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The proposed free trade agreement with India could lose its sparkle for New Zealand wine exporters after the European Union clinched an even better deal for its wine producers.
A month after agreeing to cut tariffs on most NZ wine from a trade-stopping 150% to a more palatable 50%, the Indians went one better for the EU, promising to drop tariffs on most of its wine to 30%.
Fortunately for the industry here, NZ’s agreement includes a Most Favoured Nation (MFN) clause for wine, meaning NZ must receive the same tariff cuts granted by India in all its future trade deals.
There is a catch, however.
For NZ wine exporters to qualify for the same 30% tariff as EU rivals, the NZ-India FTA must start before the EU-India agreement.
The EU has made an art form out of delaying the ratification of important trade deals in recent years – but, while NZ would normally back itself to beat the Europeans, there is uncertainty over whether the National-led government can muster the votes to pass enabling legislation for the NZ-India FTA after coalition partner NZ First said it would vote against the deal.
And it is not just Europeans that NZ exporters could lose ground to.
Australia’s trade deal with India in 2022 included a similar MFN clause to NZ’s, meaning tariffs on its wine automatically drop from 75% to 50% as soon as the EU-India FTA is ratified.
Of the world’s top wine exporters in 2024, EU members (France, Italy and Spain) and Australia take out the first four spots. NZ (accounting for 3.1% of global wine exports) was ranked seventh.
NZ Winegrowers chief executive Philip Gregan said NZ exporters face a nervous wait.
“We are very hopeful it will be ratified and if it is we get the MFN clause.
“If it were not to happen then we would be facing higher tariffs than the Europeans and the Australians and we would be sitting on the outside.
“The difference between 30% and 50% is material,” Gregan said.
Asked what assurances he had received from the Labour Party that it would supply the votes the government needs to pass enabling legislation, Gregan said he had had only a “very brief conversation” with the party’s trade spokesperson.
“Over many years there has been a strong level of bipartisanship on trade between National and Labour and hopefully we will see that continue with the India FTA,” Gregan said.
High tariffs meant NZ exported just $300,000 of wine to India last year.
However, Gregan said a vast population of 1.4 billion people and a fast-growing economy mean there is potential for significantly more sales.
“Perhaps not in 12 months’ time or two years, but if you look to the long-term, absolutely the global wine industry believes there are significant opportunities there.
“That is why access is important.”
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