India FTA legislation is shaping up as one of the first major parliamentary tests of 2026, with the government now dependent on Opposition support after coalition partner NZ First signaled it will not back the enabling bill.
Labour Party MPs are expected to meet next week to begin formal consideration of whether they will support the agreement, which must pass through Parliament before it can enter into force and deliver the promised tariff reductions.
Speaking shortly after the agreement was announced on December 22, Labour’s trade spokesperson Damien O’Connor described the India FTA as a “significant step forward” for New Zealand exporters. He told industry media that he had exchanged text messages with Labour leader Chris Hipkins, who he said agreed the deal “seems positive” for exporters seeking greater access to the Indian market.
However, the political mood shifted quickly. In a press release issued the following day, O’Connor criticized the government for what he said was a rushed negotiation process and for failing to secure meaningful new market access for dairy exports, a sector that has long been a sensitive and commercially important element of any India trade discussion.
Since then, both O’Connor and Hipkins have received further briefings from Trade Minister Todd McClay and officials from the Ministry of Foreign Affairs and Trade. According to O’Connor, those sessions have not fundamentally changed his view that the agreement represents a step in the right direction, but he cautioned that his caucus colleagues will need time and detail before committing their support.
He said it was likely Labour MPs would want to see the full text of the agreement or receive firm assurances from officials on specific clauses before making a decision. Among the areas likely to face the closest scrutiny are provisions relating to the rights of women, environmental protections, labour standards, and recognition of the Treaty of Waitangi.
“The world of trade has shifted,” O’Connor said, arguing that modern agreements must include updated safeguards. He stressed that any India FTA should not simply benefit a handful of large exporters but should deliver for the wider population.
That stance reflects Labour’s “Trade for All” negotiating mandate, a framework developed under the previous Labour government that elevated social, environmental, and indigenous rights considerations alongside traditional market-access objectives. O’Connor said that approach was now embedded in Labour’s expectations for any major trade agreement.
The Trade for All agenda was a frequent target of criticism from McClay when he was in Opposition. At the time, he accused Labour of distracting trade negotiators from their core task of opening overseas markets, particularly in tough negotiations such as those with India. Whether McClay pressed New Delhi to accept such non-economic conditions during talks remains unclear, but the current parliamentary arithmetic suggests Labour’s demands may now be unavoidable.
With NZ First refusing to support the enabling legislation, the government cannot ratify the agreement without Labour votes. That reality has elevated O’Connor’s comments from policy positioning to a potential dealbreaker.
Labour MPs are said to be weighing not only the commercial outcomes but also whether the agreement upholds what the party views as baseline standards for modern trade. Dairy market access remains a particular flashpoint, as India has historically protected its domestic dairy sector from foreign competition.
O’Connor said that although he personally viewed the agreement as a positive move, Labour’s caucus would likely insist on reassurance that the deal aligns with the Trade for All framework.
“That is something we have laid out under our Trade for All policy,” he said, adding that he would expect the agreement to continue along those lines, particularly given the minister’s previous acknowledgment of the importance of bipartisan support for trade.
For the government, the coming weeks will be critical. Without Labour’s backing, the India FTA cannot proceed, regardless of the economic arguments advanced by exporters. For Labour, the decision is equally fraught, balancing the promise of improved access to one of the world’s largest markets against the risk of endorsing a deal that may not meet its social and environmental benchmarks.
As Parliament reconvenes, the fate of the India FTA will rest less on what was agreed in negotiations with New Delhi, and more on whether Trade for All can find a place within the final shape of New Zealand’s newest trade agreement.
Written for eDairyNews, with information from: Farmers Weekly
