New Zealand parliament passes 'once-in-a-generation' India trade deal, cutting tariffs on most exports
New Zealand's parliament has passed legislation implementing its free trade agreement with India, clearing the way for tariff elimination or reductions on about 95% of New Zealand exports to India. The agreement also provides duty-free access for Indian goods and includes a $20 billion New Zealand investment commitment over 15 years.
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Context
The New Zealand Parliament has passed legislation ratifying a 'once-in-a-generation' Free Trade Agreement (FTA) with India, which was initially signed in April. The deal promises immediate duty-free access for all Indian goods into New Zealand and includes a commitment from Wellington to invest $20 billion in India over 15 years. This development marks a significant deepening of bilateral economic ties, concluding a decade of negotiations.
UPSC Perspectives
Economic
This agreement is a prime example of a Free Trade Agreement (FTA), an arrangement between two or more countries where they agree on certain obligations that affect trade in goods and services. The core feature highlighted here is the reduction or elimination of tariffs (taxes imposed on imported goods). By making more than half of covered products, and eventually all Indian goods, duty-free, the FTA aims to boost export competitiveness. For India, this means its products will be cheaper in the New Zealand market compared to competitors without an FTA, potentially leading to increased export volumes. The promised $20 billion investment over 15 years is significant for India's Foreign Direct Investment (FDI) goals, potentially supporting infrastructure, manufacturing, and job creation. UPSC often focuses on the broader impacts of FTAs, including potential trade imbalances, the effect on domestic industries (especially vulnerable sectors like agriculture, though the article mentions 'farm safeguards'), and the strategic shift from multilateralism (like the ) to bilateral or regional agreements.
International Relations
The ratification of this trade deal reflects a strategic strengthening of bilateral relations between India and New Zealand, a key player in the Indo-Pacific region. Trade agreements are rarely just about economics; they are tools of economic diplomacy used to build geopolitical alliances. For India, engaging with New Zealand aligns with its broader 'Act East' policy and efforts to diversify its trade partnerships beyond traditional markets like the US and EU. The decade-long negotiation period underscores the complexities of balancing domestic interests (like protecting Indian dairy or agriculture) with the desire for greater market access. The successful conclusion of this FTA could serve as a template or momentum builder for India's ongoing trade negotiations with other developed economies, such as the UK or the EU. For Mains, candidates should analyze how such FTAs fit into India's larger foreign policy objectives and its position in the changing global economic order.
Polity
The news highlights the process of treaty ratification, a crucial aspect of international law and domestic governance. While the executive branch (the government) negotiates and signs international treaties (like the FTA signed in April), many democratic systems require legislative approval to make them binding domestically. In New Zealand, the Parliament passed legislation (by a vote of 93-29) to ratify the deal. In the Indian context, the power to enter into treaties and agreements with foreign countries is vested in the Union Government under of the Constitution. The has the power to make laws for implementing any treaty, agreement, or convention. However, unlike some systems where every treaty requires parliamentary ratification, in India, the executive generally has the power to ratify treaties without prior parliamentary approval, unless the treaty requires domestic legislation to be implemented or affects the rights of citizens. Understanding this distinction in treaty-making powers is important for UPSC Polity questions.