Reframing the India-NZ Relationship

 The Asia New Zealand Foundation's Suzannah Jessep suggests that it is time to think big to bring the two countries closer together.

In 1980, Prime Minister Sir Robert Muldoon famously observed that New Zealand’s foreign policy is trade policy.

While Sir Robert may have had his shortcomings, on this point it is hard to fault him.

Trade has been at the core of New Zealand’s foreign policy for the past several decades and as international trade has grown — aided considerably by New Zealand’s free trade agreement with China — it has become the central prism through which many other aspects of New Zealand foreign policy are valued and assessed.

Trade has created jobs, fostered greater specialisation and, because of that, delivered higher incomes. It has provided the government with the financial means to deliver on other foreign policy priorities and has shaped New Zealand’s reputation as a respected multilateralist.

But there is one stand-out exception where putting trade at the heart of New Zealand’s approach has not and most likely will not work, and this is India.

With significant differences in population size, geography, culture and religion, one might believe that New Zealand and India share little in common.

In reality, there are many shared values and practices that draw the two countries together, which include their use of English, commitment to democracy, membership of the Commonwealth, administrative norms of governance and, yes, even cricket. There are also many shared interests, as have been articulated in the two countries’ vision for the so-called Indo-Pacific and pursuit of a stable, peaceful, open and secure region.

There is no doubt that India will be consequential for New Zealand, with or without a trade deal.

India’s global role and influence, as well as its ambition, are only set to grow. Since the election of Prime Minister Narendra Modi in 2016, the world has begun to see a new India emerge; one that has been described as globally ambitious and regionally engaged, and that brings with it a uniquely Indian school of thought.

Even if New Zealand’s trade and economic interests are put aside, India is going to matter to New Zealand. It is also true that the relationship is set to become more complicated. As India grows, it is going to want to shape the rules and systems that govern it, which may or may not align with the Western liberal rules-based order that New Zealand champions.

New Zealand Prime Minister Norman Kirk meets Indian PM Indira Gandhi in 1973 / photo NZ Archives

New Zealand’s framing of India as an ‘untapped market’ is not the product of any grand strategy, or even necessarily a conscious decision. It is the natural reflex of a country whose trade-oriented foreign policy has delivered it real successes in other important Asian markets, including with Japan, South Korea and the so-called dynamic tiger economies of Singapore, Taiwan and Hong Kong.

In the case of India, however, this outlook poses two key risks.

Firstly, it risks disappointment in the short term and disillusionment in the longer term. Already in the New Zealand public sector there is evidence of both.

Successive rounds of unsuccessful trade negotiations, including most recently with the Regional Comprehensive Economic Partnership, and the experience of engaging with India in multilateral trade forums such as the World Trade Organisation, have bred a feeling of fatigue among officials.

India has become synonymous with hard work.

Secondly, if trade continues to be treated as the primary lens through which all other activities are judged and valued, then New Zealand risks missing other important opportunities that are of consequence to New Zealand’s longer-term security and prosperity — particularly in the context of intensifying US–China rivalry, the climate crisis and Covid-19 pandemic.

But there are also other opportunities to deepen New Zealand’s knowledge of India and people-to-people connections that would help to foster greater levels of trust, understanding and mutual respect and that — ironically — might ultimately prove to be the necessary ingredients to forge a deeper, closer trade relationship in the fullness of time.

The Republic of India is a country of 1.3 billion people, with a rising and upwardly-mobile middle class and entrepreneurial youth culture.

It is a country well-known not only for its trade potential but also for its trade protectionism. Many observers have despaired at India’s unwillingness to open its market and sign on to new free trade agreements such as the RCEP.4 Those observers argue that India is perpetuating its lack of competitiveness and hindering its own development by remaining closed to the outside world.

Rather than becoming a vibrant modern market, India’s trade policy only ensures that it is left further behind. 

