New Zealand private sector delegation to India meets key players in 2023: Left to right: Paramita Tripathi (Joint Secretary (Oceania) Ministry of External Affairs - India); Simon Bridges (CEO, Auckland Business Chamber), Dr Rajkumar Ranjan Singh (former Minister of State for External Affairs - India), David Pine (former NZ High Commissioner), Michael Fox (Chair, India-NZ Business Council) and Stephen Jacobi (CEO, NZIBF).
As New Zealand awaits the official announcement that Prime Minister Christopher Luxon will soon head to India, the India-New Zealand Business Council is writing a new report on the trade relationship with a much different tone to its shouty message of “neglect” a year ago.
The council had claimed the neglect was on New Zealand’s side. It alleged this country had been asleep at the wheel in recognising the importance of a strong relationship with India, an emerging economic powerhouse soon to be the world’s third largest economy.
Council chair Michael Fox says work on a follow-up report is under way, and after a year of “huge engagement”, new momentum in the relationship will make for a much more positive message.
Fox says Beehive attention to the relationship in the latter days of the Labour Government, and now by the coalition Government, has fuelled bridge-building efforts. But last year’s strong messaging helped galvanise action. “It was a really good opportunity to bring a lot of thinking together from people who were focused on the relationship and wanted to take it forward. It’s an idea whose time has come.
“Suddenly India is recognising that New Zealand is investing in the relationship and that there are really good opportunities to work together. I’m really encouraged.”
The council has been urging New Zealand to see the relationship as two-way: it must offer India, which Fox describes as “a very large and complicated country”, trade opportunities too. The good news, he says, is that traffic between the countries has been in both directions.
The Federation of Indian Exporters visited recently, bringing about 50 businesses to meet their counterparts in New Zealand; India’s commerce secretary visited just before the June Indian general election which returned Narendra Modi as prime minister for the third time; and the council has hosted its Indian counterpart, visiting local businesses this year. The council last year took New Zealand’s biggest ever trade delegation to India.
While some Kiwi companies, such as technology business Rakon and Fisher & Paykel Healthcare, are already doing well in India, New Zealand primary industries have some way to go make an impression on the world’s second biggest food producer after China.
But Fox says there’s now big engagement by primary industry, including dairy, along with strong interest in collaboration opportunities in the education, financial and technology, and pharmaceuticals. (India is a world leader in pharmaceuticals manufacture.)
The obstacle of high tariffs aside – one lamb exporter pays a 30% access tariff on the niche restaurant and hotel market he’s carved out, says the Meat Industry Association – Fox notes agriculture in general is “still a really sensitive area for India” in terms of market access.
Dairy access has long been cited by New Zealand trade officials as a roadblock in free trade agreement talks, though former business council chair and former Fonterra director Earl Rattray suggests we’ve gone about our approach the wrong way.
Fox notes the New Zealand dairy industry has been active lately in India, the world’s biggest milk producer. India has an estimated 70 million producers of cow and buffalo milk. Most are subsistence producers of fresh milk for households and villages.
Rattray, who has had an interest in a dairy farm and fresh milk direct-to-home marketing business in India since 2012, believes the Indian dairy industry is on the cusp of enormous change.
“It’s a country that’s urbanising very, very quickly. It has an economy that’s growing flat out, but still very heavily weighted to a rural economy with many household farms.
“Wages and salaries and employment opportunities outside the village are growing very quickly and you’ve got almost two generations now of children that are reasonably well educated and their aspirations and expectations are growing quickly. They will not see a future in gathering feed most of the day for a couple of buffaloes for household milk consumption.”
Rattray says a narrative has been spun in India that New Zealand is a threat, not a friend. “There’s a false expectation that any free trade agreement would open the doors to flood them with New Zealand product … it’s certainly not based on commercial reality. New Zealand produces less than 10% of the total milk (volume) consumed in India. We are actually selling everything we produce now. India would have to compete for (New Zealand) imports with the rest of the world.”
Rattray believes we could have done better in its approach to trade talks with India, which has an estimated economy of more than US$3 trillion (NZ$5t).
