The government cannot see any significant downsides to signing a free trade agreement with India, as New Zealand's manufacturing sector will not be competing directly with their Indian counterparts, Finance Minister Bill English says.
Prime Minister John Key yesterday left for India on a week-long trip to push along discussions on a free trade agreement (FTA) with India, which is expected to be signed mid-way through next year, meaning New Zealand would have FTAs with countries with more than half of the world's population.
English said the government could see no significant downsides stemming from an agreement.
“Our manufacturing sector has spent 20 years under pressure from various competitors, particularly around the Asian region, and they have now developed into a very resilient, niche driven, small volume manufacturing sector – and increasingly high value," English told RadioLive's Marcus Lush.
“So they won’t be competing directly for instance with India’s competitiveness in textiles, which is one of their big advantages," English said.
“I think our manufacturers have already stood the test – they’ve had a high exchange rate for a while - they’re just not in the same markets [as Indian manufacturers],” he said.
New Zealand had an excellent opportunity over the next five to ten years to “really beef up” its economy by earning more by selling more to the rest of the world.
An Indian free trade agreement, when added to the current FTAs with China and the ASEAN nations, would mean New Zealand would have FTAs with countries representing more than half the world’s population, English said.
“That means that the only barrier to us achieving a stronger economy through more exports is our ability to organise it, rather than them trying to keep our products out,” he said.
Tougher than China FTA
Meanwhile, Trade Minister Tim Groser, along with several business leaders have said completing the India FTA will be more difficult than with China, for whom New Zealand was the first developed country to sign a free trade agreement with.
"The big picture is that NZ Inc has got to replicate with India what has been achieved over the last 25 years with China," the NZ Herald reports Groser saying.
"But unlike with China, we don't enjoy first-mover advantage with India," he said.
Labour in support
Labour leader Phil Goff said Groser’s stance that the Indian deal would be harder than the Chinese FTA was a fair view.
“The tariff levels in India are much higher than those that existed in China, and there has in the past been quite a strong amount of protectionism [in India]," Goff told journalists in Parliament this afternoon.
“But India is a rapidly growing economy, it’s got a rapidly growing middle class that wants the sort of things that we produce, and they also want food security. New Zealand is a country that provides good quality food as well as other commodities, as well as, hopefully, other processed goods," Goff said.
“I don’t think it’s going to be easy, but we wouldn’t have gone into it if we didn’t think we could succeed. We went into it, we laid the foundation, and we’re supporting this government building on that foundation,” he said.
With China, New Zealand had the “first player advantage” of being the first developed country to sign a free trade agreement with the communist state. This was different in the Indian situation.
“There’s been 10 other free trade agreements [that India has signed, and] the European community is about to complete theirs. So we’ll be following in the footsteps of others, but it’ll still be important to us, and those people that export apples, wine, dairy and other things that face big tariff barriers at the moment,” Goff said.
(Updates with Goff comments, further comments from English, Groser.)