1493779288401 - Pattrick Smellie: Stuck at the starting gate with India

Pattrick Smellie: Stuck at the starting gate with India

OPINION: The achingly slow process of developing a closer trading relationship with India takes a small step forward this week with a visit from Amitabh Kant, chief executive of the National Institution for Reforming India.

A confidant of India’s Prime Minister Narendra Modi, Kant has no ability in his own right to advance the stalled trade agenda between Wellington and Delhi, but he does have influence in the highest parts of the Indian government.

He is also at the progressive end of Indian politics.

But as has so often been the case between the purist minnow, New Zealand, and the protectionist behemoth, India, the two continue to talk past one another.

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India maintains some of the highest traditional tariff barriers to trade in goods of any large economy in the world. 

The politics of trade liberalisation, especially in agriculture but also in traditional manufacturing such as clothing and footwear, has long proven too hard for Indian governments to tackle.

That makes it difficult to square away Kant’s claim in an interview in Wellington this week that “in India’s economic debate, protectionism never comes up”.

If that were true, there would be much less difficulty in getting India to the negotiating table for both a free trade deal with New Zealand – in the doldrums for five years – and to complete the Regional Comprehensive Economic Partnership, a low-ambition prize in place of the Trans Pacific Partnership Agreement.

According to Kant, the only thing stopping free trade agreement (FTA) negotiations is that “we are awaiting New Zealand’s offer on services”.

To which the New Zealand Ministry of Foreign Affairs carefully responds: “Progress will depend on what India is prepared to bring to the table, particularly with respect to goods. New Zealand is interested in agreeing a high-quality FTA”.

In other words, after numerous negotiating rounds, we’re still stuck at the starting gate on building a far deeper trading relationship with a country of more than a billion people, whose middle classes speak English, know the Commonwealth, love the otherwise obscure game of cricket, are avid tourists, and should in theory be easier bedfellows than China.

Yet two-way trade with China topped $22 billion last year, whereas total flows between New Zealand and India were just $1.2b, according to analysis by the Auckland-based India Trade Alliance.

Logs, wood pulp and wool are the biggest exports to India, while clear opportunities exist in greater dairy, meat and fresh produce export. Except that all face high barriers to entry.

As a result, exports to India have slipped in the last couple of years, despite the Indian economy growing at around 7.6 per cent a year and aiming higher.

As Kant says: “India is the last giant economy to start its long spurt of growth.”

However, people flows between India and New Zealand are booming, mainly from Indian tourists and students heading here, and from family connections.

That’s animating one big idea whose time may have come: the establishment of direct air routes between the two countries.

At present, about a quarter of Indian travellers get to New Zealand through Sydney and Melbourne,

Another 30 per cent arrive via Singapore, 24 per cent come via Malaysia and arrivals via the southern Chinese city of Guangzhou are exploding.

The case for direct flights to Auckland is compelling and it seems Air India is under pressure to divert some of its Australian flights to see if the service takes off, as it were.

The issue of Indian student arrivals is politically fraught.

However, export education remains a priority for the current New Zealand government and this country remains attractive to aspirational young Indians, albeit as much for work and residency opportunities as study.

Likewise, tourism in both directions remains a growth area.

If we can’t trade more easily in the short term, at least easier travel might be a route to growing this obvious, but frustratingly poorly developed relationship?

– BusinessDesk