Why in News ?
- India and New Zealand have concluded a Free Trade Agreement (FTA) in December 2025 — hailed as the fastest-negotiated FTA (nine months) — providing zero-duty access for 100% of India’s exports to New Zealand and targeting $20 billion FDI inflows by 2030.
- The deal is positioned as a gateway to Oceania and Pacific Island value chains, aims to double bilateral trade (~$1.3 bn) in five years, and is notable for being negotiated by an entirely women-led team.
- Strategically, it marks India’s push toward trade diversification, supply-chain resilience, and deeper integration into global value chains (GVCs) amid tariff headwinds and slowing progress on the Indo-U.S. trade track.
Relevance
GS-III | Economy, Trade, Infrastructure
- Trade diversification, export competitiveness, supply-chain resilience.
- Global Value Chains (GVCs), FDI inflows, manufacturing & services linkages.
- MSMEs, labour-intensive sectors, tariff policy, rules-of-origin safeguards.
GS-II | International Relations & Economic Diplomacy
- Bilateral engagement, strategic partnerships, market access diplomacy.
- Geopolitics of FTAs, diversification beyond U.S./EU/China.
From Basics — Strategic Context
- Trade diversification push
- Shift away from over-dependence on U.S., EU, and China-centric markets.
- New FTAs → U.K., Oman, Russia (ongoing), Pacific & West Asia partners.
- GVC positioning
- FTAs aligned with Make in India, PLI, technology transfer, and manufacturing integration.
- Objective → move from market access dependence to value-chain participation.
Key Features of the India–New Zealand FTA
- Market Access
- Zero-duty access for all Indian exports.
- India to liberalise 95% of imports, 57% duty-free from Day-1 (calibrated list).
- FDI Commitment
- $20 bn over 15 years with clawback safeguards.
- Focus → skills, services, mobility, 118 sectors.
- Services & Mobility Gains
- Easier movement for students, professionals, youth.
- Opportunities → IT, healthcare, education, construction, chefs, yoga & music instructors.
- Cultural & Soft Power Linkages
- Indian diaspora ~5% of NZ population (~3 lakh) strengthens people-to-people ties.
- Traditional Knowledge Access
- First-time facilitation of Ayurveda, yoga, traditional medicine services.
Sensitive-Sector Safeguards
- Agriculture & Dairy kept outside FTA
- No concessions on milk, butter, cheese, yogurt, oils, sugar, spices, rubber, onions.
- Protects farmers, SMEs and cooperatives against a major global dairy exporter.
- Cooperation without Market Opening
- NZ to assist India’s fruit & honey productivity, supply chains, quality standards, centres of excellence.
Relevance to Global Value Chains (GVCs)
- Moves India up the value ladder
- Encourages manufacturing collaboration, skill-linked services exports, MSME participation.
- Gateway to Oceania & Pacific supply networks
- Expands market reach, logistics corridors, export diversification.
- Investor-friendly framework
- Predictable rules → supports value-chain anchoring and cross-border co-production.
Strategic Significance
- Geo-economic diplomacy
- FTAs as instruments for long-term trade alliances, not transactional access.
- Resilience against tariff shocks
- U.S. tariff tightening + slow bilateral progress → push for alternate market footholds.
- Employment & skills pathway
- Labour-intensive sectors gain → textiles, leather, gems & jewellery, engineering goods, processed food.
Criticisms & Risks
- In New Zealand
- Criticised for excluding dairy & agriculture — called “not fair or free” by political partners.
- In India
- Concerns over trade deficits and asymmetric gains from past FTAs.
- Success depends on implementation, monitoring, rules-of-origin discipline, anti-dumping enforcement.
Way Forward
- Strengthen domestic competitiveness
- Quality standards, productivity, export capability, MSME upgrading for GVC participation.
- Enforce safeguards
- Robust ROO checks, supply-chain traceability, anti-dumping provisions.
- Invest in R&D & capability building
- Move from market-access gains → value-addition positioning.
- Leverage services + manufacturing synergy
- Skill mobility + production partnerships → GVC embedding, not shallow trade growth.