Last year, as chair of the business council when it released its report on the weakness of the relationship, he said 15 years of trying to negotiate a conventional trade agreement with India had “delivered nothing”. “India is different, accordingly it requires a different approach”, he says.
We could not “copy and paste” trade agreements typical of those with Europe, UK and North Asia, says Rattray, noting Australia had negotiated a free trade deal with India.
Unsurprisingly, products from our $26 billion dairy export industry don’t feature in latest Ministry of Foreign Affairs and Trade stats on New Zealand-India trade.
In the year ended March, New Zealand exported $1.35b of total goods and services to India, and imported $1.48b. Of this, total goods exports were valued at $520.2 million, while goods imports were $1.11b. Key exports were wool, iron and steel and fruits and nuts. Key services exports were travel and government services.
Prime Minister Luxon is widely tipped to visit India in October – only the fifth New Zealand prime minister to make a formal visit in 40 years – but MFAT says it can’t confirm any details about a “possible” visit.
Kimberly Crewther, executive director of the Dairy Companies Association of New Zealand (DCANZ) says dairy has “always had a base level of engagement” through international dairy forums.
“But I think there has also been a growing recognition on both sides that we’ve got some topics in common, challenges that we can engage in together and that’s resulted in a number of two-way visits over the last year.”
Crewther and other dairy industry representatives, including from industry organisation DairyNZ, recently returned from India, which hosted the International Dairy Federation regional Asia-Pacific conference.
Areas of common interest with India include animal health and disease management, biosecurity and challenges such as climate change and carbon emissions, says Crewther.
India, which accounts for 25% of the world’s milk production and is the world’s largest consumer of dairy products, is not just “sensitive” to New Zealand’s dairy industry, but to other countries too, she says.
Its consumer market shows a high growth rate for dairy demand with “significant” potential to grow.
But with New Zealand producing only 2.2% of the world’s milk, “the notion that we would ever be able to swamp India with milk is increasingly recognised as not being part of the current dairy global dynamic,” Crewther says. “India is a fast-growing economy, and with that economic and income growth for its very large, and still growing population, there will be continued demand for dairy products and they will consume dairy in a range of different ways.
“At the same time they are dealing with supply side challenges, including heat stress associated with climate change for cows and the potential for that to place limits on production.
“It’s been suggested over time these things could come together as a growing structural deficit for milk, and at that point there is the opportunity for imported dairy to support the mix of demand growth.”
India imports around US$500m of dairy products a year, mostly from Europe, Crewther says. Of this, specialist protein products valued at around $47m were from New Zealand. These were entering India under one of its lower tariff levels of around 20% and were used in medical and sports nutrition applications.
“I was approached for a range of conversations by commercial parties when I was up there who were interested in New Zealand dairy ingredients, but also agribusiness players interested in how they work with, and supply through our sectors - people working on data information systems, systems that support transport logistics and they have a very well-developed and globally significant animal pharmaceutical industry. So there are signs of interest.
“The other dynamic is that India has set the tone of growing its own dairy and food manufacturing exports. There’s an opportunity for our specialist ingredients to support that.”
Asked if India’s export dairy ambitions could negatively affect New Zealand, Crewther says it presented an opportunity for integration of value chains. “There’s the opportunity for us to play to our strengths and build mutual value through closer relationships.”
So what does the dairy industry want from India?
“We start with wanting a closer relationship so when India is importing product, New Zealand is preferentially positioned as a preferred supplier. And of course market access conditions supporting that positioning and the opening up of opportunities. But as the Indian market develops and there may be opportunities for imported product, we are working to have New Zealand positioned at the front of that.”
Fonterra, the big cheese of New Zealand’s dairy export industry with an after tax profit in FY23 of $1.6b, says India is a strategic market for its ingredients business.
Justine Arroll, general manager trade strategy and stakeholder affairs, says the business is complementing local Indian milk supply with specialist advanced proteins used in sports nutrition, medical and paediatric applications, including those not produced locally in India.
Fonterra also has a foodservice presence in India under its Anchor Food Professionals brand, Arroll says.
