Pattrick Smellie: Indian trade: chasing a tiger by the tail

The election of Indian Prime Minister Narendra Modi in 2014 was seen as a circuit-breaker for New Zealand's push for a ...
BLOOMBERG

The election of Indian Prime Minister Narendra Modi in 2014 was seen as a circuit-breaker for New Zealand's push for a Free Trade Agreement with the country.

OPINION: 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 high hopes that New Zealand might forge a free trade agreement (FTA) with this fast-growing, English-speaking, cricket-loving 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 signing of an FTA in 2008 to produce two-way trade today of more than $20 billion a year.

READ MORE:
Pattrick Smellie: Bringing agriculture into the emissions trading scheme
Pattrick Smellie: Winds of change need to blow through tertiary education sector
Pattrick Smellie: Reality check on globalisation's impact


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.

Protests by Indian students facing deportation at Diwali celebrations in Auckland last weekend stem from exploitation by ...
BEVAN READ/FAIRFAX NZ

Protests by Indian students facing deportation at Diwali celebrations in Auckland last weekend stem from exploitation by unlicenced Indian education agents and some low quality training in New Zealand.

Fast-forward five years, and disappointingly little of that has happened and 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.

High protective tariffs allow Indian dairy farmers to survive on an average herd size of fewer than five cows.
REUTERS

High protective tariffs allow Indian dairy farmers to survive on an average herd size of fewer than five cows.

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 FTA push, which had almost immediately run into the sand. 

Ad Feedback

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 India-New 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 low-achievement trip to New Delhi? 

A cynic might observe it's well-timed to help the Mt Roskill by-election campaign, predictable ever since Phil Goff announced his Auckland mayoralty campaign.

The electorate has a large Indian community and National is standing an Indian candidate, Parmjeet Parmar. 

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 Asean-led Regional Comprehensive Economic Partnership (RCEP) – an attempt to stitch together a new free trade area linking the economies of South-East Asia and Australasia to China, Japan, Korea, and India.

RCEP represents an alternative route to a bi-lateral FTA 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

Comments

Ad Feedback
special offers
Ad Feedback