Free Trade with India

A lot of hype has been given in recent days to the likelihood of a free trade agreement (FTA) with India.  The benefits to New Zealand of such an FTA have been noted and discussed, recognising that India is the world’s most populated nation at 1.4 billion and has a rapidly growing middle class.  The middle class is the fastest growing segment of the Indian population currently representing 31% of the total. This is projected to be 38% by 2031 and 60% by 2047.  You only have to look at the amount of money being offered in the Indian Premier League and the crowds attending matches to recognise the potential presented for New Zealand products.  Obviously there will be some products that will be difficult to have included in the FTA but we don’t believe there are any such sensitivities in respect of timber.

 At the last big effort to negotiate an FTA with India the import duty on New Zealand timber was 10%.  At the time, our estimated share of timber imported to India was less than 1%.  So, there is great potential for growth in that market.  The value of our timber exports to India in recent years has been;

We will be watching developments with this and will keep you informed.  Clearly the conditions that may surround and FTA will be important.  Such conditions may relate to how quickly the phase-in to duty free will extend.  Overnight would be great but a reduction at 1% a year for ten years would be next to useless.  There is also the important issue of logistics relating to shipping availability and directness, port congestion and access to and locations of main markets.  Other important factors will be identification and resolution of any technical issues such as grades, sizing and timber condition for identified end uses and ultimately pricing.

So while we are naturally bullish about the prospects of a New Zealand-India FTA, if one should eventuate, there would still remain a considerable programme of work to be completed before we could grow the market and realise its full potential.