The long-anticipated Free Trade Agreement (FTA) negotiations between India and New Zealand have officially concluded, while both nations announced on Monday that the agreement is set to be signed within the next three months, with its implementation expected to commence next year. This landmark agreement marks a new chapter in the trade relations between the two countries, while throughout the negotiation process, India has placed paramount importance on safeguarding the interests of its domestic farmers and Micro, Small, and Medium Enterprises (MSMEs), ensuring that sensitive sectors aren't adversely affected by increased foreign competition.
Protection for Sensitive Sectors
India has made a firm decision not to grant any tariff concessions to New Zealand on a range of crucial products under this FTA. This strategic move is aimed at shielding domestic industries and agricultural producers from potential adverse impacts of foreign competition, while among the products explicitly excluded from the ‘tariff concession list’ are dairy products, including milk, cream, yogurt, and cheese, which are vital to India's vast dairy sector. On top of that, most animal products, with the exception of sheep meat, also fall under this protected category.
No Concessions on Key Agricultural and Food Items
In the realm of vegetable products, essential food items such as onions, chickpeas, peas, and maize won't receive any tariff concessions from India, while this decision is critical for protecting the interests of Indian farmers who cultivate these crops on a large scale. Sugar and artificial honey are also on this list, providing a crucial layer of protection to the domestic sugar industry and beekeepers. Animal, vegetable, or microbial-based fats and oils are another category where no concessions will be granted, thereby supporting the local edible oil industry.
Other Significant Exclusions
Beyond agricultural and food products, India has also declined to offer tariff concessions to New Zealand in several other strategically and economically important sectors. This includes sensitive items like arms and ammunition, which are crucial from a national security perspective. The gems and jewelry industry, a significant employer in India, has also received protection under this agreement. Also, copper and its derived products, along with aluminum and related items, are among the categories where no tariff concessions will be extended. These measures are designed to bolster India's metal and manufacturing sectors against undue foreign competition.
Limited Market Access with Safeguards
Despite the broad exclusions, India has provided limited market access to New Zealand for certain agricultural products. This access is carefully coupled with solid safeguard mechanisms, specifically ‘tariff rate quotas’ (TRQ) and minimum import prices (MIP). This means that a predefined quantity of these products can be imported at a concessional duty, but only at or above a specified minimum price, to prevent price dumping and protect domestic market stability. Products falling under this limited access category include Manuka honey, apples, kiwi fruit, and albumin used in medicines.
Specific Provisions for Manuka Honey
Manuka honey, a specialty product from New Zealand, currently attracts a 66 percent duty in India, while under the new agreement, India will offer concessions on the import of up to 200 tons of this honey annually. A minimum import price (MIP) of 20 US dollars per kilogram has been set for this quota. The tariff on this quantity will be reduced by up to 75 percent over a period of 5 years, while however, if imports exceed the specified quota, the MIP will increase to 30 dollars per kilogram, a measure designed to shield domestic producers from unfair competition and ensure market stability.
Regulations for Apples and Kiwi Fruit
For apples, which currently face a 50 percent duty, the agreement stipulates that 32,500 tons in the first year, increasing to 45,000 tons by the sixth year, will be subject to a 25 percent duty and an MIP of 1. 25 dollars per kilogram. Imports exceeding this quota will incur the standard 50 percent duty. Similarly, for kiwi fruit, a zero-duty regime has been established for 6250 tons in the. First year, rising to 15,000 tons by the sixth year, coupled with an MIP of 1. 80 dollars per kilogram. After this limited quota, normal duties will apply, while similar provisions are in place for albumin, where normal duties will apply once the limited quota is exhausted. These provisions ensure a controlled supply of these fruits in the Indian market, preventing any detrimental impact on domestic producers.
Protecting Domestic Interests
This FTA exemplifies India's balanced approach to trade policy, where strengthening global trade ties goes hand-in-hand with safeguarding the interests of domestic industries and farmers. Mechanisms like tariff rate quotas and minimum import prices are crucial in ensuring that concessional imports don't lead to an oversupply or a significant drop in prices within the domestic market, thereby providing stability and security to Indian producers. While this FTA is expected to foster trade and economic cooperation between India and New Zealand, it simultaneously upholds India's economic sovereignty and protects the livelihoods of its domestic producers.
