Credit: Original article can be found here
Simon Draper is the executive director of the Asia New Zealand Foundation Te Whītau Tūhono.
OPINION: The Australia-New Zealand relationship has often been likened to a sibling one, with New Zealand frequently comparing itself to its bigger neighbour. And that’s not to forget friendly rivalries over topics like sport and the origins of pavlova.
But New Zealand businesses may well have a new source of envy, in the form of an Australia-India trade deal.
Last week, India’s Prime Minister Narendra Modi and Australia’s Scott Morrison issued a joint statement saying many elements of a Comprehensive Economic Cooperation Agreement (CECA) were close to finalisation. By the time this goes to print, a deal may already be struck.
Both sides – but particularly Australia – have been at pains to point out that this is an interim free-trade agreement (FTA), and that work is under way towards an ambitious and full agreement by the end of the year. The proof will be in the pudding, but the signs are good.
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India has had a reluctant approach to signing FTAs. In 2019, it pulled out of the Regional Comprehensive Economic Partnership (RCEP) negotiations, saying it had not been able to resolve concerns about China’s participation and the potential impact on its domestic producers.
New Zealand’s own bilateral FTA negotiations with India began in 2010, with the last formal round taking place in Delhi in 2015. They have since languished.
In 2020 Prime Minister Modi launched the Atmanirbhar Bharat Abhiyaan “self-reliant India” campaign – a sentiment that probably doesn’t fill our exporters with joy.
But India-watchers have noticed a change in recent months, with actual interest in FTAs. India has just signed an FTA with the UAE and wants to review major agreements with ASEAN, South Korea and Japan. It is also negotiating FTAs with the UK, Canada, the EU and Israel – and, as recently announced, Australia.
So, what’s Australia’s secret? Well, Australia has prioritised its strategic relationship with India, making a large investment across nearly every sector over a sustained period. It’s hard to keep track of the sheer volume of ministerial and officials visits over the past few years, Covid notwithstanding.
At the virtual summit on March 21, Morrison announced a raft of new funding that covered areas including innovation and technology research, clean technologies, space cooperation and a new Centre of Australia-India relations.
Last week the Australian Government also published a report highlighting the contributions of Australia’s Indian diaspora communities to Australian society.
The deal will see India benefit from improved access to Australian minerals to help develop growing sectors, such as electric vehicles and renewable energy. Australia has the world’s second-largest reserves of lithium as well as other rare earth elements. Services will likely loom large, and agriculture not.
Both countries have experienced deteriorating relationships with China, and for both an FTA would be seen as a step towards reducing their economic reliance on China.
It also hasn’t escaped political analysts that a new FTA would look good for Morrison’s Government ahead of the federal election, which will take place on or before May 21. The need to diversify export markets away from China has been a live, hot topic.
And this FTA progress has been made despite some real tension around what is seen as Indian hedging on the Russia and Ukraine conflict. It’s uncomfy for Australia, but clearly not a dealbreaker. They are playing a long game.
In New Zealand, we have tended to take a trade-first approach to our relationships in Asia, and that has mostly worked for us. But in the case of India, an FTA is unlikely to be the key that unlocks the door to a bigger, better relationship.
Like Australia, New Zealand is going to need to invest much more in building a bigger, better and much broader relationship with India before it can expect any trade dividends. I’d argue that even with no trade dividends how India approaches climate, human rights and a host of other issues is going to be consequential for New Zealand in years to come.
The Asia New Zealand Foundation has been watching the India-New Zealand relationship closely in recent years – and we have convened roundtables with experts on the relationship.
We have argued the relationship has considerable room to grow, but that this can only happen if we take a whole-of-government approach and stop letting acutely felt irritants like immigration dominate the relationship. The way Indian visa holders, and migrants are treated is by far the most discussed topic when it comes to New Zealand.
Just before New Zealand’s last trade mission to India, in early 2020, the Asia New Zealand Foundation published a report: New Zealand and India: Our story, our future.
The report highlights many ways to grow the relationship: invest in young people to collaborate and learn about each other’s cultures and traditions; more regular engagement between our governments to build trust and understanding; increasing the connections between industries like tech and film-making; and doubling our efforts in areas of shared interest, like climate adaptation, maritime search and rescue, and Pacific disaster response.
India will be different for New Zealand. We will have to build a relationship first; the onus will be on us – then you might get a transaction. It won’t be the other way round. Australia has learned this; maybe we could too.