Next week's business delegation is more than double the size of the group then-deputy prime minister Winston Peters took to India in 2020. Photo / Getty Images
ANALYSIS
New Zealand will send one of the largest business delegations it has ever sent to India next week.
It will do so against the backdrop of a stuttering Chinese economy, plunging farmgate milk price and concerns over the current account deficit while the clock ticks down to a general election date less than two months away.
The backdrop on the Indian end is a nation embracing a series of trade deals, including with the UK, US, United Arab Emirates, Australia, Canada and the European Union, after a history of shirking them – including walking away from the Regional Comprehensive Economic Partnership (RCEP) negotiations in 2019.
India NZ Business Council (INZBC) chair Michael Fox said this visit was needed if only to continue the momentum of diplomatic visits between the two countries, but he acknowledged there is a bit of work to do too, and said this was the case even before covid-19.
“We are coming from a long way back, we have to be pretty honest with ourselves,” Fox said.
“The level of engagement at the prime ministerial level has not been a lot, and at a ministerial level has not been a lot.
“I was there with ministers Parker and Peters, just before Covid … and we were being told by everyone that the Australians were wiping the floor with us and, at the same time, we got stuck in Donald Trump’s motorcade.”
Unlike NZ’s recent state-sponsored delegation to China, the trip to India is being led by the privately-run INZBC and the centrepiece of the trip will be an INZBC summit in New Delhi.
BusinessDesk understands trade minister Damien O’Connor will travel to India too, although his office has not commented on specifics associated with the trip, including the length of time he will be over there for.
Auckland representatives lead the pack
NZ’s business delegation is more than double that of the business delegation then-deputy prime minister Winston Peters took to India in 2020.
Auckland mayor Wayne Brown is one of those on a business delegation representing some 40 organisations, including Fonterra, Zespri, QualityNZ and the Meat Industry Association.
This large list comes out of expressions of interest from 110 different organisations, according to INZBC.
Auckland is well-represented on the delegation, with both Brown and Auckland Chamber of Commerce chief executive Simon Bridges in attendance. But Bridges and Brown are the only members of city councils or local chambers of commerce flying over.
Bridges said there was a recognition in Auckland that growing a relationship with India, along with the country’s different states and companies, was important, but nationally there wasn’t as much of an understanding of India’s role as a technology hub and an important market.
“I think Auckland probably does get the importance of India, I think in a New Zealand sense, there’s possibly a slightly outdated view, and we need to bring that forward.”
NZ International Business Forum executive director Stephen Jacobi said the business-led initiative represented the eagerness to grow the trade relationship with India.
“We can’t wait for the Government to lead us anyway; what do they know? We have to do the leading, we have to do the heavy lifting, so that’s what we’re doing,” Jacobi said.
Bridges said the huge interest in the trip was proven by the fact it had grown to a group of 40 without too much of an effort to drum up interest.
“In relation to India, look, it’s pretty hot right now. I think some of us would say we’ve seen this for some time, but I think there’s just like never before a real appetite to understand India to build a relationship with it and a sense maybe that ‘hey, we probably should have got into this a bit sooner’,” Bridges said.
He added there was heightened interest among the business community in exploring trade options with a number of countries beyond India, too. After the INZBC summit, Bridges will head out on another business delegation to Israel in November.
Too late?
NZ has often been criticised for seeing India as an afterthought, with many of our leaders only visiting when they are on their way out.
John Key visited in 2016 and resigned the same year; NZ’s then chief of the NZ Defence Force, Tim Keating, visited to grow the defence relationship in 2018 and resigned a few months later; Peters visited in 2020 and was out of parliament less than a year afterwards.
However, Employers and Manufacturers Association CEO Brett O’Riley said India was now “more outward-looking than ever” and it was important for both O’Connor and NZ to visit India. O’Riley said O’Connor visiting would also build on a relationship reset with India, triggered by earlier government visits in both directions.
“The strength of the delegations is that you’ve got a number of organisations there, INZBC, ourselves, Business New Zealand, who will be around after the election … so if there is a change of government, you’ve got that continuity,” O’Riley said.
“Building the layers of that relationship are quite important, so it isn’t just a political layer, and it’s not just an individual business-to-business layer.”
The visit comes on the back of an INZBC report into the state of the relationship with India which recommended more regular diplomatic contact between the two countries and other measures to grow the relationship, like the setting up of regular direct flights.
