Major dairy commodities like butter and skim milk powder need to be parked for now if New Zealand wants to avoid being relegated to the back of the queue for a trade deal with India.
That’s the view of former Fonterra director and Indian dairy farm investor Earl Rattray, who led a delegation of most of NZ’s major primary exporters to India earlier this month, and the are few New Zealanders with a better feel for India’s dairy sensitivities than him. The Waikato dairy farmer has visited the country four or five times a year for a decade, establishing a dairy farming joint venture 70km from New Delhi with three Indian tech entrepreneurs.
India this year signed a free trade agreement with Australia – and other countries, including those of the European Union, are scrambling to gain a similar foothold in the market of more than a billion consumers.
“It is now the fifth biggest economy in the world, it is going to have the world’s largest population, and it is one of the world’s fastest-growing economies,” Rattray said.
“Given the Australia FTA and possibly more other potential suppliers to the Indian market who may achieve a competitive advantage because of the lack of tariffs, that is not going to be a good place for NZ exporters to be in the future.”
Talks for a free trade agreement began in 2011 but stalled six years ago.
Despite starting its talks a year later, Australia clinched a deal with India in April.
Some exporters have questioned Trade Minister Damien O’Connor’s ruling out NZ following Australia and parking demands for access for dairy products.
The meat industry worries NZ’s dairy demands are holding up the talks and blocking potential gains for other exporters.
Rattray agrees NZ’s default position of demanding tariff elimination on all of its major export commodities as a starting point is not suitable for the current negotiation with India.
But he said that does not mean dairy should be excluded altogether in the current talks.
“There are elements of our export product mix that are extremely sensitive for India but there are significant and meaningful parts of dairy exports out of NZ which represent zero threat.
“It does not have specialty in some of the more concentrated whey proteins or fractions of proteins, for example.”
Rattray said India’s demographic trends could turbocharge future demand for such products.
Getting alongside local manufacturers now could pay big dividends in the future.
As could lowering any tariffs on those products.
“I personally think there is an economic miracle unfolding there …[as the] working age population completely overwhelms the size of the dependent population and more women join the workforce, that is going to have a massive economic dividend.
“Those products that have specific health attributes beyond basic nutrition which is fat and protein…the market for those kind of things are likely to continue to grow and there is unlikely to be a bigger market anywhere else in the world for them than India.
“For Indian businesses that are building up their product portfolio I would say there would be some elements of NZ’s export mix that would be very attractive to them.”
In the meantime, NZ needed to be careful it did not blow its chances by making demands India could not agree to.
“We have to secure our place in the queue and not go in there with unrealistic expectations about timeframes or be too demanding.
“We have to work through what we can do which is achievable and can add value to the relationship.
“India needs to see we are value-adders rather than competitors.”