Relevance for UPSC: GS Paper II (International Relations), GS Paper III (External Trade, Employment)
 Source: The Hindu ;  Government of India trade briefings; international trade outlooks

Key Takeaways

  • Focus on goods and services, not goods alone.
  • Strong emphasis on skilled mobility and employment.
  • Strategic balance between liberalisation and domestic protection.
  • Success hinges on effective implementation and Micro Small and Medium Enterprises readiness.

Context

India and New Zealand have successfully concluded negotiations on a Free Trade Agreement, marking a notable shift in India’s trade diplomacy towards strategic yet calibrated liberalisation in the Indo-Pacific region. The agreement seeks to expand trade and services while safeguarding sensitive domestic sectors.

Salient Features of the Agreement

Dimension

Key Provisions

Trade ObjectiveDouble bilateral trade to United States Dollar five billion within five years
Market Access for GoodsEnhanced access for textiles, leather, engineering goods, pharmaceuticals, gems and jewellery, auto components, chemicals, select agricultural products
Tariff LiberalisationReduction or elimination of customs duties on a large share of traded goods
Services and MobilityFive thousand employment visas annually for Indian professionals; stay up to three years
Investment and Supply ChainsPromotes investment inflows, Micro Small and Medium Enterprises participation, and supply chain diversification
Digital and New-age AreasCooperation in digital trade, innovation, and modern services

Strategic and Economic Significance

  • Indo-Pacific economic engagement: Moves India’s Indo-Pacific approach beyond security to trade-led regional integration.
  • Export diversification: Helps Indian exporters reduce overdependence on United States and European markets, a vulnerability highlighted in World Bank trade assessments.
  • Employment and skills mobility: Strengthens India’s services sector, supporting skilled workforce absorption abroad.
  • Geoeconomic resilience: Aligns with International Monetary Fund emphasis on diversified supply chains amid global uncertainties.

Challenges and Areas of Caution

  • Agricultural sensitivities: India remains guarded on dairy and farm imports due to livelihood concerns of small farmers, consistent with views of Parliamentary Standing Committees on Commerce.
  • Implementation gap: Real benefits depend on regulatory harmonisation, awareness among exporters, and preparedness of Micro Small and Medium Enterprises, as flagged by NITI Aayog in export strategy reports.

Key Terms 

  • Free Trade Agreement: An agreement to reduce or remove trade barriers between partner countries.
  • Indo-Pacific: A strategic and economic region connecting the Indian and Pacific Oceans.
  • Services Trade: Cross-border exchange of skills, professional services, and digital services.
  • Supply Chain Diversification: Reducing dependence on a limited number of suppliers or markets.
  • Digital Trade: Trade enabled through digital platforms and technologies.

Conclusion:  The agreement underscores India’s shift towards pragmatic trade liberalisation aligned with strategic and employment goals.

Q. Discuss how the India–New Zealand Free Trade Agreement reflects India’s evolving trade strategy in the Indo-Pacific region.

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