India and New Zealand have officially resumed negotiations for a Free Trade Agreement (FTA) after a ten-year pause. This development comes in the context of increased pressure from the United States for India to open its agricultural and dairy sectors to international competition.
Background
The initial FTA discussions between India and New Zealand began 14 years ago but were suspended in 2015 after ten rounds of negotiations. The primary sticking point was India’s reluctance to grant market access to New Zealand’s dairy products, a sector vital to New Zealand’s economy but politically sensitive in India due to the prevalence of small-scale dairy farmers.
Current Developments
The decision to restart FTA talks aligns with India’s broader trade strategy, which includes concluding agreements with major economies such as the United States and the European Union within the year. The U.S. has been advocating for India to reduce barriers in its agricultural and dairy markets, aiming to enhance American exports to the Indian market.
Challenges Ahead
Despite the renewed commitment, significant challenges remain. India’s average import tariff stands at 17.8%, compared to New Zealand’s 2.3%, highlighting a substantial tariff disparity. Additionally, India’s dairy sector continues to be a contentious issue, with domestic political sensitivities making concessions unlikely.
Strategic Implications
Resuming FTA negotiations with New Zealand reflects India’s intent to diversify its trade partnerships and reduce dependence on any single market. However, balancing domestic interests, particularly in sensitive sectors like agriculture and dairy, with international trade commitments will be crucial for the successful conclusion of these talks.
Conclusion
The relaunch of FTA negotiations between India and New Zealand marks a significant step in both countries’ trade agendas. While external pressures and strategic considerations drive this initiative, addressing longstanding issues, especially concerning agricultural market access, will be essential to achieving a mutually beneficial agreement.
