National celebrates 'game-changing' free trade agreement with India, but NZ First says it's a bad deal

Monday, 22 December 2025

New Zealand and India have struck a free trade agreement that will give New Zealanders  access to 1.4 billion Indian consumers, Trade and Investment Minister Todd McClay announced on Monday.

The agreement eliminates and reduces tariffs on 95% of New Zealand’s exports with almost 57% being duty-free from day one and increasing to 82% when fully implemented, with the other 13% subject to sharp tariff cuts.

But Foreign Minister Winston Peters warned against what Prime Minister Christopher Luxon hailed as “game-changing” agreement on Monday, accusing National of rushing to sign a “low quality deal with India”.

He said NZ First had invoked the “agree to disagree” clause of the coalition agreement, leaving just ACT and National in support. Luxon would then need to rely on Opposition parties to get this deal over the line.

Peters said he urged National and ACT to spend more time negotiating with India to get a better deal.

“Unfortunately, these pleas went unheeded. National preferred doing a quick, low-quality deal over doing the hard work necessary to get a fair deal that delivers for both New Zealanders and Indians.”

Peters said the deal needed to include dairy.

“While New Zealand is completely opening its market to Indian products under this deal, India is not reducing the significant tariff barriers currently facing our major dairy products,” he said.

“This is not a good deal for New Zealand farmers and is impossible to defend to our rural communities.”

McClay, meanwhile, called it a “once-in-a-generation agreement” that creates opportunities New Zealand exporters have never had in India.

“The Indian economy is forecast to grow to $12 trillion by 2030. The India-NZ free trade agreement  unleashes huge potential for our world-class exporters to the world’s largest country and will significantly accelerate progress towards New Zealand’s ambitious goal of doubling the value of exports over 10 years,” McClay said.

Negotiations of the free trade agreement or FTA began on March 21 and concluded after nine months. New Zealand and India expect the agreement to be signed in the first half of next year.

The deal is expected to give Kiwi businesses a stronger foothold in the market and will open the door to India’s rapidly expanding middle class. India is the fastest-growing economy in the G20 and is projected to become the third largest economy in the coming years.

The deal includes rules to protect New Zealand product names like mānuka honey, as they are under agreements with the European Union.

A special clause allows New Zealand to trigger further negotiations if India offers better dairy access to other countries in future.

However, Peters said the deal “failed the test” for New Zealand workers by making it easier for Indian citizens to work in New Zealand.

“By creating a new employment visa specifically for Indian citizens, it is likely to generate far greater interest in Indian migration to New Zealand – at a time when we have a very tight labour market.”

Luxon said, contrary to Peters’ claim, negotiations had “absolutely not” been rushed and the deal was “high quality”.

More time negotiating would not have meant a higher quality deal, Luxon said, and he was confident the agreement would get through Parliament without NZ First’s support.

“We’ve seen a lot of good bi-partisan support for trade across Parliament, and we’ll continue to build a case for that,” Luxon said.

ACT’s trade spokesperson, Dr Parmjeet Parmar, said the deal was “a massive moment for New Zealand”.

'India is the world’s most populous country and a major growing economy, strengthening our economic ties is long overdue. This agreement signals that New Zealand is serious about engaging with one of our most important economic partners,“ she said.

'Two-way trade between New Zealand and India already totals more than $3 billion each year. This agreement has the potential to grow this figure significantly, freeing trade and reducing barriers making it easier for businesses on both sides to sell and invest.

'This is a great opportunity for New Zealand with easier access to Indian markets meaning more certainty for exporters and more choice for consumers.“

Disappointment for dairy industry

The Dairy Companies Association of New Zealand (DCANZ) was disappointed the deal, which includes some protein products, and products exported to India for re-export, did not secure a bigger step towards dairy trade liberalisation.

That meant the deal joined the EU-New Zealand FTA and CPTPP as agreements with significant unfinished business to remove dairy sector tariffs, DCANZ chairman Guy Roper said.

“Looking forward, and with tariffs now being largely resolved for other sectors, it's time to ramp up focused efforts and creative approaches to bring down trade barriers for dairy,” Roper said.

Meat industry welcomes deal

Representatives of the meat industry welcomed the deal, labelling it a “strategically significant milestone” for the red meat sector.

Meat Industry Association independent chair, Nathan Guy, said the deal will unlock a “promising market” that was currently constrained by a 30% tariff on New Zealand sheepmeat.

“In a global environment marked by rising protectionism, uncertainty and volatility, this agreement provides a foundation for the New Zealand red meat sector to realise opportunities in a market that has great prospects in the future,” Guy said.

That 30% tariff will be eliminated once the deal comes into force, and put New Zealand on a level playing field with Australia, which already has an FTA with India, Beef and Lamb New Zealand chair Kate Acland said.

“Although the impact on farm-gate returns may not be significant in the short-term, this is an important step for future resilience and profitability in the sector.”

The India-NZ FTA in brief

• Tariff elimination or reduction on 95% of NZ exports.

• Immediate tariff elimination on sheep meat, wool, coal and over 95% of forestry and wood exports.

• Duty-free access on most seafood exports, including mussels and salmon, over seven years.

• Duty-free access on most iron, steel and scrap aluminium, over 10 years or less.

• Duty-free access for most industrial products, over five to 10 years.

• 50% tariff cut for large quota of apples. That’s nearly double recent average exports.

• Duty-free access for kiwifruit within a quota almost four times NZ’s recent average exports, and tariff halved for exports outside of quota.

• Duty-free access for cherries, avocados, persimmons and  blueberries, over 10 years.

• Tariffs on wine reduced from 150% to either  25% or 50% (depending on the value of the wine) over 10 years  plus  Most Favoured Nations (MFN) commitment.

• Tariffs on mānuka honey cut from 66% to 16.5% over five years.

• MFN status and liberalisation across services exports.

• Duty-free access for dairy and other food ingredients for re-export from day one.

• Duty-free access for bulk infant formula and other high-value dairy preparations over seven years.

• 50% tariff cut for high value milk albumins within a NZ-specific quota equal to current export volumes.

• The FTA establishes a process for up to an average of 1667 skilled, non-renewable and temporary 3-year work visas per year, with a focus on jobs where NZ has skills shortages, including doctors, nurses, teachers, ICT and engineering.

• A Working Holiday  Scheme to be aligned with Australia’s Indian FTA, provides up to 1000 places each year.

The full FTA text will be published when the agreement is signed.

McClay said New Zealand has agreed to review the FTA one year after entry into force, which provides a mechanism to pursue further improvements into the future.

The two countries began negotiations in March, when Luxon travelled to New Delhi. At the time, the Indian Prime Minister called the pursuit of a free trade deal “mutually beneficial” and said that talks would also “enhance cooperation and investment in the areas of dairy, food processing and pharmaceuticals.”

The two countries had aimed to sign a deal in 60 days, by mid-May, but it had faced delays because of differences over tariffs on dairy products.

India imposes strong tariffs on dairy, between 30% to 60%.