That, in effect is what the prime minister is inviting us to do under the terms of his Free Trade Agreement with India. It would seem many people are spurning the invitation, not because they don’t like curry or Indians but rather it’s the ingredients of the agreement itself that are causing a level of angst. Critics argue Luxon has given away too much, that it is heavily weighted in India’s favour and that we will become overrun by this ethnicity. I beg to differ.
There are two sides to every story and this is the case here. I'll stick my neck out and say I think a lot of the criticism is driven by a dislike of Luxon. On the domestic front, I'm not a fan either: he has let us down badly on what he promised at the last election, but in the area of trade I view him differently.
I am not surprised at the comments from Winston Peters and Shane Jones. I consider them two of the best politicians in the House and Winston’s comments imply putting the country first. I can’t argue with that. It is right out of the Trump playbook. The situations of both countries, though, don’t compare. America has a population of 342 million, so, while Trump has the luxury of offering trade protection domestically, we do not. We need every cent of foreign trade money on offer if our economy is to improve.
Shane’s major platform is mining coal and minerals for export, which I completely support. However, imagine if the countries he wanted to export to took his stance. The export dollars he talks about would not eventuate. We would be the poorer for it. No one ever gets everything that they want out of a trade deal. We, as a small country, are on the back foot from the start. Does that mean we shouldn’t do trade deals? Of course not. What it does mean is we have to be realistic in terms of what we can get. The FTA Labour did with the European Union wasn’t perfect, either. They never are.
In respect of Indian students coming here, there never has been a cap and that position will remain. Approximately one in four student applications is declined. Indian students will be able to work part time while studying here (up to 25 hours per week). Eligible graduates will have post-study work opportunities once they have completed their studies. The work periods vary from two to four years, depending on the level of graduation. The FTA does not include a new residency pathway. Overall, not a lot changes.
On trade, it is important to know what we will gain. India is currently New Zealand’s 11th largest goods and export market, representing 1.8 per cent of our total exports. Miniscule. Key exports were travel services, forestry, horticulture, aluminium, iron and steel and wool. In total, New Zealand exported $2.03 billion of goods and services to India.
Under the FTA, products that will benefit from the removal of tariffs include forestry, sheep meat, wool, coal (Mr Jones), fish and seafood products, kiwifruit, apples, cherries, avocados, blueberries, persimmons, wine, mānuka honey, bulk infant formula and other dairy-based preparations and albumins (a milk protein product). On dairy, there is a commitment to implement a fast-track mechanism whereby dairy products can be sent to India tariff-free for further manufacturing and export. Of our current exports, 57 per cent will be tariff free immediately, 82 per cent over time and a further 13 per cent will have sharp tariff reductions.
In terms of the $20 billion investment in India, Modi saying we have ‘committed’, I suspect, was for home consumption. The agreement does say we will promote investment in India to private enterprise companies with the AIM to reach $20 billion over 15 years. It’s only an AIM and not a firm commitment. You can dispute it if you want but that is what is written in the agreement.
India is the fastest growing economy in the G20 and by 2030 is projected to become the world’s third largest economy with a GDP of US7 trillion. It is expected to have a middle class of more than 700 million. The question therefore has to be asked: Do we join in and make a more level playing field with other countries exporting to India or do we sit as an outlier incurring the economic consequences of such a decision. Just because we are a small country doesn’t mean we have to be small minded. I think we should be grateful India is interested in us at all.
I am aware we often punch above our weight but trade deals are a different beast; they tend to take on a life of their own. We might have only got what some might like to call ‘crumbs’ while Modi got the full loaf but in these types of negotiations you have to start somewhere. Economically, they are an elephant while we are more akin to a pony. That is not to denigrate our country but to state a fact. We have to live with some basic truths but not let them get in the way of or distort our thinking when, on the face of it, disappointment appears to be warranted.
We will never get everything we want out of a particular trade deal. With some countries, like India, particular skills are needed to get a foot in the door, never mind a seat at the table. The initial moves were made by Luxon and then worked upon by him and Todd McClay, whom I regard as one of the best trade ministers we have had. It’s easy to criticise, but put yourself in their shoes for a moment. John Key describes those criticising the agreement as “clowns” and describes, in factual terms, why. He has a point.
In my view Luxon and McClay have done the best they could and probably better than most, if not all. We cannot afford to shut ourselves off from the world’s biggest global markets. We need a slice of the cake, no matter how big or small. There is every chance this FTA, in terms of trade, will grow over time. The ability to do so is written into the agreement. We, in global thinking, are a pimple at the bottom of the world therefore in trade we need to be in every room where the topic is being discussed and decisions are being made – simply for the sake of our economy.
There’s an old saying: ‘Don’t cut off your nose to spite your face.’ You might think Modi has bloodied the noses of Luxon and McClay but I don’t. I’m prepared to say they have made a good start but they must ensure the long-term opportunities that exist in the FTA offers are acted upon and met. I have confidence that Mr McClay will do just that.