“India is a hugely populous market with a growing and increasingly sophisticated dairy-consuming population. While there are a range of views around Indian supply and demand dynamics, credible international dairy experts forecast India to have the second largest dairy deficit market globally after China by 2050, meaning that the long-term opportunities for high-value New Zealand dairy exports are significant.
“At the same time, India’s total projected dairy consumption growth far outweighs New Zealand’s ability to increase supply. This means New Zealand can only play a small role in helping to meet India’s growing dairy demand by complementing domestic dairy production and supporting the growth of India’s value-add manufacturing sector,” Arroll says.
Fonterra believes a long-term, strategic approach to the relationship is important “in laying the right foundations for more formal trade negotiations at an appropriate time”.
The $12b New Zealand export meat industry has been talking to India for a long time, says Meat Industry Association (MIA) chief executive Sirma Karapeeva. But with the cow a revered animal in Hinduism, the sector has had to look for export product lines other than beef.
Lamb is also a challenge due to the high tariff rate – India has one of the world’s biggest sheep and goat flocks – but Karapeeva sees opportunities here to partner with India as the country seeks to satisfy demand for niche, added-value product from its growing middle classes.
Little known, she says, is that New Zealand exports blood and animal gland products to India for its pharmaceutical industry.
This trade earned $4.3m in 2022. The by-products have a high value because New Zealand animals are disease-free and don’t receive growth hormones.
“The pharmaceutical industry in particular really likes our product because they know it’s safe, high quality and it’s pure,” says Karapeeva.
The association of meat companies is working on a value-add engagement strategy for India with stakeholders such as the India High Commission.
The Indian government has been investing and upskilling exporters to help them develop products and processes domestically, which means the Indian meat sector will be looking for quality ingredients, she says.
The MIA has also been exploring opportunities as India addresses an iron deficiency among its people.
“One of the activities I’m exploring with nutritionists in New Zealand and the high commissioner is what we can do to provide resources and education to improve the nutrition of Indian women in particular.”
Business council chairman Fox is also head of global public affairs at kiwifruit marketer Zespri, which had sales last year of $4b. He’s close-lipped about Zespri’s efforts in India, only saying it has “a huge amount of potential for New Zealand exporters and that’s true for kiwifruit”.
He added: “We’re having really good discussions with the Indian government but we still have work to do.”
With his business council hat on, Fox says New Zealand exporters “want a really comprehensive trading relationship that creates opportunity on both sides”. He doesn’t know how long that might take to achieve but “I’d like to think we could make some real progress over the next year or two towards that”.
Last word to agricultural trade envoy Hamish Marr.
“India is an agricultural powerhouse,” says the Canterbury farmer, employed by the government to be a farmer conduit with trading markets.
The reception from India to New Zealand’s recent advances has been good, he says, and headway is being made by companies working there.
Marr says horticulture’s an “obvious” target for focus with India interested in New Zealand kiwifruit and apple production. “I’ve found the people there to be amazing – very gracious, very humble, very proud. I really enjoyed my visit.”
Trade Minister Todd McClay is rapidly forging links with key Indian Cabinet ministers and officials as he builds the case for New Zealand to cement closer trade links with India.
In Europe last week, he caught up with Piyush Goyal, India’s Minister of Commerce and Industry, on the outskirts of the G7 Trade Ministers’ meeting.
Along with Foreign Minister Winston Peters, McClay is laying the groundwork for the Prime Minister’s upcoming official visit to India where he is expected to be accompanied by a major business mission.
He flew to India shortly after the coalition was sworn in late last year to advance what he describes as a “strategic priority” for the Government – a bilateral trade deal.
He notes New Zealand businesses provide terrific value to India.
“We truly present leading expertise, experience, technology and a practical edge that can make a tremendous impact when paired with India’s economic capabilities and ambitions.
“Be it in agriculture, F&B, tech, manufacturing solutions, ICT, services etc.”
Today I caught up with colleague and friend @PiyushGoyal, India’s Minister of Commerce and Industry. We swapped notes on how we’re strengthening the 🇳🇿🇮🇳 relationship and growing our opportunities for both countries 🤝 pic.twitter.com/DOXI8RyOaM
— Todd McClay (@toddmcclaymp) July 16, 2024
Christopher Luxon speaks on restoring farmer confidence