Trading with India - Diwali event
Good evening Excellencies, members of the NZ India Trade Alliance Executive Committee, distinguished guests, ladies and gentlemen.
Thank you for the invitation to speak today. It’s a pleasure to be here. Events like this provide an invaluable means of enriching the conversation around New Zealand’s increasingly important relationship with India.
Indeed, Diwali – the festival of lights - is now an embedded part of New Zealand’s cultural calendar. It has seen Indian culture take on a more visible and prominent role in New Zealand’s public life in recent years. We have a thriving and growing Indian community, which is willing to proudly share its traditions.
Today’s celebrations are a timely reminder of the warmth of friendship between our two countries, and of the close ties that bind our people and communities. Our shared support for democracy, our Commonwealth heritage, the remarkable legacy of Sir Edmund Hillary and our passion for cricket have ensured that we have much to celebrate.
We look forward to hosting the Indian cricket team this summer!
India Matters to New Zealand
The value of New Zealand’s relationship with India was raised by Prime Minister Jacinda Ardern, when she met with Prime Minister Narendra Modi in the margins of the East Asia Summit last year.
As you would expect, their meeting was warm and respectful, and they had a dynamic conversation exploring how India and New Zealand can build our relationship and work together across what are at times very difficult and increasingly complex global and multilateral issues.
Indeed, in today’s world, there is no question that there is significant pressure on the existing international system and many of the principles and rules that underpin it
These are things worth defending for small countries with global interests. But not only for small countries – Prime Minister Modi too has spoken out against protectionism and in defence of a stable international regime, including for trade.
The reason is simple: both New Zealand and India benefit from an open, rules-based international system.
New Zealand’s identity as a trading nation is self-evident.
India too has a long and proud history as a trading nation. The facts bear this out today: India’s total trade is equivalent to about 50 percent of its GDP. This is higher than the trade to GDP ratio of the US, Japan or China.
And there is an increasing recognition in India that global integration is crucial if India is to increase its exports as a means to balance consumption-led growth and to create employment.
In this globally contested environment, a strong relationship with India matters for New Zealand. We need strong and diverse partnerships with countries that share similar aspirations.
India is the world’s largest democracy and our most developed relationship in South Asia. India’s economic growth is strong and forecast to remain so, infrastructure is rapidly expanding, the ease of doing business is improving and incomes are rising, albeit unevenly. It is forecast to be the world’s most populous country by 2025. That population will be young and increasingly well-educated.
India Trade Relationship
For these reasons, we have identified India as a key relationship – and one in which we need to invest genuine time and effort.
Despite increasing two-way trade with India - as well as other countries in the region such as Sri Lanka and Bangladesh - our trade relationship does not yet reflect its potential given the size and growth of the Indian economy.
While India is the sixth largest economy globally, it comes in as New Zealand’s 11th largest trading partner. Two-way trade in goods and services was NZ$2.8 billion in the year to June 2018.
The complementarity of New Zealand expertise and technology, particularly to boost India’s agricultural productivity and exports, combined with India’s vast consumer market make India a strong proposition for New Zealand to diversify its trade footprint.
We know there are success stories between India and New Zealand, in international education and in increasing tourism numbers.
Services exports have been particularly notable: they rose from $414 million in 2011 to $1.9 billion last year. In other words, they were more than four times bigger in 2018 than seven years before.
A key to success for businesses – and there are some notable successes, such as Glidepath, Fisher and Paykel Healthcare and Gallaghers, for example - is in finding the right local partner, whether in manufacturing, distribution or sales. The other critical factor is to be responsive to the peculiarities of the Indian market, where the average consumer still shops daily rather than weekly, and where larger purchases are increasingly made on-line.
We are continually supporting New Zealand businesses to achieve their goals in India. Around 140 New Zealand companies are doing business with India and 20 have offices in India.
We are also aware of the areas where we can do better – such as expanding the trade in goods between us. New Zealand’s goods exports to India have plateaued since 2011. In contrast, New Zealand’s goods exports to China – the other major emerging economy - reached NZ$12.2 billion last year, with imports into New Zealand of NZ$10.8 billion. This reflects high Indian tariffs, which act as an immediate disincentive for New Zealand exporters, but also a lack of familiarity with the market on the part of New Zealand business.
Commercial success in India also depends on being able to demonstrate how New Zealand can add value to India’s agenda to transform the lives of its people - indeed this is one of the key criteria by which India will decide whom to engage with.
As a small, advanced economy with a fundamental adherence to international rules, New Zealand is well placed to support India’s reform agenda, including:
- improving agricultural production;
- improving India’s domestic business environment;
- boosting India’s technological development and modernisation.
A good example of this is New Zealand Apple and Pear, together with New Zealand Plant & Food Research, which recently began a World Bank-funded project to enhance productivity in the apple and stone fruit industry in Himachal Pradesh (Him-a-chal Prah-desh).
We want to strengthen our economic and trade architecture with India. To do so, a framework is needed to give businesses confidence to invest, whether that be a free trade agreement or something else.
A comprehensive economic partnership remains the focus of New Zealand’s trade relationship with India, which we are pursuing through two tracks: a bilateral Free Trade Agreement, and the plurilateral Regional Comprehensive Economic Partnership, or RCEP negotiations.
At present, the immediate prospect for securing trade liberalisation into India is through the RCEP track.
RCEP builds on New Zealand’s already strong relationships in Asia, and will, we hope, open up more opportunities for New Zealand businesses in these fast growing economies.
If RCEP is successfully concluded, it will provide a single set of rules, covering comprehensive high quality commitments, including on market access, for almost half the world’s population. Put in other terms, it would cover almost one-third of world trade and US$23 trillion in GDP.
New Zealand is working intensively with the other RCEP countries this year to try to substantively conclude the negotiations. While New Zealand supports a swift conclusion, it is also important that any final RCEP agreement is ambitious and commercially meaningful.
Trade in Turbulent Times
Deals like RCEP become even more important in the context of the current uncertain environment for international trade.
We’ve seen trade friction between the US and China. The EU and the UK are also trying to decide what rules will apply after Brexit.
The New Zealand government is closely monitoring these developments, as is the rest of the world. Prime Minister Modi has spoken (at both Davos and the Shangri La Dialogue) defending globalisation and decrying trade protectionism.
This Government will be promoting New Zealand’s interests in this increasingly uncertain global trading environment and we can use support from our trading partners, including India.
In the spirit of Diwali, which symbolises the victory of light over darkness, we will maintain a close dialogue with India, and our other trading partners, so that we can negotiate through these turbulent times and find solutions that are consistent with international law and in the interests of the global economy.
Our hope is that this represents part of an ongoing dialogue in which stakeholders across New Zealand, India and South Asia can work together to deepen the connections between our countries – because India matters to New Zealand.
Again, thank you for the invitation to speak with you all.