New Zealand - India Trade Relations
TradeThank you for the opportunity to address the India Business Forum this morning.
New Zealand and India have a warm and long-standing bilateral relationship.
Our Commonwealth ties mean that we share the same language, the same democratic traditions and - of course - a passion for cricket.
At least three New Zealanders, Sir Edmund Hillary, John Wright and Sir Richard Hadlee have been household names in India.
It is fair to say, however, that while our relationship has been warm, it has not always been particularly deep or active.
Historically, trade levels have been very low and as recently as the 1990s there were few ministerial visits in either direction.
India Rising
India's has emerged as a global and regional power.
It is the world's second most populous nation. Of its population of 1.1 billion it is estimated that nearly half may achieve middle class consumption levels by 2025.
It has the world's second fastest growing economy and is expected to become one of the world's top three economies by 2025.
Current economic growth is around 9 percent. Average growth over the past three years was about 8.1 percent.
The Indian economy has become more open - not as open as we would like, particularly in the agriculture sector - but it is moving in the right direction.
External trade in merchandise goods now accounts for 33 percent of GDP.
India's rapid economic expansion has been matched by its growing geopolitical importance.
It is a major player for example in both the World Trade Organisation and on environmental and climate issues, roles that give it both power and responsibility.
India has also has another huge strength in terms of its human capital. Its software industry is regarded as one of the most sophisticated in the world - with its success in business process outsourcing well known.
New Zealand benefits from these talents, with India being the third largest source country for new migrants to our country.
Indian corporates are increasingly influential on the global scene.
An Increasingly Important Bilateral Partner
The growing importance to New Zealand of our relationship with India has, in large part, mirrored India's emergence as a key international and regional player.
The tempo of Government engagement has accelerated.
As Foreign Minister I first visited India in 2001. Remarkably, this was the first such visit in almost a decade.
Since that visit, the pace of ministerial visits in both directions has increased.
The Prime Minister visited in 2004 - the first bilateral head of government visit since 1986.
Most recently, Indian Minister of Commerce and Trade, Kamal Nath visited New Zealand in May, specifically to discuss our growing trade and economic relationship, and the prospects of a bilateral free trade agreement.
And Anand Satyanand made a landmark visit last month, being warmly welcomed as New Zealand's first Governor General to visit India, and as a New Zealander of Indian ethnic origin.
In the last few years we have significantly expanded the New Zealand Government presence on the ground in India.
Staffing in the High Commission in New Delhi has been increased and in addition, we now have Honorary Consuls in Chennai and Mumbai, and since last year trade and tourism offices in Mumbai.
NZTE's successful Beachheads programme has been expanded in India with a newly established Indian Board headed by Pradip Madhavji as Chair.
The increase in political contacts and the expansion of the "NZ Inc" Infrastructure on the ground in India is a critical element in terms of broadening our relationship.
Expanding the Trade Relationship
One of the key focuses in this regard is the trade and economic relationship.
New Zealand exports grew from under $200 million in 2004, to $366 million in the year to December 2007.
Our main exports are coal, wool, wood, wood pulp, machinery, hides and skins. Coal exports in particular are flourishing, and we welcome recent Indian investment in the sector.
As India invests heavily in infrastructure and new manufacturing capacity, New Zealand technology companies are finding the Indian market increasingly attractive.
However, while exports in goods have grown solidly in the last three years, this growth has been from a low base, and in relative terms overall trade levels are still very low.
By way of comparison, our merchandise exports with China in the year to December 2007 were worth nearly $2 billion.
And that trade should grow rapidly with the Free Trade Agreement with China coming into effect today.
The effect of the FTA is that 35% of all of our exports will enter China duty free from today, full tariff removal of two thirds of our exports will occur within five years, and 96% of our exports will have tariff free entry by 2019.
There is clearly much untapped potential in our trade and economic relationship with India.
One key reason for this is the prohibitive tariff and non-tariff barriers faced by our exporters into India.
Of most concern in this context are the non-tariff barriers that impede our dairy and meat trade.
India's standards - for example in the SPS context - are inconsistent with international practice, a point that we have consistently made to the Indian Government.
We have stressed that it is in both countries' interests to remove such barriers.
New Zealand meat and dairy products will not flood the market in India. India is of course the world's largest dairy producer, with New Zealand only in ninth place.
The impact of these barriers was emphasised to me when our NZTE representative in India, Paul Vaughan, briefed me on New Zealand's trading profile with India when I was in New Delhi in April last year.
Paul told me that India was perhaps our only major trading partner in which food and beverages were not a top ten export sector - an anomaly in our major trading relationships.
However, our high quality food products could make a valuable contribution to the hospitality and emerging retail sector there.
The removal of prohibitive trade barriers would also make India a much more attractive investment destination for New Zealand companies - particularly in the agriculture and agritech areas, which could make important contributions to the development of India's agriculture sector.
Another example of an area in which we face barriers is the forest products sector. India is an important emerging market for New Zealand forest products, worth NZ$59 million to the year ending May 2007.
But seventy-six percent of total New Zealand forest products exports to India are raw logs.
Ideally, we would like to supply India with a range of other timber products. So far, however, India's high tariffs on value-added products have hindered our ability to do so.
