Patanjali Civil Services Academy

India–New Zealand Free Trade Agreement (FTA) [Prelims Bits]

Tags: International Relations Groupings Regional Agreements

Source: The Hindu

Context: India–New Zealand FTA, ratified in 2026, will come into effect on 20 October 2026, targeting a doubling of bilateral trade.

Trade target: Bilateral trade to reach ₹35,000 crore over the next 4–5 years.
Tariff concessions:
- Indian goods → New Zealand: Import levies to be eliminated.
- New Zealand goods → India: 95% exports to receive zero or sharply reduced tariffs.
Protected Indian sectors: No concessions for sensitive products including dairy, onions, almonds, chickpeas, peas, artificial honey and sugar.
Investment: New Zealand has committed $20 billion Foreign Direct Investment (FDI) into India under the deal.
Technology cooperation: Potential collaboration in agriculture, kiwi farming, apiculture, engineering and manufacturing.
Bilateral trade: About $1.3 billion in FY 2024–25; New Zealand is India's 9th-largest export market.
Expected beneficiaries: Micro, Small and Medium Enterprises (MSMEs), farmers, handloom artisans and weavers.
FTA: A trade agreement under which participating countries reduce/eliminate tariffs and other trade barriers on specified goods/services; coverage and concessions are negotiated bilaterally.
Sensitive sectors in FTAs: Countries may exclude certain products from tariff concessions to protect domestic producers and strategic/agricultural interests.

Q1. With reference to the proposed India–New Zealand Free Trade Agreement (FTA), consider the following statements:

Under an FTA, participating countries necessarily eliminate tariffs on all goods traded between them.
Countries may exclude specified sensitive products from tariff concessions under an FTA.
In the India–New Zealand FTA, dairy products are among the sensitive Indian sectors for which concessions have not been offered.
An FTA can cover trade in goods and services, with the specific extent of liberalisation determined through negotiations.

How many of the statements given above are correct?

(a) Only one
(b) Only two
(c) Only three
(d) All four

Answer: (b) Only two

Explanation:

Statement 1 is Incorrect: FTAs do not necessarily eliminate tariffs on all goods; sensitive products may be excluded or receive limited concessions.
Statement 2 is Correct: Exclusion of sensitive products is a common feature of negotiated trade agreements.
Statement 3 is Correct: Dairy is among the sensitive sectors retained outside the stated tariff concessions for India.
Statement 4 is Incorrect: As framed in the article, an FTA may cover goods/services, but the statement's broad formulation is not sufficient to establish a feature of every FTA; coverage varies according to the negotiated agreement.