New Zealand faces a potential immigration tradeoff if a free trade agreement with India is to be achieved

Coalition government leaders are expected to face a head-butting contest between immigration policy and trade policy during the remaining 31 months of their administration.

That's because the big prize of a Free Trade Agreement (FTA) with India could require greater migration inflows at time when the Government is moving to reduce New Zealand’s net gain of migrants.

The problem is not urgent, since actual negotiations have not yet begun, nor is it clear when they will start. 

But the Government has said it wants to double New Zealand exports within 10 years and wants to reach an FTA with India in its first three-year term.

About three quarters of NZ trade is covered by FTAs already.  There are two significant prizes that could boost that number.

The first, with the United States, is regarded by virtually all trade experts as unattainable due to political gridlock in Washington.

The remaining significant option is India, which is now the world’s fifth largest economy. It grew year-on-year by 8.4% in the December quarter and is forecast to grow 7.6% year-on-year in the March quarter.

This rate of growth is predicted to make India the world’s third largest economy by 2035,behind only China and the US.

Ahead of becoming prime minister after last year's election, Christopher Luxon said achieving an FTA with India would be a major strategic priority for a National Party government.

"India provides a massive opportunity for New Zealand. There are reciprocal opportunities in a number of areas including foreign direct investment, employment opportunities, educational exchanges, and definitely for trade," Luxon said.

Since then, the impetus for a trade deal with India has eased off, even though Ministers have continued pushing strongly. 

One cause of delay is believed to be fierce protests by farmers in India in 2020 and again this year. Although their marches were not aimed at NZ, a common theme was protection for small farmers against large conglomerates, and an opposition to free trade. 

The other complication is that elections in India begin later this month, so major foreign initiatives have been put on hold.

But a trade expert at the coalface who interest.co.nz spoke with remains optimistic, and puts prospects of a successful FTA with India at “greater than 50%."

And speaking in his post-cabinet press conference on March 11, Luxon said he would "be looking to take a big trade delegation there in the back half of this year."

The immigration quandary

Up until now, one of the problems to be overcome has been the expectation of greater rights for immigration from India into NZ.

This was also an issue for an Australian version of the same process, the Australia-India Economic Co-operation and Trade Agreement. That deal, signed at the end of 2022, gave immediate tariff-free status to 85% of Australia exports, and increased that percentage over time.

It also opened up working holiday arrangements for Indians in Australia. In subsequent talks, the Australia-India Migration and Mobility Partnership Arrangement was announced, which would “promote the two-way mobility of students, graduates, academic researchers and business people,” according to the Australian Prime Minister Anthony Albanese.

There was subsequent criticism in Australia of this agreement, suggesting it could make population planning difficult in Australia, and could also undermine a visa fraud crackdown that got underway later.

Like Australia, NZ's also experiencing very strong inward migration. In the January year NZ recorded 257,200 migrant arrivals. After 123,300 departures, an net migration gain of 133,800 was recorded. That's the highest annual net gain on record, according to Statistics NZ. At 51,000, Indian citizens were the largest migrant arrival group. 

Earlier this year Immigration Minister Erica Stanford told TVNZ’s Q+A programme, NZ could not have current levels of immigration year after year.

“What I want is to understand what our absorptive capacity is, to make sure that our hospitals, our schools, our infrastructure, are working with immigration to make sure we have better long-term planning,” Stanford said.

Speaking to reporters last week, Stanford said work was underway to deal with this, and papers on this subject are due to go to cabinet in the coming weeks.   

Over the weekend, as a first step, Stanford announced immediate changes to the Accredited Employer Worker Visa scheme. Among other things Stanford said the changes were designed to; "help manage numbers and pressures on core infrastructure, such as schools, housing, and the health system."

With India the biggest source of migrants, any attempt to bring down total numbers appears almost certain to affect arrivals from India, which could be at variance with Indian demands during FTA talks. Stanford is for now refusing to engage in this matter.

“That’s all speculation at this stage, since nothing has been put on the table, so I can’t comment,” she said.

If and when these issues are finally clarified, National's NZ First coalition partner could be an extra problem. The party has long railed against high immigration, and wants New Zealanders to be at the front of the jobs queue.

In its coalition agreement with the National Party, it wanted to establish a category of essential workers and to ensure Immigration New Zealand is engaged in “proper risk management and verification to ensure migrants are filling genuine workplace needs.”

The party leader and Deputy Prime Minister Winston Peters, dismissed potential complications from an FTA in a similar way to Stanford, saying it was “hypothetical, given no negotiations are underway."

The dairy dilemma

If and when the matter is cleared up, the push for immigration into NZ could be even greater than into Australia, since NZ is seeking access for dairy products, which did not form part of the deal India made across the Tasman. 

Despite all these arguments, opinion varies as to how much immigration rights into NZ will be a do-or-die matter for India in the long run. 

One sceptic is the veteran trade expert Stephen Jacobi. He wonders whether the Indian Government will make a resolute stand on this matter, because it might come to believe that too much emigration could be harmful to its own economy. According to this argument, the supply of skilled workers within India would be depleted by emigration, while the availability of skilled workers in NZ would be enhanced.  

NZ has a similar problem with Australia, with some of our skilled workforce, trained at some expense in this country, transferring across the Tasman, presenting Australia with skilled workers free of charge.

Countering this is stark data from the International Labour Organisation (ILO) which was released last month, highlighting high levels of unemployment among graduates in India. It found educated youths have experienced much lower levels of labour market participation. 

Looked at another way, the unemployment rate among graduates was 29.1%, nine times greater than people who cannot read or write. 

One reason for this is that many graduates are seeking Government jobs which are in short supply.

This problem raises the possibility that an Indian government could court popularity by raising the chances of young people winning increasing chances of employment abroad. 

Pressed for further details on when all this might come to the fore, Ministry of Foreign Affairs and Trade (MFAT) officials would only say that officials will sit down "in the coming months to discuss the wider economic and trade relationship."

”We would like to strengthen collaboration across the board," they say.

"There are opportunities for us to work more closely together on areas including people-to-people connections and business cooperation, defence and security, climate change, education, tourism, sports and cultural links.”