fostering partnerships with like-minded nations. It also helps in diversifying India's trade partners beyond traditional blocs and reduces over-reliance on a few markets.

The constitutional framework for such international agreements in India is primarily derived from **Article 253** of the Indian Constitution, which empowers Parliament to make any law for implementing any treaty, agreement, or convention with any other country or any decision made at any international conference, association, or other body. This ensures that international commitments can be effectively translated into domestic law. Furthermore, **Entry 14 of List I (Union List)** in the Seventh Schedule grants the Union government exclusive power over 'entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries.' The **Foreign Trade (Development and Regulation) Act, 1992**, and India's overarching **Foreign Trade Policy**, are the primary legislative and policy instruments governing India's engagement in international trade agreements.

The future implications of an India-New Zealand FTA are substantial. If successfully concluded, it could lead to a significant increase in bilateral trade and investment, fostering deeper economic integration. However, negotiations are often complex, involving sensitive issues like tariff reductions, non-tariff barriers, intellectual property rights, and dispute settlement mechanisms. India will need to balance its ambition for export growth with the need to protect vulnerable domestic sectors. A well-structured FTA could serve as a template for India's future engagements in the Oceania region, enhancing its strategic presence and promoting a rules-based international trading system. The success of this FTA will also depend on its effective implementation and the ability of businesses in both countries to leverage the new opportunities it presents.