Indian business is significantly focused on its own massive internal market/ photo Kirk Hargreaves

 But this is not the way the government of India sees it. India contends that it has signed plenty of free trade agreements, but that they (and the rules governing them) have not served India’s interests.

It argues that it needs more time to strengthen its domestic manufacturing sector so that it can trade on an equal footing with much larger economies, including China.

It also maintains that its domestic agricultural sector needs protection, because of the many millions of rural poor who depend on it and who would never be able to compete with more efficient producers such as New Zealand (irrespective of the size difference). The adjustment cost, and political fallout, of signing a new free trade agreement with agricultural provisions would be too great.

One only needs to look at the farmer protests that have taken place in India over late 2020 and early 2021 to understand the scale and intensity of reaction that is possible. Having achieved independence in 1947, only 74 years ago, and having been virtually asset-stripped by the East India Trading Company (bearing in mind that India had once been the largest economy in the world, for much of the 1st millennia BCE until the beginning of British colonial rule) India’s leaders do not welcome the notion of having foreign countries or companies dominate its markets again.

While New Zealand champions free trade, India tends to talk of self-reliance (‘Atmanirbhar Bharat Abhiyan’) and being self-sustaining, even if the official statements of both countries (and indeed India and its other bilateral partners) can be remarkably similar at a high-level.

India conceptualises itself as a viable stand-alone market, with enough domestic consumers and a fast enough rate of population growth to meet a significant proportion of both demand and supply requirements. India welcomes inwards investment and much-needed technology, but is otherwise focused on supplying to itself and, in due course, to the world 

India does not want to pursue a standard free trade agreement-based trade relationship in order to achieve its development goals, and the partners who are most likely to be successful in India are those who invest the time and resources in understanding India's unique needs, and who are judged by India to be the most strategically aligned.  

 Of course, in reality, India continues to import large quantities of goods, including from countries such as China with whom it has a sizable — albeit diminishing — trade deficit of US$45.9 billion (2019). But such deficits weigh heavy on the minds of Indian trade officials who are charged with the unenviable task of modernising, growing and diversifying India’s domestic manufacturing capabilities, while heading off pressures from the rapid inflow of cheap but high-demand goods such as cell phones.

It is also for this reason that many of India’s free trade agreement negotiations, including with New Zealand, have been quietly shelved by Indian officials.

The latest New Zealand government India strategy, entitled India–New Zealand 2025: Investing in the Relationship, released in early 2020, sought to rebalance New Zealand’s engagement with India. It recognised that New Zealand’s trade-centred approach was not paying dividends and that more work was needed to deepen New Zealand’s understanding of India from a non-trade perspective.

Sadly, the Covid-19 pandemic hit only weeks after the strategy’s release and trade has once again shifted to centre stage with a focus on countering the disruptive economic impacts of lockdown measures, restoring disrupted supply chains, securing vaccines and managing broader challenges to the rules-based trading system. India continues to battle with the biggest public health crisis in its modern history.

Closed borders have also hugely restricted people flows and put a spotlight on New Zealand’s sizable Indian diaspora, who are a natural, but often overlooked, building block in the pursuit of closer people-to-people relations.

A little-known fact is that New Zealand has accepted more Indian migrants per capita than any other developed country; more than Canada, Australia and the United Kingdom, and five times as many as the United States. As such, New Zealand is as well placed as any to build social connections and deepen knowledge within its own communities. 

Kolkata, the business and financial hub of Eastern India/ photo wikimedia

Looking back over the past ten years, most of New Zealand’s ministerial and leader-level visits to India have had a strong trade focus and many have travelled with accompanying business delegations. Consequently, each visit has created optimistic expectations that ‘a deal’ between India and New Zealand was imminent, and each visiting prime minister or minister has invariably had to address the question of why there has been no discernible progress.

If there is one trend that can be observed from these visits, it is of quietly growing pessimism, based on the perception that India does not sufficiently care about the relationship to help it thrive and of India being a ‘difficult’ or ‘challenging’ country with which to do business.