An India - New Zealand FTA: A Mechanism to Address these Issues
A high quality free trade agreement with India is the obvious mechanism to negotiate the removal of these barriers with India, and to advance our overall bilateral trade and economic relationship.
We have made very positive progress on this front.
Last year I agreed with Kamal Nath, that we should explore the possibility of negotiating a Free Trade Agreement between India and New Zealand.
Over the course of this year, a Joint Study Group of officials has been undertaking a study.
They have focussed on the current state of the trade and economic relationship, on where the impediments are to expanding trade, on the shape of a negotiation and on other areas where increased cooperation would support increased trade.
That study is now well advanced and the discussions have been positive and constructive. Officials are likely to complete it within a few weeks.
Once the study is completed the two governments will consider the study recommendations and decide whether to proceed to negotiations.
I do not want to pre-empt that decision process, but on the basis of my discussions with Kamal Nath earlier this year, there is a good prospect that New Zealand will enter FTA negotiations with India next year.
During the Governor General's visit, both Prime Minister Singh and Foreign Minister Mukherjee also referred positively to the prospects of a free trade agreement taking our relationship forward.
Our goal is to conclude a high quality and comprehensive FTA with India similar to the one we have with China.
Beyond addressing the market access barriers that our agricultural, forestry and other products face, an FTA would also address other key areas of our trading relationship such as services and investment.
Looking to the future, services are likely to be a particularly important area for both countries.
Education, for example, is an important growth area.
We are working hard to realise the enormous potential for New Zealand to cooperate with India in the education sector - both in terms of attracting Indian students to study in New Zealand, and establishing joint education ventures in India.
There are currently 4,000 Indian students studying in New Zealand, up from less than 200 in 1998. Tourism from India has now reached 25,000 per annum with a rate of growth of 12.5% over the last year.
India is one of our fastest growing English speaking tourism markets.
This has prompted Tourism New Zealand to launch its 100% Pure New Zealand tourism campaign in India.
Cooperation in the film industry is also important. In recent years more than 120 Indian film productions have been made in New Zealand. A positive side effect of this has been a major boost to our tourism industry.
And, the people-to-people linkages built through tourism and education can provide a starting point for many kinds of other business linkages.
An FTA would also provide a means to develop mechanisms for enhanced dialogue and cooperation with India in areas such as increasing understanding of each others' regulatory systems, ensuring product safety, addressing non-tariff barriers, and enabling the recognition of each others' professional and educational qualifications.
Another important benefit of an FTA would be to raise the profile of India in New Zealand and vice versa.
Building mutual awareness and understanding of each others' markets will also be an important element in building our trade and broader relationship.
Despite being the second fastest growing economy in the world, India is yet to capture the attention of New Zealand businesses in the same way as China.
For New Zealanders, the scale of India can be hard to grasp. Its tertiary institutions - for example - produce over 100,000 engineering and two million non-engineering graduates a year.
That's half the total population of New Zealand graduating annually.
Understanding and embracing India's emergence will be vital if we are going to be able to build our trade and economic relationship.
There remains, however, a lot of work to be done if New Zealand is to fully realise the opportunities offered by India.
We need to increase the breadth and intensity of our interaction with India across the board. This involves both government and non-government sectors.
We can, for example, do more to enhance contacts between New Zealand universities and institutes and their Indian equivalents.
The Government is providing support for these linkages, including through ‘Seriously Asia' programmes.
We have, for example, provided $25,000 funding for the India Business Forum through the Seriously Asia Fund.
Forums such as the India - New Zealand Business Council and the Auckland-based India Trade Group are providing important support for businesses involved in, or wishing to enter, the Indian market.
We also have the benefit of a growing and active Indian community that makes a very positive contribution to New Zealand.
In my own electorate of Mt Roskill many of my schools have Indian enrolment levels of up to a third of their students.
The growing and active Indian community makes a huge and welcome contribution to New Zealand.
As well as continuing to enrich our culture, Indian Kiwis will play an important role in expanding our bilateral relationship - including in the trade and economic area.
We have signed an air services agreement, which allows for direct flights between Auckland and Mumbai, and code sharing between most major centres using Singapore or Australia as an intermediate point.
We hope that airlines in either country will in due course take advantage of the option of direct flights. That would give tourism in both directions a significant boost.
Huge potential exists in the "new economy" in India - with ICT and bio-technology - other sectors in which significant opportunities exist.
So in conclusion our trade and economic relationship with India, like India itself is on a positive track. But we need to do more to ensure we can fully realise the opportunities that the vibrant Indian market presents.
The Government is committed to doing its part. We will continue to urge India to remove the barriers faced by our exporters, and to promote trade links in the "new economy".
This year has been a great year for expanding market access for New Zealand exporters.
We have completed a hat-trick of implementing a free trade agreement with China, concluding trade negotiations with our fourth biggest export market, the ASEAN countries, and opening FTA negotiations with our second largest export market, the United States, through the Trans-Pacific Partnership, or "P4" Group.
I would very much like to add to this, early negotiations for a free trade agreement with India.
An "NZ Inc" approach will enhance our chances of success. I would encourage you to do whatever you can to help through your networks, to achieve progress in this direction.
I wish you well for a successful forum. Thank you