Trade Minister Damien O’Connor says he won’t be following Australia’s lead and ditching New Zealand’s demands for improved access to India’s dairy markets as a means to get stalled trade talks moving again.
Australia’s own trade deal with India in April and the freeing up of Wellington’s negotiating capacity after recent agreements with the United Kingdom and the European Union have catapulted India’s billion-plus consumer market to the top of NZ’s hit list for new trade agreements.
O’Connor heads to India in the next few weeks to try to re-ignite talks started in 2010, but which have been on ice for the past six years.
The talks came to a halt in 2015 after India baulked at NZ’s demand that it scrap tariffs of up to 60% on imported milk powder.
A similar demand is understood to have played a part in India pulling out of the massive Regional Comprehensive Economic Partnership trade deal – involving China, NZ, Australia and 12 other countries, mainly in Southeast Asia – before its conclusion in 2020.
“What India fears from us is our dairy industry … they have the biggest dairy industry in the world and for them it is a very, very sensitive issue,” O’Connor told Farmers Weekly.
Australia revived its own talks with India, started a year after NZ’s, in part by agreeing to drop its own dairy demands.
Australian Trade Minister Dan Tehan said Australia accepted that India remained reluctant to increase dairy imports and would not make those demands in its own talks.
The same sensitivities did not apply to other products, such as wine and sheep meat, where the Australians were able to get tariffs reduced.
Asked whether NZ would be prepared to drop its own dairy demands to make progress on access for other products, O’Connor said it was not something he could contemplate.
Dairy made up a comparatively small part of total Australian exports and was easier for them to give ground on, he said.
“But given it is such an important part of our trade then we realistically cannot have trade agreements without improving access for things like dairy, meat and horticultural products.”
Asked what cards NZ has left to play, O’Connor said offers to share expertise in technology and production methods could yet tempt India back to the negotiating table.
He said kiwifruit marketer Zespri has joint ventures in the works, and NZ researchers have teamed up with apple growers in the northwestern Himalayan region in recent years for a World Bank-funded project aimed at boosting orchard productivity in that part of India.
“There are many ways we can progress value between our two countries, we just have to be flexible in our thinking and continue to work on it.
“Engagement and connections are a crucial part of that,” O’Connor said.
However, O’Connor warned not to expect an imminent conclusion to trade talks or even for them to resume soon.
“We will work to build relationships ultimately culminating in a free trade agreement.”
Dairy Companies Association of NZ executive director Kimberly Crewther said the industry is prepared to wait.
“There is a long-term relationship interest with India.
“They do have dairy sensitivities [but] as a dairy-consuming country that has a very large and growing population and finite resources, over time there will be a structural deficit of dairy supply for them domestically.”
DCANZ in 2015 predicted India’s population was growing so rapidly that in 10 months its total demand for dairy products would increase by the same amount that the entire NZ dairy export industry produced in a decade.