Two global free trade agreement experts say negotiators of an FTA with India need to keep a win-win outcome firmly in their sights.
Dr Rahul Sen, senior lecturer in economics at the AUT Business School, and National University of Singapore Professor of Public Policy, Mukul Asher say the path to deeper economic integration with Asia is negotiating an enduring FTA. And the benefits will be felt globally.
They say while New Zealand will gain from entering into an FTA, for the agreement to be sustainable, there must be built-in incentives for creating a strong economic relationship for both countries.
"It needs to be driven by businesses from both countries and people-to-people contacts, as well as strengthening strategic ties and reducing information and perception gaps," says Dr Sen.
"And it is essential for New Zealand to expand its understanding of India's economy and society, particularly as the country undergoes a rapid transition."
Dr Sen says with India's GDP of USD 1400 billion in 2010, which is projected to be USD 5000 billion by 2020, the gains of an FTA with India are well understood.
Professor Asher concurs, adding a bilateral FTA focused on tariff reduction only would result in uneven gains.
"New Zealand is an aggressive globalizer," he says. "It currently has tariff rates on goods that are already substantially lower than India's."
The statistics are revealing, adds Professor Asher. A simple average of applied tariffs by New Zealand on most favoured nation (MFN) basis is 2.2% overall (1.4% for agricultural products and 2.3% for non-agricultural products). In contrast, the corresponding overall tariff rate for India is around 13% (32% for agricultural products).
Dr Sen says this implies that New Zealand's current FTA with India should be broad based, and reach well beyond trade in goods. It should, he urges, be embedded in the strategic context of deeper Asian economic integration.
"Even if the FTA itself does not contain the four broadening provisions we suggest below, these could be side agreements or understandings, with implementation provisions to build confidence in the bilateral relationship."
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EXPERT: FTA with India must be win-win
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