New Zealand may achieve its long-held ambition of a free trade agreement with India—albeit with some major carve-outs—after signing a new defence agreement.
India and New Zealand have signed a new Defence Cooperation Arrangement, a move that appears to bring the two countries closer to a long-awaited free trade agreement—though significant hurdles remain.
“We have decided to strengthen and institutionalise our defence and security partnership,” Indian Prime Minister Narendra Modi said following talks with his New Zealand counterpart Christopher Luxon.
The new defence pact will expand military cooperation, including joint training, port visits, and defence industry collaboration.
Notably, the two nations are already working together in Combined Task Force-150, a multi-national naval unit protecting Indian Ocean trade routes from piracy and terrorism.
Both leaders emphasised their shared vision for a free, open, secure, and secure Indo-Pacific, a clear reference to growing regional concerns over Beijing’s increasing assertiveness.
Luxon framed the agreement as a step toward economic security as well.
“In today’s world, security is the foundation of prosperity—and India is a key partner of New Zealand in the Indo-Pacific,” Luxon said.
Does Defence Cooperation Open the Door to a Trade Deal?
New Zealand has been pushing for an FTA with India for over a decade, but previous talks collapsed in 2015, largely due to disagreements over dairy exports.
However, Modi’s recent comments suggest negotiations may finally be moving forward.
He told local press that a “mutually beneficial FTA” could unlock greater investment and cooperation in dairy, food processing, digital payments, and pharmaceuticals.
However, India has historically been reluctant to open its markets, particularly in sensitive sectors like dairy. Its tough negotiating stance has stalled trade agreements with the UK, EU, and other partners.
That said, recent precedents suggest a compromise is possible. Australia signed an Economic Cooperation and Trade Agreement (ECTA) with India, which excluded dairy but still unlocked significant trade benefits.
The two nations have also agreed to strengthen cooperation in key industries, signing a horticulture memorandum to improve post-harvest processing, a forestry letter of intent, an education cooperation agreement, and a sports cooperation pact.
Additionally, airlines in both countries will be encouraged to establish direct flights to service the 150,000 Indian tourists visiting New Zealand annually, as well as the 72,000 New Zealanders travelling to India.
Signs of a Deeper Strategic Shift
One indicator of India’s growing interest in New Zealand is Luxon’s keynote address at the Raisina Dialogue, India’s premier foreign policy conference. He was the first leader outside of Europe to be invited to deliver such a speech.
Luxon used the platform to emphasise the Indo-Pacific’s rising economic influence, cautioning against reliance on a few dominant trade partners—a remark that could apply to both China and India.
Smaller Pacific nations were being asked to make “choices that may undermine their national sovereignty,” he said, in a clear reference to Beijing’s bilateral agreements with Fiji, PNG, Samoa, Tonga, Solomon Islands, Vanuatu, Kiribati and, most recently, the Cook Islands.
“In an increasingly multipolar world, India’s size and geo-strategic heft give you autonomy,” Luxon said, reiterating New Zealand’s longstanding support for India to have a permanent seat on a reformed UN Security Council.