Thursday, September 29, 2022

Point of Order: Why keeping tabs on Tata suggests O’Connor should be quickening the pace in push for an FTA with India

Among the many issues related to the performance of the export sector and how the Government might further help it is the case for negotiating a trade deal with India.

Australia has secured a free trade deal with what is the planet’s fifth-biggest economy.

In contrast, Agriculture and Trade Minister Damien O’Connor says concluding a free trade agreement between NZ and India “is not a realistic short-term prospect”.

Intensive negotiations were held between India and NZ in the context of the Regional Comprehensive Economic Partnership FTA negotiations, especially in 2018 and 2019, before India withdrew from the RCEP negotiations in November 2019.

“RCEP contains provisions enabling expedited accession by India should it wish to re-join RCEP at some point in the future, says O’Connor.

In the meantime NZ and India continued to work together to strengthen their broader bilateral relationship, he says.

But why should NZ be missing out on getting something like Australia’s deal?

The world economic outlook is changing, the pace of development in India is quickening and the extent of our dependence on China is being questioned This gives a fresh urgency to securing a deal with Delhi, even if it were not as comprehensive as NZ would like.

Just look at what is happening in India.

According to The Economist, there is a staggering $90bn investment surge by India’s biggest business, Tata.

The Economist says Tata’s ambition to create electronics factories and semiconductor fabrication plant in India could transform its economy.

“The change in strategy also reflects the dramatic psychological shift within the world’s most ardent globalisers as they adapt to new megatrends. These include the rebasing of strategic manufacturing away from China, the rise of a new energy system, and industrial policy, which in India is being championed by Prime Minister Narendra Modi.

“Anyone who follows India, the world’s fastest-growing big economy may be under the impression it is run by Mukesh Ambani and Gautam Adani, two swaggering tycoons, whose conglomerates generate headlines and make them Asia’s richest men. Together the ‘two A’s’ may spend over $100bn in the next five years. Yet Tata is in fact the country’s biggest business measured by market value ($269bn) and operating profits ($16bn last year), spanning everything from steel mills to software”.

The Economist estimates that Tata’s new plans are larger than any other individual firm’s, encompassing electric vehicles, electronics, battery gigafactories, clean power and chips.

“If that doesn’t sound ambitious enough, it has also taken on the Everest of corporate turnarounds, buying Air India.

“The firm’s scale, reputation and record make it one of the world’s most important companies.With 800-900m customers across ten business lines, it employs almost 100m people, more than any listed firm anywhere bar Amazon and Walmart….

“When blue-chip multinationals head to India —not just Apple (reportedly) but everyone from Starbucks to Zara—they seek to team up with Tata, the one firm you can really trust.

“To understand where Tata and India are heading in the 2020s and 2030s, you have to back in time. The company has stayed alive by adapting to technological and political change…If you want to glimpse the frontier of Indian capitalism, take a trip to Tamil Nadu in the south of the country.

“New factories with solar panels on their roofs lie on a vast 220-hectare site. Inside, it is reported Tata is making components for the latest iPhones on behalf of Apple—and in the process finally connecting India to the world’s most sophisticated supply chain which used to be anchored to China.”

As Point Order sees it, this is key to why NZ should be working harder to connect more closely to India.

Already there is concern that NZ is too dependent on the Chinese market. What happens if it were to close overnight if it attacked Taiwan and war broke out, let’s say?

In any case shouldn’t NZ already be trying to match Australia and build its trade from the paltry $2bn a year currently?

Certainly the red meat sector would benefit from a free trade agreement between NZ and India.

One trade expert points out the deal between Australia and India cuts tariffs on a range of Australian exports to India, including sheepmeat, wool and lobsters. It also includes a phased reduction of tariffs on wine and a host of other agricultural products including avocados, nuts, cherries and other fruits.

A Meat Industry Association spokesperson was quoted as saying it was frustrating Australia had beaten NZ to the multi-billion dollar Indian market.

“India is a big market. It’s a diverse market and I think a lot of what New Zealand produces complements India’s consumers, particularly for the red meat sector. India as a market has huge potential”.

One puzzle is why our Opposition parties have been seemingly as indifferent as the government has been to the opportunity in India and to the need to secure an alternative to China on which NZ has become heavily dependent. National used to pride itself on how it fostered NZ’s regional economies.

Another good reason for NZ to look to India is that it could be a source of the skills this country desperately needs, particularly in the hi-tech field.

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton

1 comment:

Punch said...

The remarkable thing is that New Zealand and India already have a close bond through something that is seldom considered - cricket! The game is to India what rugby is to NZ. India has tremendous respect for New Zealand Cricket and cricketers. Some years ago, I think in the Key days, a delegation including the likes of Richard Hadlee and Stephen Fleming went there to try and move trade matters along. I'm told there are real issues around trust and corruption, but the key to trade is relationships. India speaks the same language and plays the same game as us. It shouldn't be impossible.