Others with a stake in the bilateral relationship have tried to get New Zealand past this negative bias by pointing to other ‘value-generating’ parts of the relationship.

In late 2020, the Indian High Commission welcomed new research conducted by the Waitakere Indian Association which declared that New Zealand’s Indian diaspora contributed $10 billion to the New Zealand economy in 2019.

The subtext of this research was that India does add value, just not directly through the traditional means of a free trade deal. The Indian government has also been working hard to attract New Zealand foreign direct investment, suggesting that there are economic gains to be made through working directly with India, in India.

Seeing New Zealand’s relationship with India negatively impacted by its free trade agreement experience is as much disappointing as it is self-defeating.

It is a disappointment felt by others, including New Zealand’s Indian business chambers, which have worked hard to promote other aspects of the relationship.

Although any growth in two-way trade would be welcome, research shows that most would be happy to see any kind of meaningful development between the two countries that brings them closer together in areas of shared interest.

The good news is that India does not expect New Zealand to become a comprehensive partner across every facet of political, economic, security and social policy. India is not afraid of being transactional — it is almost a necessity in a country of its size, divided across 28 states and eight union territories, and with a foreign ministry that deploys roughly the same number of diplomats offshore as New Zealand does.

India appreciates any country that can come to it with a good, clear, achievable plan and makes its affections known.

The bad news is that New Zealand will almost certainly have to do all the heavy lifting. India simply does not have the capacity to manage thousands of bespoke bilateral initiatives, while it is also grappling with a number of more immediate and serious economic and security challenges along its border.

But there are many aspects to India that should be of interest to New Zealand and that are worthy of further exploration. 

PM Jacinda Ardern meets with Indian leader Narendra Modi in New York in 2019/ photo PIB Delhi

 One of the long-running challenges facing New Zealand’s India relationship is the asymmetry of size and scale. New Zealand can rarely deliver the things India wants in the quantity India desires it, and India has proven reluctant to deliver New Zealand a trade agreement, despite years of trying.

In short, finding mutually beneficial activities, from opposite ends of the Indo-Pacific region, is very hard to achieve. Rather than sit back and feel exhausted by the prospect of having to ‘re-learn India’ or significantly change New Zealand’s approach, it pays to recall that even small gestures can lead to transformational changes.

For example, New Zealand money helped to start one of New Delhi’s largest and most respected hospitals: the All India Institute of Medical Science or ‘AIIMS’. In 2017, the Whanganui River in New Zealand and the Ganges and Yamuna rivers in India were given the legal status of persons, creating the foundation for an on-going dialogue about how these river ecosystems can be protected for future generations.

New Zealand and Indian officials are also working together to combat Covid-19 and there is nothing to say that this partnership might not blossom into a wider range of health co-operation — starting from a place of manaakitanga — kindness or the reciprocity of goodwill; whanaungatanga — our connectedness or shared sense of humanity; mahi tahi and kotahitanga — collective benefits and shared aspiration; and kaitiakitanga — protection and stewardship of our inter-generational well-being.

I began by recalling Sir Robert Muldoon’s take on New Zealand foreign policy. It seems fitting, therefore, that it should also end with Muldoon, who, in the early 1980s, tried to sell New Zealand’s High Commission property situated in central New Delhi when he was ‘thinking big’.

It was a brainwave that was fortunately intercepted by Indian Prime Minister Indira Gandhi, who reminded him that the property was not in fact owned by the New Zealand government but rather gifted, on a long-term loan basis, by the Indian government.

Today, the New Zealand High Commission on Sir Edmund Hillary Marg is a sanctuary in the heart of New Delhi and the site of many great gatherings between Kiwis and Indian friends.

It is time to think big again — but this time, not to move apart but rather to bring India and New Zealand closer together.

The full version of this article appears in the latest edition of the  New Zealand International Review

- Asia Media Centre