India-New Zealand FTA to drive trade growth and economic certainty: Todd McClay

THe release merchandise accord (FTA) signed by republic of india and young Zealand will create certainty at a time when the global trading system is facing many challenges and speedily ramp up two-way trade from the current level of about $2 billion, New Zealand trade minister Todd McClay said on Monday.The FTA, which is expected to be implemented by the end of the year, is unlikely to face any hurdles despite opposition from some political parties in New Zealand, McClay told HT in an interview shortly after signing the deal. The deal will also lead to 5,000 temporary visas for Indian professionals in sectors such as ICT, healthcare and construction, he said. Edited excerpts:How will the FTA change trade and investment ties between India and New Zealand? Well, quite significantly. If you look at our two economies, the trade that we have between us is underdone, it is modest, and I think we will see this go from strength to strength. Whenever New Zealand signs an FTA, two-way trade goes up very quickly. We did an agreement with the United Arab Emirates (UAE) a year ago; in the first six months, our two-way trade grew by 34%. We have an FTA with the European Union (EU); in the first 18 months, $2 billion extra of trade took place. I think our FTA with India is very high quality, comprehensive and well-balanced, and recognises the sensitivities of both sides. I think the two-way trade and investment will grow extremely fast and that can do nothing but bring our nations more closer together.Do you have a ballpark figure that you’re looking at for growing trade over the next five years?Well, we haven’t done that yet. The modelling on both sides is quite modest and that’s based on existing trade. But we know that when India did an FTA with Australia, exports from Australia went up between 50% and 100% in many areas in the first 12 to 18 months. I can see that happening very easily. The most interesting thing though will be Indians exports to New Zealand. We are a country of only five million people. Our number one trading partner is China and we buy more than $20-billion worth of goods and services from China every year. From India, it is only around $1 billion or so. New Zealanders like choice, competition and competitive pricing. I think you will see exports from India, across the board, increase in New Zealand, just as New Zealanders will look towards this market to be able to come and establish themselves and build long-term relationships and trade.There’s been criticism of the FTA from NZ First and the Labour Party has expressed concern about commitments for private investments. Do you think that’s going to be a hurdle in implementing the deal?No, it won’t be. New Zealand and India are both democracies. We’re probably the first democracies in the world and we believe in a parliamentary process. We also believe in open dialogue and freedom of speech. The agreement is 700 pages long and it is very detailed and complex. So it’s right, parties need to understand it well. That’s some of the debate you’ve seen in New Zealand. But we have a super majority in Parliament to pass the FTA with India. The two main parties are bipartisan when it comes to trade. As with most of our agreements, it will pass into law very quickly and very easily. It’s very simple – New Zealanders like trade, we’re a trading nation, and for a very long period of time, New Zealanders have wanted an agreement with India. In just nine months, we’ve negotiated one of the highest-quality [FTAs] each country has done. It will go on to be very, very beneficial for both sides.Is there a timeframe you’re looking at for implementing the deal? We hope to have it in place before the end of this year. Today, we signed. Tomorrow, the agreement is tabled in our Parliament and it has a national analysis. It goes to a committee, where they seek the views of the public. They report back quite quickly, it’s a time-bound period. We then must put the implementing legislation in place, which largely reduces tariff rates for everything India can export or wants to export to zero on day one, and sets up some quota management systems and a few other things. It’s not a very large piece of legislation. We will get on quite quickly. It’s a public parliamentary process, but we believe we can get it in place before the end of this year.How will the FTA help at a time when countries across the world are dealing with disruptions because of the trade and tariff policies of the US? Well, there’s a lot of global uncertainty around trade. There are many challenges to the world trading system, but our FTA with India will help in two ways. First, it gives certainty. The two governments today put pen to paper to take on rights and obligations. We have said publicly we like each other and trust each other. The business community in each of our countries can now take that as a commitment and it reduces risk. If you invest effort or product in India or New Zealand, the rules are very, very clear. You can rely upon them and therefore you have certainty, not uncertainty. Second, it gives options for both India and New Zealand. Our job as a government in New Zealand is to negotiate trade agreements and then for New Zealanders to decide where they want to put their effort, based on where they think they will get a return or where they see risk.This is an end strategy. We want to trade with many parts of the world. We have a lot of trade agreements, and with India. Today, it means that Indians and New Zealanders can take on commitments, build sustainable trading relationships and we will see two-way trade grow very quickly.Prime Minister Narendra Modi has talked about the FTA leading to deeper global engagement. You’ve said it will lead to economic security. You’ve mentioned you have a fairly large trading partnership with China, and there are some who think this FTA can help in reducing dependence on one particular geography.For many countries, China is a very important partner and this is an important economic relationship that we have. But we’ve done trade agreements over the last few years with the UK, the EU [and] the UAE, completed [a deal] with the Gulf Cooperation Council (GCC), including with Saudi Arabia, and we have many trade agreements and what that does is allows choice. I don’t think New Zealand is dependent on any one part of the world, although there are often times, for geographical location, we trade more with one. This isn’t about saying that we choose one country over another. We back New Zealanders to make those decisions for themselves, but ultimately trade agreements set up very clear rules and if you honour them, economies grow. As economies grow and people become wealthier, they have more choice. That’s the fundamental core of the India-New Zealand FTA – balanced, to give opportunities to businesses in both countries and you will see quite significant achievement as a result of what we’ve negotiated and completed today.The deal includes 5,000 temporary visas for Indian professionals. Could you throw more light on that? We’ve agreed to create a special visa for skilled Indian professionals, where we have a need in our economy, to have the ability to work in New Zealand for a three-year period. These are areas we have had shortages. Some people from India have already come, but this is a special visa just for India. We are now going to be putting the details of that into place. For instance, in areas of healthcare or ICT, where India has a real advantage, and it’s also around engineering and construction – an opportunity for young, qualified Indians to work in New Zealand, gain some experience and return home to continue to help build your economy. We see that as a win-win. It’s modest numbers, although big for New Zealand, but we need these people [as] it helps our economy grow. What it also does is bring people closer together, breaks down barriers and creates more friendship. We think it’s a very significant achievement.Does New Zealand plan to work with India and other regional partners to cope with the disruptions caused by the West Asia conflict?I think this trade agreement does that and we’ll get it in force very quickly and then we must promote it, help our businesses understand it. Some commitments on both sides will make it much easier to trade. We will bring many more trade missions to India but we’re inviting Indian companies to come to New Zealand. Some of the organisations [and] companies have been talking about what to do even before the agreement was signed. There’s a real willingness on our side and there are many areas that we will want to work together with India. We do so very well in the WTO already. There will be opportunities in the region, down in the Pacific. The conclusion of the FTA negotiations is actually the start of a much larger relationship and what you will see across the board is not only greater engagement, but greater achievement together.