The recent India-New Zealand Free Trade Agreement (FTA) has sparked considerable discussion. Many are calling it “once in a generation,” especially since it took only nine months to finalize. Typically, FTAs require years of intricate negotiations. This rapid pace raises questions and concerns about the depth of discussions, particularly surrounding key issues.
One critical topic is the impact on Indian exporters, especially small and medium-sized enterprises (MSMEs). Past FTAs, such as those with ASEAN, South Korea, and Japan, have shown troubling patterns. While imports surged, many Indian exporters struggled. They often lack the necessary documentation and market support to compete. In contrast, New Zealand’s exporters operate in a well-supported trade ecosystem. For instance, zero tariffs on New Zealand’s forestry sector may significantly hurt Indian industries, as over 95% of these exports will enter India tariff-free.
In terms of agriculture, New Zealand has secured special access to India’s markets for kiwifruit and apples, placing pressure on Indian apple growers, especially in politically sensitive regions like Himachal Pradesh and Jammu & Kashmir. These growers now face tough competition from New Zealand apples, which have traditionally held a strong position in the Indian market. However, it’s worth noting that India has managed to protect its dairy sector, excluding it from duty-free access.
Politically, the agreement faces challenges in New Zealand. The Labour Party has labeled the FTA as “high risk,” with criticism from the opposition regarding the concessions made, particularly around immigration. The deal includes a pathway for up to 5,000 Indian professionals through a Temporary Employment Entry visa. However, this aspect might face intense scrutiny during the approval process.
Historically, India’s rushed FTAs have often resulted in negative outcomes. The ASEAN FTA, for example, brought years of industrial struggles. The swift execution of this new deal may lead to similar issues if not carefully managed.
In conclusion, this FTA holds promise but also significant risks. It’s essential for both nations to address the potential downsides, especially for those on the ground who may bear the brunt of any negative impacts. As always, the success of trade agreements will depend on careful implementation and ongoing support for affected sectors.
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