Chasing a trade tiger by the tail
Prime Minister John Key boards a plane next week for his first official visit to India in five years. The 2011 visit was accompanied by hopes that New Zealand might forge a free trade agreement with this fast-growing, cricket-loving, English-speaking democracy of more than a billion people.
The Ministry of Foreign Affairs and Trade had made India the first in a series of NZ Inc strategy documents. The analogy, erroneous as it turned out, was to the explosion in trade with China that followed the 2008 signing of a deal to produce two-way trade today of $20 billion-plus a year.
Among the aspirations were to push exports to India to $2b by 2015, grow services exports by 20 per cent a year, improve investment rules, and encourage more tourism and highly skilled migrants. Fast-forward five years and disappointingly little of that has happened; where it has, there have been unintended consequences as well as gains.
Exports to India have hardly moved, doddling along at $639 million last year, and while Indian tourist numbers are growing, there are still no direct air links between New Zealand and India.
Services exports have grown, mainly thanks to an explosion in the number of Indian students coming to New Zealand to undertake sub-degree tertiary education. That has helped progress towards the Government’s hairy-chested goals for growth in export education.
But the accompanying unscrupulous practice by unlicensed Indian agents, some low quality training in New Zealand, and a pattern of exploitation and underpayment by expatriate Indian-owned businesses has been less welcome.
Too many such migrants have clearly pursued student visas for the right to work rather than study here. Protests by Indian students facing deportation at Diwali celebrations in Auckland last weekend stem from these tensions, which will inevitably come up in talks in New Delhi.
While there, Key will meet the Indian Prime Minister, Narendra Modi, whose election in 2014 was initially seen as a circuit-breaker on the push for a free trade deal, which had almost immediately run into the sand.
There was never much enthusiasm for the initiative in protectionist Delhi, and the then High Commissioner in Wellington, Ravi Thapur, set out to undermine the pro-FTA faction in the IndiaNew Zealand Business Council, which remains a dysfunctional shadow of its former self.
So why this investment of prime ministerial time in what will almost certainly be a lowachievement trip to New Delhi?
A cynic might observe it’s welltimed to help the Mt Roskill byelection campaign, predictable ever since Phil Goff announced his Auckland mayoralty campaign.
The electorate has a large Indian community and National is expected to stand an Indian candidate.
Less cynically, India remains too big and important to ignore as a market and there is more than one way to skin a cat.
While its farmers enjoy protective tariffs so high that the world’s largest dairy market can function on an average ‘‘herd’’ size of fewer than five cows, New Zealand logistics, cold chain and other agricultural technology faces fewer hurdles.
And then there’s the Regional Comprehensive Economic Partnership (RCEP) – an attempt to stitch together a new free trade area linking the economies of Southeast Asia and Australasia to China, Japan, Korea, and India.
RCEP represents an alternative route to a bilateral free trade deal with India, although it would be a lower quality deal that New Zealand aspires to – a fact Key acknowledged this week.
However, in an age of growing protectionism, making India’s long-held protectionist stance all the stronger, a low quality RCEP where India gives way to badgering from a wider group of larger countries than just New Zealand, may be better than no deal at all. –BusinessDesk