OPINION: The agreement secures a place in one of the world’s key emerging markets.
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India's role in global economic governance is growing, writes Chris Nixon. Photo / Getty Images
The debate around the New Zealand–India Free Trade Agreement has focused heavily on what is in the agreement. But they risk missing the bigger issue, writes Chris Nixon.
The most important thing about the India FTA is that it gets New Zealand in the room.
For decades, India was one
of the most difficult countries in the world with which to negotiate a trade agreement. Previous attempts stalled. Agriculture remained politically sensitive. Market access proved difficult. Negotiations often seemed to make little progress.
That is why the agreement matters.
Not because it will transform the New Zealand economy overnight. It won’t. Not because it delivers everything New Zealand exporters wanted. It doesn’t.
It matters because it opens a door that has been closed for a very long time.
Trade agreements are often discussed as if they are simply collections of tariff schedules and legal commitments. In reality, they do something much broader. They create relationships.
An FTA establishes regular contact between governments, regulators and businesses. It creates institutional familiarity. It provides mechanisms for resolving problems and exploring opportunities. It gives businesses confidence that the relationship matters and is likely to deepen over time.
And once you are in the room, future opportunities become easier to pursue.
This matters particularly in India’s case because the economy is changing rapidly.
For years, discussions about India were dominated by population statistics. The argument was always that if New Zealand could sell to only a tiny fraction of India’s population, the gains would be enormous.
The more important point is that India is becoming increasingly integrated into the global economy. It is developing strengths in technology, services, digital industries, advanced manufacturing and innovation. Its role in global economic governance is growing. It is becoming more influential in shaping international economic rules and relationships.
Chris Nixon, Principal Economist, NZIER, says the agreement with India gives New Zealand a seat at the table in a country whose economic and geopolitical importance is likely to grow significantly over coming decades.
The opportunities that emerge over the next 20 years may look very different from those that exist today.
That is precisely why being present matters.
No one knows exactly where future commercial opportunities will arise. What we do know is that countries and businesses that already have established relationships are usually better placed to take advantage of them.
This is one of the lessons from New Zealand’s own trade history. Some of the greatest benefits from trade agreements have emerged gradually over time, often in ways that were not fully anticipated when agreements were signed.
The wider geopolitical environment makes this even more important.
The world economy is becoming more fragmented. Strategic rivalry between major powers is increasing. Supply chains are being reconfigured. Protectionism is returning in various forms. Governments are placing greater emphasis on economic security and resilience.
In this environment, opportunities cannot be taken for granted.
Political windows open and close. Governments change. Priorities shift. International events intervene.
There is no guarantee that if New Zealand had failed to conclude an agreement now, another opportunity would have emerged in five years’ time.
Indeed, history suggests the opposite.
Trade negotiations frequently stall for years or even decades. Anyone who has followed international trade policy knows that timing often matters as much as substance. A deal that is available today may not be available tomorrow.
From that perspective, one of the strongest arguments for the agreement is that it was achievable now.
Of course, it is not a perfect agreement.
Agriculture remains sensitive. Some provisions lack the depth New Zealand has achieved elsewhere. There are areas where exporters and investors would have preferred stronger outcomes.
Those criticisms are legitimate.
But trade agreements are negotiated in the real world, not an ideal one.
Every negotiation involves constraints. Political realities matter. Bargaining power matters. Timing matters.
The relevant comparison is not between this agreement and a hypothetical perfect agreement. The relevant comparison is between this agreement and the possibility of no agreement at all.
Seen through that lens, the calculation looks rather different.
The question becomes whether securing a place in one of the world’s most important emerging economies is worth accepting an agreement that is imperfect but workable.
For New Zealand, the answer is likely yes.
Small countries rarely succeed by waiting for perfect conditions. Historically, New Zealand has done best when it has been pragmatic, adaptable and willing to move when opportunities emerge.
The India FTA should therefore be judged not only by what it delivers today but by what it enables tomorrow.
The agreement opens a door. It creates relationships. It gives New Zealand a seat at the table in a country whose economic and geopolitical importance is likely to grow significantly over coming decades.
In a world where opportunities are becoming harder to predict and political windows can close as quickly as they open, that may prove to be its most important achievement.
