Murkiness around India deal takes gloss off PM’s triumph

Friday, 3 July 2026

Matthew Hooton is editor-in-chief of The Post.

OPINION: The prime minister’s signature foreign policy achievement is his free-trade deal with India. With the exception of National’s bold U-turn over compulsory retirement savings after its 50 years of recalcitrance, it may be the most important single initiative of any kind this term.

When then-opposition leader Christopher Luxon promised during a 2023 leaders’ debate to complete the deal before the 2026 election, then-Prime Minister Chris Hipkins laughed at him.

So too did pretty much every trade policy expert. After all, everyone knew a free-trade agreement (FTA) with India was impossible, not least because of the crucial economic importance of dairy to New Zealand and its social, cultural and even religious role in India.

Read More:

• Coalition feud over India Free Trade Agreement ‘unfortunate’

• PM Christopher Luxon ‘compartmentalises’ coalition dispute over India FTA

• Winston Peters says clause in India FTA contradicts NZ First’s coalition deal

The better strategy, according to the experts and accepted by successive governments since the 1990s, was to negotiate with India issue by issue. Gain clearer and more scientifically based sanitary and phytosanitary measures rules here. Lower a tariff or two there.

It’s a reminder that while experts ought always be listened to, they aren’t always right and shouldn’t dictate policy decisions exclusively. Sometimes wisdom is required. In this case, Luxon’s absolute self-belief and almost reckless ambition were the crucial factors.

Even the prime minister’s harshest critics must concede that, for better or worse, the India-New Zealand FTA before Parliament is his triumph alone.

The trade aspects of the deal are complete no-brainers. Access to 70% of India’s enormous and fast growing market is easily worth giving India 100% access to ours, especially given New Zealand’s 42-year commitment across both main parties to an open and competitive economy, without production or export subsidies or tariffs and quotas.

Even the exclusion of dairy may be a good thing. A case can be made that the 2008 FTA with China gave the dairy industry such extraordinary new access to the world’s fastest-growing market that it acted almost like supplementary minimum pricing did for pastoral farming in the bad old days of the late 1970s and early 1980s.

Why innovate if you can sell far more than you can produce at a price higher than you budgeted previously?

But Luxon’s personal political commitment to the deal also meant it had to be done quickly. It is to Trade Minister Todd McClay’s enormous credit that he and his negotiators managed to first build a working relationship with their opposite numbers, India’s Commerce and Industry Minister Piyush Goyal and his team, and then get the deal over the line on Luxon’s timetable. In December, McClay and Luxon decided to take the deal that was on the table. Given the sheer improbability of having got that far with historically protectionist India, that was the right judgement.

After understandably playing politics for a few months, Hipkins’ party has since come on board and the deal has a clear majority in Parliament. Its passage will also secure New Zealand’s diplomatic relationship with the world’s most populous nation and rising third power.

Yet, as in commerce, speed in trade negotiations and wider diplomacy also demands some corners be cut and some bureaucratic procedures neglected, at the cost of greater risks of misunderstandings at the finish line than for other deals with more common gestations.

That was apparent when the conclusion of negotiations was first announced just before Christmas. McClay emphasised market access, saying the deal would eliminate or reduce tariffs on 95% of New Zealand’s exports, with nearly 57% being duty-free from day one, increasing to 82% over time.

Goyal’s officials announced that New Zealand had promised to invest US$20 billion in India, help India improve its competitiveness by transferring intellectual property in sectors including kiwifruit, apples, honey, supply chain management and food safety, and remove numerical caps on Indian students coming to New Zealand.

India announced that New Zealand had agreed to Indian students being allowed to work up to 20 hours per week while studying here, even if future New Zealand governments would prefer less, and to extended post-study work visas of three years for bachelors’ graduates in science, technology, engineering and maths and any master’s degree, and four years for PhDs.

Indian education providers would also be able to build campuses in New Zealand.

Most controversially, India said New Zealand had agreed to a quota of 5000 visas for skilled Indians to spend three years in New Zealand if working in sectors including IT, engineering, healthcare, education, construction, cooking, music teaching, ayurveda, yoga, naturopathy, unani, siddha and homeopathy.

The wording from both sides has become tighter since.

Nevertheless, National and NZ First have argued over the extent to which these students, graduates and 5000 skilled workers will also be able to bring their families with them. As NZ First leader, Foreign Minister Winston Peters has led a vitriolic campaign against the deal, entirely consistent with his party’s guiding ideology since he founded it 32 years ago. More surprising than Peters’ opposition was that Luxon and McClay had not taken more care to assure the support of Hipkins and Labour trade spokesman Damien O'Connor as the negotiations had progressed.

Trade-policy commentator Stephen Jacobi has called Peters’ opposition to the deal “embarrassing and unfortunate” and it is certainly unusual in a Westminster system for a prime minister and foreign minister to so publicly disagree, especially on what is ultimately a foreign policy matter.

But Jacobi may be a bit too purest. The Indian High Commission and all the diplomatic corps in Wellington are sophisticated enough to understand that Peters wears two hats, and that they often conflict. Public conflicts within a government are not uncommon in other proportional representation systems, especially as elections near, and our foreign partners know that Peters is the consummate professional wearing his ministerial hat, faithfully representing the consensus position of the New Zealand Government in both public and private. His antics as NZ First leader aren’t relevant to them.

On this occasion, however, it seems that Peters - as NZ First leader - might have been on the money with some of his attacks on the deal, especially around immigration. As foreign minister, he worries New Zealand may have misled India on how the agreement will be implemented and says he does not want to have to look his Indian counterpart Subrahmanyam Jaishankar in the face “and say I wasn't honest with him”.

Matters risk heading in that direction.

As revealed exclusively by The Post’s Anneke Smith yesterday, there is evidence that Immigration Minister Erica Stanford and her officials have been working on changes to our immigration settings to blunt the impact of what McClay has agreed with India. The Post’s source indicates that, despite Beehive denials, final decisions on those changes have already been made.

At the least, it seems the Government has been working suspiciously hard to keep the nature and progress of that work secret from New Zealanders - and from the Indian Government - ahead of the expected visit to Auckland of Indian Prime Minister Narendra Modi next weekend.

Greater transparency is needed and ought to be demanded. The secrecy around this matter - and suggestions Modi will be holding what risks being mistaken for a political rally for his controversial Hindu nationalist Bharatiya Janata Party in Auckland on Saturday - threatens to take the gloss off Luxon’s triumph.