New Zealand’s India Outreach: Opportunities and Obstacles

At the culmination of his recent visit to India from March 10-13, New Zealand’s Foreign Minister Winston Peters remarked that the India-New Zealand relationship was entering a “new phase.” Since the 1990s India has moved from being a “peripheral concern” for New Zealand to a country with which it has tried to establish a “core trade, economic and political partnership.” 

In recent years, New Zealand has placed considerable importance on building its relationship with India. During the general election in 2023, the two major political parties – National and Labor – both pledged to deepen New Zealand’s ties with India if they won the election. Even minor parties, such as the ACT party, promised to place special emphasis on the India-New Zealand relationship. 

Since the new government took office in November 2023, New Zealand’s trade and foreign ministers have already made official visits to India. New Zealand Prime Minister Christopher Luxon has stated that he will visit India in his first 12 months in office. 

Even before the current government's outreach, New Zealand had attempted to forge closer ties with India under various governments from across the political spectrum. This was first reflected in the “Opening doors to India” document released by the Ministry of Foreign Affairs and Trade (MFAT) in 2011, which also introduced the “NZ Inc. India” strategy.

As the document states, the core aim of this strategy was the successful negotiation of a free trade agreement (FTA) with India in order to increase New Zealand’s goods exports to the large Indian market of over 1 billion consumers. FTA talks began in 2010. This strategy was reiterated in 2015 and ten rounds of FTA negotiations have been conducted since the strategy was launched, with the last formal round taking place in Delhi in 2015. 

As Mark G. Rolls of the University of Waikato noted, although this NZ Inc. India strategy had other objectives – such as increasing trade in services, attracting more skilled Indian migrants to New Zealand, and working with India at the United Nations – securing access to the growing Indian market for New Zealand goods formed the crux of New Zealand’s approach to its relationship with India. 

However, the strategy’s primary objective of increasing New Zealand goods export to India to at least NZ$2 billion by 2015 was not met – and still has not been met today. Between 2017 to 2022, New Zealand’s goods exports to India have not even exceeded NZ$1 billion. Far from improving trade relations between the two countries, total trade between New Zealand and India declined by over NZ$1 billion in the same period. As of December 2022, India was New Zealand 16th largest trading partner, accounting for a little over 1 percent of New Zealand’s total trade. 

The FTA negotiations themselves have stalled since the last round of negotiations took place in 2015. In effect, despite the NZ Inc. India strategy stating that trade would form the basis of its approach to India, the policy has failed to improve New Zealand’s goods exports and trade relations with India. 

As Rolls pointed out, FTA negotiations and New Zealand’s emphasis on prioritizing trade over other aspects of the relationship have emerged as a “stumbling block.

As a small trading nation that is reliant on goods exports, it is not surprising that New Zealand policymakers adopted an approach wherein market access and trade formed the basis of its India policy. As New Zealand diplomat Rosemary Banks argued, owing to its geographic location and the small domestic market, New Zealand has long viewed itself as being “geostrategically secure but economically insecure.” As a result, seeking market access in order to diversify trading relations has been New Zealand’s principal method to address this perception of economic vulnerability. 

However, there are two reasons why this approach with India has not worked so far. The first aspect relates to the prevailing domestic political economy structures in both New Zealand and India. New Zealand has a comparative advantage in primary sector exports, particularly milk and dairy. On the other hand, India has a large domestic dairy industry, effectively making it one of the largest dairy producers and a net agricultural exporter. 

India’s average tariff on agricultural goods is over 34 percent and New Zealand’s approach has been to primarily seek a lowering of this tariff for its primary sector exporters. However, there are domestic political imperatives and political costs, given the significance of the domestic dairy industry, which shed light on India’s reluctance to lower tariffs in this sector. 

This is further indicated in the fact that even in India’s recent trade deals with Australia and the European Free Trade Association (EFTA), dairy and the agricultural sector were excluded from these agreements. In effect, this divergence in the existing political economies of both countries creates an obstacle for New Zealand’s approach to securing an FTA. 

The second problem is that there is an “asymmetry” in the India-New Zealand relationship on account of the differences in size, power, and capabilities of the two countries. As scholar Tom Long explained, this asymmetry creates differing perceptions of risks and opportunities for both countries, with the smaller state placing a higher premium on the relationship than the larger state. 

To be clear, as the smaller state New Zealand would benefit more from an FTA than India. More crucially, India’s awareness of this existing asymmetry in the relationship combined with the divergence of domestic political economies explains why an FTA has emerged as an obstacle in the relationship. 

Despite the stasis plaguing the relationship on account of the dormant FTA negotiations, there are opportunities for New Zealand to forge closer relations with India. One such area highlighted by Winston Peters in his recent visit was defense and maritime cooperation. It is vital to note that during the visit, Peters met India’s national security advisor. Defense and regional security issues in the Indo-Pacific, such as freedom of navigation, have also been emphasized in official statements released by the New Zealand government about the foreign minister’s visit. 

There is some congruence between New Zealand and India’s perceptions of the prevailing geopolitical environment in the Indo-Pacific, primarily on account of a more assertive China. Defense cooperation between the two countries has been limited so far and has involved activities such as port visits by naval vessels, visits by naval commanders, and military personnel from both countries serving in United Nations peacekeeping missions. Further cooperation in the defense-security sphere presents an opportunity for New Zealand to enhance its relationship with India. 

New Zealand and India can also find common ground in the South Pacific and work together with Pacific Island countries. New Zealand is a key stakeholder in this region, and in recent years, India has ramped up its engagement with the Pacific Island states and also increased its aid to the Pacific. This presents another opportunity to enhance the bilateral relationship as there is some convergence between New Zealand and India’s interests in the South Pacific.

To be clear, this is not the first time that other areas of cooperation have been identified. Even the NZ Inc. India strategy mentioned aspects beyond trade such as people-to-people ties and cultural aspects like cricket, which could become crucial linchpins of the New Zealand-India relationship. As late as 2022, MFAT publicly emphasized that New Zealand should invest in these other areas of cooperation to improve the India-New Zealand relationship.

However, Peters’ visit was a crucial indication that New Zealand had indeed turned a page in its interactions with India. It signaled that while trade can still be a crucial element of this bilateral relationship, other aspects of the relationship will be accorded a greater degree of importance than before, and these issues will not be placed in a separate, lower orbit. 

In effect, this signified a broadening of the relationship with concrete areas of cooperation that have been identified to enhance the bilateral relationship. In doing so, the current New Zealand government has indicated that it is willing to adopt an approach similar to that of neighboring Australia, where the Australia-India relationship is multifaceted and covers several crucial aspects, including but not limited to trade and economics.

For New Zealand, although the FTA continues to remain an obstacle, the bilateral relationship still has opportunities to grow in other areas. The foreign minister’s visit and the noticeable shift in New Zealand’s approach to India does indeed indicate that a “new phase” of the relationship may be on the horizon.