India trade deal takes effect, but dairy gets three tariff lines and a promise of review
New Zealand's free trade agreement with India took effect at 12.01am today, 20 October. Trade and Investment Minister Todd McClay said 57 per cent of New Zealand's exports to India are now tariff-free, including sheep meat, wool, coal and most forestry products, the Indian Weekender reported. He said that share would rise to 82 per cent over time, with the next round of tariff cuts due from 1 January 2027.
"Today, just 19 months after we started, it's in force and working for exporters," McClay said, as quoted by the New Zealand Herald.
The deal starts about two and a half weeks before the 7 November election. It does little for New Zealand's $27 billion dairy export sector.
According to the Millennium Post, reporting from New Delhi, India is offering tariff concessions on 70 per cent of its tariff lines, covering about 95 per cent of the value of current bilateral trade. Dairy is on its list of excluded sensitive products, along with onions, pulses, sugar and edible oils.
The Herald reported the Government's account of the dairy terms. Tariffs on bulk infant formula, other dairy-based preparations and peptones will be phased out over seven years. Tariffs on albumins will be halved within a quota covering average recent trade.
The Dairy Companies Association of New Zealand (DCANZ) puts the package at three tariff lines, worth about 3.8 per cent of New Zealand's current global dairy trade by value. Its executive director, Kimberly Crewther, said two of those lines get tariff elimination. But she said milk albumin stays limited by a quota smaller than current trade volumes and an 11 per cent in-quota tariff. On that point the industry and the Government disagree about whether the quota covers existing trade.
Crewther's comments, and those of Fonterra and Open Country, were reported by the Herald before the agreement was ratified. They are not reactions to today's start.
"For milk albumin, we will be at a disadvantage to UK exporters who received a full tariff elimination outcome," Crewther said. "This is not yet a platform for meaningful growth, and active use of the review provisions to make improvements over time will be a priority for us."
Fonterra's group director of global external affairs, Simon Tucker, said it was "disappointing that negotiations were unable to secure any significant new core dairy access opportunities for New Zealand into the Indian dairy market". He said that was no surprise given India's long-standing sensitivities about dairy, and acknowledged the "considerable" efforts of McClay and officials. India is the world's largest milk producer, and most of its milk comes from small farmers with one to five cows, the Herald reported.
Open Country, the second-largest dairy exporter, said the deal "keeps us in the tent". Its chairman, Laurie Margrain, said there was no material upside for dairy but that this was hardly unexpected. He said progress would be "measurably more difficult were we not to have the agreement".
That leaves dairy relying on fallback commitments. According to the Herald, India has committed to consult New Zealand on similar treatment if it later offers dairy access to comparable countries. The agreement also commits both sides to a review one year after it enters into force. That puts it around October 2027. There is also a fast-track mechanism that lets New Zealand products, including dairy ingredients, enter India duty-free for further manufacturing and export. Crewther said the detail of that mechanism is still being worked through.
The deal immediately removes a 30 per cent tariff on New Zealand sheep meat. The Meat Industry Association told a select committee that tariff made it "commercially impossible" to compete, and the cut puts New Zealand level with Australia, the Herald reported. The trade is small for now. In 2025, meat made up less than $15 million of New Zealand's $476.5 million in merchandise exports to India.
McClay named winemakers among the biggest winners. "Our winemakers have been shut out of India by tariffs of 150%. Those will now come down to 25 or 50% over 10 years and we will also now get the better access negotiated by the EU," he said, as quoted by the Herald.
Mānuka honey is among the products under India's duty-based quotas, alongside apples, kiwifruit and albumins, the Millennium Post reported, with minimum import prices and other safeguards to protect Indian farmers. McClay's list of goods that are tariff-free from day one does not mention honey.
Indian exporters now have zero-duty access to New Zealand across all tariff lines, covering all of India's current exports, the Millennium Post reported. They previously faced duties of up to 10 per cent. The outlet called it India's first free trade agreement to remove duties on every tariff line from the day it takes effect. New Zealand has opened 118 services sectors and sub-sectors to Indian providers. It has also created a temporary employment visa for skilled Indians, capped at 5,000 visas at any one time, for stays of up to three years.
India's Commerce and Industry Minister, Piyush Goyal, marked the start by flagging off a small JCB India excavator for export to New Zealand under the deal. He said New Zealand had become JCB India's 140th export destination. Commerce Secretary Rajesh Agrawal said the priority was turning the agreement into tangible gains. The deal sets customs clearance targets of 48 hours for cargo and 24 hours for express and perishable goods.
McClay called the deal "a big step towards doubling the value of our exports in 10 years". India expects it to lift two-way trade in goods and services to about NZ$7 billion by 2030, the Millennium Post reported. The outlet put current two-way trade at roughly US$2.4 billion. Goods trade is falling. It dropped 11 per cent in 2025-26, to US$1.15 billion from US$1.3 billion the year before.