Neither McClay, also the Associate Foreign Affairs Minister, or trade czar Vangelis Vitalis would say if they thought a deal was realistic this term when they faced questioning from Labour’s trade spokesman and former minister Damien O’Connor at a select committee on Thursday morning.
The promise to lock down an FTA with India this term was made by Luxon during last year’s election campaign. It was considered highly ambitious given India’s protectionist agricultural policies, and the fact no formal negotiations have taken place for nearly a decade.
McClay said the Government had demonstrated India was a “strategic priority” through several visits to the Southeast Asian nation over the past year, including by himself and Foreign Affairs Minister Winston Peters. Luxon also met with Indian Prime Minister Narendra Modi in Laos in October, leading to an invitation for Luxon to visit. The Indian President has also journeyed to New Zealand this year.
“On the trade front, we have been able to lift a number of barriers to trade, so log exports have resumed, although we need to continue to pursue that ... we are looking for other ways to trade more,” McClay said.
“As far as trade is concerned, I think the relationship is in the best place it has been for a while, yet there is still more work to do before we can start talking about any type of trade architecture.”
Pressed on whether he believed the Prime Minister would be able to honour the promise to have a deal this term, McClay said Luxon was “ambitious for New Zealand”.
“If he doesn’t, it’s my fault, not his, because he’s given me the job,” McClay said.
Trade Minister Todd McClay says it will be his fault if there isn't a deal - not Prime Minister Christopher Luxon's. Photo / Mark Mitchell
Later, O’Connor also asked Vitalis, the Ministry of Foreign Affairs and Trade’s deputy secretary for the trade and economic group, if he thought there’d be a deal this term, at which the trade representative initially chuckled.
Vitalis: “You heard what the minister said.”
O’Connor: “No, I want to know what you say.”
Vitalis: “My job is to deliver to the Government’s priority”.
The pair also discussed reports of a think tank based in Delhi working on strategy for Indian trade, though Vitalis said the relationship between that and what the Indian Government was going to do was unclear.
“My focus, and certainly that of the minister, has been building the relationship with India and that goes well beyond the trade element,” he said.
Vitalis said New Zealand was at a “distinct disadvantage to Australia in the Indian market”. Australia and India have their own trade deal.
“The tariff on sheep meat in India is 30%. We were the largest supplier of sheep meat into India, it was very modest because the tariff constrains our ability to access that. On the first of January this year, Australia became tariff-free, so they don’t pay tariff anymore and immediately they have enjoyed an increase of nearly 163%.”
He said the potential was “huge” and there was an “urgency to catching up, because we want to at the very least level the playing field with Australia in the Indian market”.
Two-way trade with India was valued at $2.93 billion in the year to June. To put that in perspective, India ranks 12th in terms of trading partners. New Zealand’s two-way trade with China, our largest trading partner, was valued at $37.84b.
Prime Minister Christopher Luxon and India's Narendra Modi meet for the first time on the sidelines of the East Asia Summit in Laos. Photo / Jamie Ensor
After his first bilateral meeting with Modi on the sidelines of the East Asia Summit in Laos in October, Luxon said the prospect of an FTA had been raised during discussions. He said Modi had been interested in the deal.
“We’ll pick that up again as [we] go into the visit [to India] in the new year. But we spent a lot of our conversation about where are the areas in trade that we could advance where there is common interest and where it would be mutually beneficial for both countries.”
Luxon said he remained “hopeful” a deal would be achieved this term.
“It is a big stretch goal and I get it. It will be hard and difficult. But I am confident. I would sooner try. I think the New Zealand people want me to try,” Luxon said.
“I’m not the one who said we were going to get a free trade deal, I just said what we have got to do is ... get a whole lot of things right in this industry, this industry and this industry and all of a sudden it will start looking like New Zealand’s got a serious free trade arrangement.”
He said the Australian deal with India was “not a great deal” and New Zealand “could do better”.
Throughout the select committee session on Thursday, both McClay and Vitalis made repeated mention of trade agreements New Zealand had signed in 2024, including one with the United Arab Emirates and another with the Gulf Cooperation Council.
Jamie Ensor is a political reporter in the NZ Herald Press Gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub Press Gallery office.
