The India FTA – A Win for Honey, but we Should be Wary

VIEWS FROM OUTSIDE THE APIARY: IAN FLETCHER

Ian Fletcher once helped negotiate trade agreements for the European Union, now he’s at home in the Wairarapa and lending his expertise to New Zealand’s honey industry. So, what does he make of the shiny new Free Trade Agreement (FTA) with India?

By Ian Fletcher

The Government announced the conclusion of negotiations with India for a FTA just before Christmas. NZ First was immediately critical, saying it would oppose the agreement because it gave away access to the New Zealand labour market (through a new visa category and enhanced rights to work for Indian students), and yet gained nothing for New Zealand on dairy exports. All Indian products would immediately get tariff-free entry to the New Zealand market.

Rashtrapati Bhavan, the residence of India’s President, in New Delhi. 

What Should we Think of this Agreement?

The draft agreement does indeed give India a lot: full, immediate tariff-free access to the New Zealand market for Indian exports and enhanced immigration opportunities does look like a win for Indian firms and people. So, NZ First is probably right to ask whether the result is balanced on the other side.

If you take the New Zealand position as being that it’s all about dairy, then NZ First is right: this is a dog, with some marginal crumbs (that help India’s larger dairy co-operatives) and a commitment to talk if anyone else gets a foot in India’s dairy door. This is palliative: Indian rural politics (which matter very much) mean wider dairy opening is for the birds anytime soon.

If you think we may have other things to sell, then the deal looks a little better. For the beekeeping sector, the separate (and reducing) tariff for mānuka honey is welcome (copying the EU FTA). India is a big honey producer supporting a lot of rural employment. So we must be cautious about the inclusion of honey and apiculture in the technical cooperation part of the FTA: we won’t get meaningful market access beyond mānuka, and I don’t see why we should help a major competitor without meaningful market access. I hope the New Zealand industry is on its guard here.

For others, especially kiwifruit and other orchard products there are real wins, over and above current trade. That’s good.

Immigration

So, what about immigration? This does look like a big concession. But numbers are limited (an average of 1667 three-year visas per year in shortage occupations, plus 1000 working holiday visas). These numbers won’t seriously change our workforce, and NZ First are making up a story here.

I suspect NZ First have an eye on next year’s election. Immigration is the political issue this century in western democracies, because falling populations (collapsing in some cases like Japan, Korea, Italy and Germany) mean immigration is going to be essential to maintain our economies and social services. Yet older populations (NZ First’s natural homeland) don’t want migrants who look different.

New Zealand still has a marginal excess of births over deaths, but that will reverse in coming years. Immigration and departures for Australia are the big demographic swing factors in our story. Like everyone else, we will need migrants to maintain a workforce and tax base, and within a couple of decades we won’t be able to be as choosy as we can now. So, there is a case for building up and refining good migration pathways now, so there are settled and successful migrant populations here to provide a stable social pull factor as well as an educational and employment story.

The real winner here will be New Zealand, if we can attract the right migrants. If we don’t, we won’t be much worse off, given the numbers involved.

The New World Trade Order

This FTA is also a sign of things to come on trade and trade agreements generally. Thirty years ago, when I first negotiated a FTA (for the EU, with Saudi Arabia) the focus in all FTA negotiations was on trade in goods, balancing the acknowledged case for liberalisation with the politics of decline and adjustment.

Since then, the World Trade Organisation system has ceased to work as a motor for trade and market access liberalisation, and FTAs are the only game in town, apart from the US’s current use of informal and unilateral tariffs, often accompanied by threats and (sometimes extorted; sometimes sincere) promises of investment. It’s a less predictable world, driven by domestic politics everywhere, and it rewards size and aggression. None of that plays to our strengths. We have to think again about what we want, who our friends are, and how we make our way in a more hostile world.

Against that, I think this FTA is simply as good as we could get. We should also learn some lessons from it.

Lessons

Firstly, we need to recognise the limits of dairy market access. Any country with a domestic dairy industry will want to protect it. Secondly, we’ve done exceptionally well on kiwifruit, cherries and other similar products. They depend on biosecurity at home and strong airfreight links to get to market. We need to focus on both, biosecurity especially.

Finally, NZ First’s press release attacking the agreement went out of its way to put the blame (as they see it) firmly on National, and to praise the Indian side. This is good: in the world we live in, building strong personal contacts and sustaining those relationships over time is one asset we can develop. It’s good to see that being recognised. Generally, working with the grain of others’ systems is essential, even if we don’t like their values. Let’s see how we get on balancing domestic politics and foreign relations in an election year.

Ian Fletcher is a former head of New Zealand’s security agency, the GCSB, chief executive of the UK Patents Office, free trade negotiator with the European Commission and biosecurity expert for the Queensland government. These days he is a commercial flower grower in the Wairarapa and consultant to the apiculture industry with NZ Beekeeping Inc.