Christopher Luxon has promised to revive trade talks with India and may be willing to give up dairy access to achieve it

Prime Minister Christopher Luxon will touch down in India on Sunday evening with the goal of reigniting the dream of a free trade agreement which has eluded successive governments.

Helen Clark’s government set up a joint study group with India to look at the feasibility of a trade deal in 2005, and John Key spent five years working on a deal before negotiations fizzled out in 2016. Under Jacinda Ardern, trade negotiators left India on ice and focused on more promising deals such as with the European Union and Asia-Pacific countries.

Now it is Luxon’s turn to have a crack, and there are some reasons to think things might move more quickly this time around. 

India has become a more open economy and signed other trade deals in recent years. Plus, New Zealand may be ready to compromise on dairy, which was a major sticking point in previous negotiations.

Dairy is a sensitive industry in India because many of its citizens live off tiny dairy farms with just two or three cows and still deliver milk to processors in buckets on bicycles. 

Allowing NZ dairy to flow freely into the market could put these farmers out of business before the industry has a chance to modernise. It would also create a precedent for other countries seeking market access. 

When Luxon was asked whether he would consider signing a trade deal that didn’t include market access for dairy, he said it was important to find ways to grow all sectors. 

“Dairy will be an incredibly hard component of the negotiation … but that's not a reason to shy off and say that's a market we turn off, when it's going to be the third biggest economy in the world. So, it won't be perfect, but perfection is the enemy of good,” he said. 

There are other things to trade: tourism, education, technology, space and satellites, horticulture, and all kinds of services.    

Do go gently

But Luxon’s approach will need to be softer than previous attempts, however, as Indian diplomats have rebuked New Zealand’s ‘transactional style’. That’s a polite way to say, only be interested in the money.

The message our diplomats and politicians have heard is that India wants a broad and meaningful relationship to develop before it starts handing out trade deals. 

And so, Luxon’s goal with this visit will not be to restart trade talks but to build up other parts of the relationship first. That means focusing more on defence, sports, and the human connections between the 1.4 billion people in India and the 300,000 Indians who call New Zealand home.

Of course, the Prime Minister has already made a strategic error by promising voters he would secure a free trade deal during his first term in office. Not only was that unrealistic, it is also the sort of short-term transactionalism that has irked India previously.

Luxon hasn’t exactly walked back that promise but has softened the language, now describing it as more as a commitment to deepen the trade relationship. 

“The way you go about [a trade deal] is not by going through the front door asking, very simplistically, for it. You actually have to build up a store of relationships and understand each other and work out how we can deepen all components of the relationship,” he told reporters. 

“We're going to do everything we can to push trade really hard. You'll see that over this trip. But what I'm looking for is a much more comprehensive economic partnership”. 

The trip will include a business delegation, as usual, but it will be co-led by former cricketer Ross Taylor and there will also be a community delegation of successful Kiwi Indians. This is all intended to showcase the breadth and depth of the NZ–India relationship beyond trade.

It is one of the largest groups to ever accompany a Prime Minister abroad and it has been described by officials as the most important diplomatic mission of this term in Government.

Defending the balance

Regional security and defence will be another big focus of the trip, as it was when Luxon visited South East Asia. The Prime Minister has been invited to give a keynote speech at the Raisina Dialogue, an important geopolitics conference in India.

While India is an unaligned country, it has border disputes with China and sees its powerful neighbor as its biggest security concern. It would like to see a more “multipolar” world and wants security partners in the Indo-Pacific region to limit China’s power. 

New Zealand will attempt to demonstrate during this visit that it can contribute to defending the region and work with India to maintain the regional power balance. This has the added benefit of creating the broader relationship required for a trade deal.

Luxon told reporters there was scope for New Zealand and India to do more joint exercises and that his government planned to “significantly increase” its defence spending.

But don’t expect him to come home next Friday with a free trade agreement, or even with a promise to restart negotiations. This trip is still about laying the groundwork. 

“Success for me is that we keep the momentum in these individual relationships that we've been building over the last 16 months and that we see a step change in our defence, trade, and people links as a result of the visit,” he said.