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New Zealand’s Trade Agreement With India Reflects a Foreign Policy Shift

The nation is looking to expand and balance its economic and security relationships – and India is at the top of the list.

Indian Prime Minister Narendra Modi attends a summit meeting with New Zealand Prime Minister Christopher Luxon in Auckland, New Zealand, July 11, 2026.

For the past several decades New Zealand has looked to China and Australia, and to a lesser extent the United States, United Kingdom, and European Union, as its major economic partners, while relying on Australia and other Western states as its major security partners. The July 11 visit by Indian Prime Minister Narendra Modi to New Zealand on the heels of the bilateral Free Trade Agreement (FTA) signed in April suggests a new effort by New Zealand to expand and balance its economic and security relationships to resist growing militarization and politicization in the Pacific. 

Modi’s one-day trip was the first visit by an Indian prime minister since Rajiv Gandhi visited New Zealand in 1986. The visit celebrated the signing of the New Zealand-India Free Trade Agreement and signified the deepening relationship between the two states. Currently two-way annual trade between the countries is approximately $3.1 billion, with New Zealand exports (primarily in wool, logs, and apples) making up about $718 million of that total. 

The Indian government has said that the FTA is a “forward-looking partnership” that promises to give its labor-intensive sectors, such as textiles and leather, additional economic opportunities. The New Zealand government stated that the FTA provides new and expanded business opportunities. Trade Minister Todd McClay stated that the new agreement would eliminate or reduce tariffs on 95 percent of exports, such as kiwifruit, apples, meat, wool, coal, and forestry. “It puts New Zealand exporters on an equal or better footing to our competitors across a range of sectors and opens the door to India’s rapidly expanding middle class,” McClay said.

While the trade legislation supporting the deal passed its first reading in Parliament at the end of June (with Labor Party support), it has not been without controversy. Foreign Minister Winston Peters, leader of the Nationals’ coalition partner, New Zealand First, objected to the FTA. He argued that the agreement adversely impacted national migration policy, did not provide enough access for dairy products, and included unrealistic investment obligations for New Zealand business. Peters told Radio New Zealand that “the deal was neither free, nor fair.” He added, “I’ve seen deals where the objective was for political purposes rather than economic advantage for New Zealand. This is one of those.” 

A major point of debate has been whether the FTA “commits” New Zealand to invest $20 billion over the next 15 years or merely requires New Zealand to “promote” investment in India. Critics have noted it is unlikely for New Zealand to reach this investment amount, and failing so could lead India to claw back market access. The Māori Party (Te Pati Māori) has also rejected the agreement for failing to uphold Te Tiriti o Waitangi/the Treaty of Waitangi or protect Māori interests. 

Other aspects of the deal have attracted particularly vituperative rhetoric. Shane Jones, deputy leader of New Zealand First, warned that the deal would bring a “butter chicken tsunami” coming to New Zealand. Conservative Destiny Church leader Brian Tamaki urged New Zealand to “purge” Hindus, Sikhs and Muslims in response to what he claimed was the persecution of Christians in India under Modi, leading to widespread condemnation across the political spectrum.

Despite the controversy, the government’s rationale for pursuing the FTA with India is clear. Trade in goods and services comprises about 50 percent of the New Zealand economy. With such an open economy, New Zealand has recently entered into a number of free trade agreements with both developed and developing states including the U.K., the EU, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership spanning both sides of the Pacific.

The new FTA is a recognition that India can become an important and growing international market that provides significant opportunities for New Zealand services and products. India has overtaken Japan as the world’s fourth largest economy and its economy is expected to grow over 6 percent in the next few years. To date there has been limited interest and opportunities for New Zealand businesses on the subcontinent; the FTA is an effort to change that.

It is also an attempt to diversify import and export supply chains from dependence on China. This is coupled with an appreciation of the vulnerabilities that such dependence can engender, as well as an awareness that China might decide to leverage its trading and political relationship to achieve other political objectives. 

At the same time, the FTA links security issues more closely to trade and economic relations than has been usual. As........

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