FTA with India to boost exports and open doors for farmers, businesses: New Zealand PM Christopher Luxon

The announcement by New Zealand Prime Minister Christopher Luxon regarding the conclusion of a Free Trade Agreement (FTA) with India marks a pivotal moment in the bilateral relationship between the two nations. This agreement, aimed at boosting exports, creating jobs, and enhancing market access, is a testament to the evolving dynamics of global trade and India's strategic economic engagement.

**Background Context and Historical Trajectory:**

India's journey towards deeper global economic integration has been multifaceted, particularly since the economic liberalization of 1991. Initially, India pursued a strategy of multilateral engagement through the World Trade Organization (WTO). However, with the slow pace of WTO negotiations, bilateral and regional trade agreements gained prominence. India's 'Look East' policy, later upgraded to 'Act East' policy in 2014, has been a cornerstone of its foreign policy, focusing on strengthening ties with Southeast Asian and Pacific Rim nations. New Zealand, a significant player in the Oceania region, has always been a potential partner in this broader strategy. While direct trade volumes between India and New Zealand have historically been modest compared to other major partners, there has always been an underlying potential for growth, especially in areas like dairy, agriculture, forestry products from New Zealand, and IT, pharmaceuticals, and textiles from India. Previous attempts at enhancing trade, including discussions around a potential FTA, have been ongoing for several years, though significant hurdles often emerged, particularly concerning market access for New Zealand's dairy products in India and India's services sector access.

**What Happened and Key Stakeholders:**

New Zealand Prime Minister Christopher Luxon's announcement signifies that the long-standing negotiations have finally culminated in a concluded agreement. While the specifics of the pact are yet to be fully disclosed, the core objectives articulated — boosting exports, creating jobs, and enhancing market access — are standard for such agreements. The agreement is expected to take effect within seven to eight months, indicating that the ratification processes will soon commence. The primary stakeholders are, of course, the Governments of India and New Zealand, represented by their respective Ministries of Commerce and External Affairs. Beyond the governmental sphere, businesses and industries in both countries stand to gain or be impacted. Indian farmers and businesses, particularly those in sectors like textiles, pharmaceuticals, IT, and manufacturing, are looking for new export avenues. Conversely, New Zealand's agricultural sector, particularly dairy and horticulture, and its services industry, including education and tourism, are key beneficiaries. Consumers in both countries could also benefit from a wider variety of goods and potentially lower prices.

**Significance for India:**

For India, this FTA holds significant economic, strategic, and political importance. Economically, it provides enhanced market access to New Zealand, a high-income economy. This can help diversify India's export basket and reduce reliance on traditional markets. It aligns with the 'Make in India' and 'Atmanirbhar Bharat' initiatives by potentially attracting investment and boosting domestic manufacturing for export. The creation of jobs, as highlighted, is a crucial benefit for India's large workforce. Strategically, strengthening ties with New Zealand reinforces India's presence and influence in the Indo-Pacific region. It's part of India's broader strategy of forging robust bilateral economic partnerships, especially after its withdrawal from the Regional Comprehensive Economic Partnership (RCEP) in 2019, which underscored India's preference for focused bilateral agreements that address its specific trade sensitivities. Politically, it deepens diplomatic relations, fostering greater cooperation on regional and global issues.

**Constitutional and Policy Framework:**

The power to enter into and implement international treaties and agreements, like an FTA, rests with the Union Government. **Article 253** of the Indian Constitution 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 falls under the **Union List (Seventh Schedule, Entry 10 - Foreign Affairs, and Entry 14 - 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**, provides the legal framework for India's foreign trade policy, under which such agreements are operationalized. This FTA is a concrete manifestation of India's current foreign trade policy, which emphasizes both multilateralism and strategic bilateral engagements to promote exports and integrate into global value chains.

**Future Implications and Broader Themes:**

Looking ahead, this FTA is expected to catalyze increased trade volumes and investment flows between India and New Zealand. It could open doors for greater collaboration in areas beyond traditional trade, such as educational exchanges, tourism, research and development, and climate change initiatives. For India, successfully concluding this FTA could serve as a model and build momentum for negotiations with other key partners, including the UK and the European Union. However, challenges remain, such as addressing non-tariff barriers, ensuring that the benefits are equitably distributed across various sectors, and managing potential domestic industry concerns that might arise from increased competition. This agreement underscores India's commitment to becoming a more active and influential participant in the global economic order, balancing its domestic interests with the imperative of international engagement and cooperation.