India Trade Deal: Government Eyes Labour Support to Bypass Coalition Split

By Lions Roar News Political Desk

WELLINGTON, NEW ZEALAND (December 26, 2025) – The National-led government is looking across the aisle to the Labour Party to secure the future of its landmark India Free Trade Agreement (FTA).¹ While the deal has created a significant rift within the coalition—with New Zealand First formally opposing it—Trade Minister Todd McClay says he remains confident the agreement will pass with bipartisan support.²

The deal, announced on Monday by Prime Minister Christopher Luxon, promises to eliminate or reduce tariffs on 95% of New Zealand exports, including major wins for the meat, wool, forestry, and horticulture sectors.³

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🥛 The “Dairy Clause”: Hope for Future Gains

A major sticking point of the deal is the exclusion of New Zealand’s primary export: dairy.⁴ Products like butter and cheese were left out of the initial agreement to protect India’s domestic farmers.⁵ However, Trade Minister Todd McClay insists the door is not permanently closed.⁶

• Review Mechanism: The FTA includes a provision for an official review just one year after it comes into force, allowing for potential upgrades.⁷
• The “Similar Nation” Trigger: In a strategic “future-proofing” move, the deal contains a clause stating that if India grants better dairy access to any other similar exporting country, New Zealand automatically gains the right to negotiate for the same treatment.⁸

“India has not opened up dairy imports to any country yet,” McClay noted.⁹ “But we have a commitment that says if they ever do, we are first in line to ask for the same treatment for New Zealanders.”

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🥊 Coalition Friction: Peters Slams “Bad Deal”

The agreement has sparked the most public disagreement within the coalition to date. NZ First Leader Winston Peters has branded the FTA “neither free nor fair,” invoking the “agree to disagree” clause to oppose it.¹⁰

Peters’ Primary Concerns:

1. Immigration: Peters claims the deal makes “excessive concessions” regarding temporary employment visas, suggesting up to 20,000 people could enter the country annually.¹¹
2. Investment: He criticized a $20 billion investment target NZ is “required” to meet over 15 years, calling it a political maneuver rather than an economic win.¹²
3. Dairy: He argued the exclusion of milk, cheese, and butter makes the deal “impossible to defend” to rural communities.¹³

McClay’s Rebuttal: The Trade Minister has dismissed Peters’ visa claims as “not correct at all,” clarifying that the agreement only allows for 1,667 high-skilled temporary visas per year with no rights to residency or family sponsorship.¹⁴

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🤝 The Path Forward: Relying on Labour

With NZ First vowing to vote against the enabling legislation, the government now depends on the Labour Party to get the deal over the line.¹⁵

Labour Trade Spokesperson Damien O’Connor has described the deal as a “good step forward,” though the party will not officially decide its stance until a caucus meeting in the New Year.¹⁶ McClay remains optimistic, noting that trade has traditionally been a bipartisan issue in New Zealand.¹⁷

Industry	Status under India FTA
Sheep Meat & Wool	33% tariffs eliminated immediately
Apples & Kiwifruit	Significant new quotas and halved tariffs
Forestry	95% of exports become duty-free
Dairy	Excluded (subject to future review and MFN clause)