Hon Phil Goff
Minister of Trade

24 October 2007

Speech Notes

Speech to the India – New Zealand Business Council

Let me begin by welcoming the representatives of the Indian business community that have made the trip to New Zealand to participate in this important meeting of the India – New Zealand Joint Business Council.

Our relationship with India is increasingly important to New Zealand in the trade and economic area, and more broadly.

We have made significant progress in enhancing our ties with India over the last few years. However, we still have some way to go to fully maximise the benefits that our countries have to offer each other.

New Zealand and India enjoy a warm historical relationship that goes back many years. Our common historical links mean that we share the same language, the same democratic traditions and, of course, a passion for cricket.

Yet while the relationship has been longstanding and warm, it is fair to say that it has not been particularly deep until very recently.

That is changing. India’s rapid economic growth and growing regional and international influence have seen it, along with China, emerge as the major Asian regional powers.

The economic facts speak for themselves. In terms of purchasing power parity, India’s economy is now the world’s fourth largest – behind the US, China and Japan.

Current economic growth is around 9 percent. The average over the past three years was 8.1 percent.

India’s economy has become more open. Not as open as we would like - agriculture remains heavily protected - but it's moving in the right direction. External trade in merchandise goods now accounts for 33 percent of GDP.

Add to this India’s political stability – particularly impressive for a diverse population that is the world's second largest – and India’s progress and potential is remarkable.

New Zealand – India Trade: An Evolving Relationship

The scale of India can be hard for Kiwis to grasp. Its tertiary institutions – for example - produce over 100,000 engineering and two million non-engineering graduates a year. That’s half of New Zealand’s population graduating annually.

Understanding and embracing India’s emergence, however, is vital to our interests and future prosperity.

New Zealand exports to India grew from under $200 million in 2004 to $337 million in the 2006 calendar year. India is now our second fastest growing market – though this is from a low base.

New Zealand’s main exports to India are coal, wool, wood pulp, machinery, hides and skins. Our coal exports, in particular high quality coking coal used in India’s growing steel industry, are flourishing.

Coal has also figured in the investment pattern, with two Indian companies – Saurashtra Fuels and Gujarat NRE Coke Limited, having taken a stake in the Pike River Coal project on the West Coast.

Traditionally, India’s main exports to New Zealand have been gems and jewellery, though Indian exports are becoming more diverse, and now include a wide range of manufactured products.

Importantly, both countries have not only recognised the benefits of developing a more diverse trade and economic relationship, but are actively working to realise these benefits.

Education, for example, has become a key sector for us. Both governments recognised the enormous potential for cooperation in the education sector – both in terms of Indian students studying in New Zealand, and in establishing joint education ventures in India.

Following a tertiary education-focussed mission in 2005, we signed a bilateral Education Cooperation Arrangement.

This led to the establishment of an Education Joint Working Group, the first formal meeting of which is scheduled to take place early next year.

Our focus on education has already had tangible results. A decade ago there were around two or three hundred Indian students in New Zealand. This year we expect the number to exceed three thousand.

We can expect further major growth over the next decade. Reflecting the importance of this sector, the Government has established an education counsellor position at the New Zealand High Commission in New Delhi, to promote and advance the opportunities offered by New Zealand education. Perya Short started in this role in April.

Tourism is another growth area in our relationship.

Tourism numbers have been increasing steadily, and now exceed 20,000 in each direction – for New Zealand a 14% increase in Indian tourist numbers from the previous year.

This includes a significant number of Indian honeymooners - no doubt inspired by some of the popular Bollywood movies made in New Zealand.

To facilitate the increasing tourism traffic we signed an air services agreement with India last May, which allows for direct flights between Auckland and Mumbai.

An Indian carrier is likely to start flying to Australia next year, which will improve the range of options available to travellers in both directions.

We see huge potential in the “new” economy, for example in IT, specialised manufacturing, biotech, tourism and film-making. There is a growing list of New Zealand businesses that are succeeding in these areas.

Some examples include Fisher and Paykel Healthcare establishing a market for its respiratory products in India’s growing private health sector; Hamilton Marine’s tender to supply jet propulsion units to the Indian Navy; and Compac supplying metering equipment to India’s CNG industry.

The success of India’s IT industry is well known. It is regarded as one of the most sophisticated in the world.

When the Prime Minister visited Bangalore and Mumbai in October 2004, she was accompanied by a delegation of IT CEOs. In large part, this reflected the potential that we saw for partnerships in the information technology sector. This potential is now being realised.

Indian IT and biotech companies are engaged in the New Zealand market.

And New Zealand IT companies are increasingly finding success in India. Examples include Vista Entertainment Solutions which is selling its software into Indian multiplex cinema houses; OmniMax, which is building a market for its financial planning software; and Cadmus and Provenco in the area of banking software.