Fox said INZBC hadn’t received a direct response from the government to their report yet, but he believed the commitment was there. “My sense is, yes, the bureaucracy is focused on India, and obviously that’s going to be driven by the government, but I think both major parties have expressed that commitment,” Fox said.
India Beachheads Advisory Board adviser Sunder Rajan, who has a 35-year history of doing business in India, including involvement in a Japanese joint venture in India with Toyota, said larger countries around the world had companies who could pursue a relationship with India on their own.
“If you look at the Japanese success in America, the European, Americans … they all have deep pockets, and the private sector can actually by themselves steer the ship and do what they want,” Rajan said.
NZ does have a number of large corporates who are active in India, including Fisher and Paykel Healthcare and Rakon. However, Rajan argued a common all-of-government effort was still needed to replicate some of the gains made by other countries because NZ was not a large enough economy to solely rely on the deep pockets of corporates to grow the relationship.
“The government does play a big role, and that’s why the China one worked well because the government got the breakthrough, and then the whole private sector could dovetail,” Rajan said.
Trade hopes
Meanwhile, Jacobi said we shouldn’t expect a major moving of the dial on trade or a free trade agreement from the trip. He argued this was a good thing because it meant we weren’t repeating past mistakes. “We tried very hard to get the FTA [free trade agreement], five years of negotiations, plus RCEP is not doing nothing,” Jacobi said. “But the reality was the time wasn’t right, it’s not the way to advance this relationship.
“What we’ve learned from others is you have to have the relationship first, then you can get the FTA or start it; we were obviously trying to leapfrog that, didn’t quite work as we expected.”
What he hoped the trip will deliver was a roadmap and an understanding of what NZ needed to do to grow its trading relationship with India. As for some of the other elements that are sticking points in the India-NZ relationship, like dairy – which some are still holding out hope for – former Fonterra director Earl Rattray argued the best way to get there was to build a relationship of trust so India does not fear NZ’s intentions.
If you want to get an idea of the fear NZ can engender among some people, you just have to look at the lobbying which took place around India’s exit from RCEP in 2019.
The problem with dairy
The distrust of NZ and other Western countries on food has been a feature of Indian history, even in recent decades. During the 1960s, India went through a period of famine and was heavily reliant on US food aid.
In Barry Riley’s book The Political History of US Food Aid, he details how then-President Lyndon B Johnson personally intervened in aid decisions and tried to use India’s reliance on it to extract painful political concessions along with “greater public gratefulness for America’s largesse”.
The Indian dairy co-operative Amul was set up to make India self-sufficient in dairy and less reliant on food aid – domestically, it’s praised as a success story.
Amul’s founder Verghese Kurien was trained in NZ under the Colombo plan, and his dream was for India to eventually become a net exporter of milk to NZ rather than the other way around. At the time, India relied on imported milk powder from NZ to meet its domestic dairy requirements. The co-operative’s growth was founded partly on the paring back of NZ exports into India as former prime minister Jawaharlal Nehru agreed to cut back imports of butter from NZ if Kurien could compensate with increased production of butter.
Fast forward to 2019, and less than six months before India formally withdrew from RCEP, the Gujarat Cooperative Milk Marketing Federation – the apex organisation of Amul – made a presentation to the commerce ministry arguing for India not to sign RCEP because of NZ and Australia’s involvement in it.
Several of the slides in the presentation were dedicated to NZ, one showed a chart of China’s milk production before and after it signed an FTA with NZ. Where previously domestic milk production had grown significantly in China, the chart showed China’s domestic milk production numbers effectively flatlined after they signed the FTA.
The slide deck even featured a price comparison of milk in Auckland and NZ – which was 2.5 times as expensive according to the slide – which appeared to argue that Indian dairy producers were more efficient because they were able to sell their product at a lower price in their home market.
Meanwhile, Rattray said the approach of expecting a market of 1.4 billion people to suddenly open up access to dairy in exchange for access to five million people some distance away was “a fairly big ask at this point in time”.
“But India’s economy is evolving, its demography is evolving, there’s no question over there that more people want to get out of farming than get into it,” Rattray said.
”Over time, I think if you establish a very, very strong collaborative relationship with India, who knows? “You want to be at the table when the day comes that they want discussions around dairy access.”
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