The creative industries are another sector in which there is growing business interaction. India produces the largest number of films in the world, and there have been visits by over 120 Indian film crews to New Zealand in recent years

There is scope for even greater cooperation as the Indian film sector focuses increasingly on technical expertise – an area in which New Zealand companies such as Weta Digital are a world leader.

To encourage more cooperation between our film industries, the Government has committed to negotiations on a film co-production agreement.

Agriculture, the missing link

Within this very positive picture there is one key area that stands out as not doing as well as we think it could, or should: food and beverage.

When I visited New Delhi in April I made the point to Commerce Minister Kamal Nath and Agriculture Minister Sharad Pawar, that India was the only major economy where food and beverage was not on NZTE’s target list for market development.

There have been some good news stories – such as New Zealand Natural Ice Cream. Some of our winemakers have also begun to position themselves for the projected growth in India’s wine market.

Overall, however, we face prohibitive barriers in this sector, either through high tariffs or exceedingly demanding Sanitary and Phytosanitary requirements.

We will continue to urge the Indian Government to reconsider these barriers, and to press for enhanced cooperation in the agriculture sector.

As we see more corporate investment in agriculture and farm-to-market systems in India, New Zealand can play a constructive part in the development of Indian agriculture, including thorough strategic partnerships and joint ventures.

To date, the lack of agricultural trade has meant this has not really been a priority for either of us. We need to change that to better highlight, and realise, the win-win opportunities that exist.

To give a couple of simple examples, we both have an interest in promoting the apple market within India. Because of our counter-cyclical harvest seasons, lower tariffs on apples in the off season would be mutually beneficial.

Similarly, as India’s hotel and restaurant sector expands, its world class status will depend on being able to supply world class food and beverages at a reasonable cost. New Zealand can supply such products.

New Zealand appreciates the seriousness of the welfare problems that India has in the rural sector. Kamal consistently reminds me of the huge numbers of subsistence farmers in India, and the challenges that they face.

The priority that the Indian Government attaches to putting more resources into India’s rural sector is completely understandable. But trade protection isn’t the long-term answer.

The emergence of our own agriculture sector following the removal of subsidies and other protections in New Zealand in the 1980s is evidence of how agriculture can be strengthened and far more productive when market signals are not obscured by protection and subsidy.

Since halving its dairy tariffs, China has also shown that such reforms don’t necessarily damage agriculture, with a subsequent doubling of dairy production.

Taking the relationship forward

Agriculture is, therefore, one area in which we need to continue to focus as we move the relationship forward.

Looking more broadly at building our relationship, we need to further enhance the breadth and intensity of our interaction with India across the board. This involves both government and non-government sectors.

When I visited India as Foreign Minister as 2001, my visit was the first by a New Zealand Minister of Foreign Affairs and Trade in nearly ten years.

The Prime Minister visited India in October 2004 – the first head of government visit in either direction since Rajiv Gandhi visited New Zealand in 1986.

Since then, the pace of ministerial visits – in both directions – has accelerated, reflecting the importance that both countries have attached to developing relationships at the highest levels of government.

A free trade agreement with India would clearly, and significantly, enhance our trade and economic relationship.

When I raised this idea with Kamal Nath in Delhi in April this year, he readily agreed that we should study a possible FTA further.

I hope that this Friday’s meeting of the Joint Trade Committee will give us the basis for a study in the benefits of an FTA, as a first step towards the launch of FTA negotiations.

The government is also expanding the New Zealand “footprint” in India. As well as our multi-agency presence in New Delhi, we now have Honorary Consuls in Chennai and Mumbai, as well as trade and tourism offices in Mumbai. NZTE will be expanding its office in Mumbai this year.

There is also much important work that can be done by non-government players.

We can, for example, do more to enhance contacts between New Zealand universities and institutes and their Indian equivalents. The Government is providing support for these linkages, for example through the ‘Seriously Asia’ programme.

We also have the benefit of a growing and active Indian community that makes a very positive contribution to New Zealand.

In my own electorate of Mt Roskill many schools now have Indian enrolment levels of more than a third of their students. The annual Diwali festivals – now under way - are increasingly popular, as are Indian cultural events and cuisine.

And last, but certainly not least, our business communities have a vital role to play in taking our relationship forward.

The India - New Zealand Business Council and the recently formed India Trade Group provide important support for businesses involved in, or wishing to enter, the Indian market.

On the FTA front, I would encourage you to work hard with government to ensure that an FTA continues to be viewed as a priority.

This Joint Business Council meeting provides ample evidence of the close personal and professional linkages that our business people already enjoy.

I wish all of you here the best of luck as you contribute to the further growth in India – New Zealand relationships.

Thank you.

ends

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