India and Free Trade – finally someone turned the lights on

In this guest posts, Paul Chalmers reacts to some changes of approach for the free trade agreements with India.

After nearly 20 years of frustrating ‘Free Trade’ talks between India and New Zealand, the chair of the India New Zealand Business Council (INZBC), Earl Rattray, has acknowledged that “a different approach to the traditional Free Trade Agreements which have served us well in many markets will be needed for India.” Whew. About time.

Earl was talking at the recent INZBC forum, where the lights have finally been turned on in a relationship that has seen six failed negotiating rounds for the FTA, and regular trade visits to India by a variety of Ministers. I have been on three.

In the meantime, the Australian Parliament has set a date of 29 December 2022 for the formal establishment of their India-Australia Economic Cooperation and Trade Agreement (AI-ECTA). This is not a ‘free’ Trade Agreement as we would know it; dairy and other some other agricultural products are excluded. India has effectively protected its dairy industry, building it to be the world’s largest, and commentators are not expecting these barriers to come down any time soon. However, wine, sheep meat and wool and the crucial services sector have had their tariffs removed and other products, including a range of seafood items, will see most tariffs eliminated over 7 years. A number of side letters establish working parties to progress other areas of trade not included specifically in the current deal. Up to $14.8 billion worth of Australian merchandise was traded into India in 2022. Removal of tariffs will likely increase this significantly. A 40% increase is expected for 2023.

Yet New Zealand has struggled to get any Trade Agreement across the line, partly because India sees our dairy industry as a threat and partly because, in the words of veteran commentator, Venkat Raman, ‘we have drifted apart’. Back at the INZBC Forum, our Minister of Foreign Affairs, Nanaia Mahuta, noted that India “is a priority relationship for New Zealand.” Excellent news.

But what of the sector that was, prior to Covid, by far the largest export revenue earner with over $4b of exports to India: International Education.

On a trade visit to India in 2012 led by the Hon Steven Joyce, the Indian Minister for Human Resource Development, Shri Kapil Sibal, had expressly asked New Zealand for assistance with enabling students to Study, Work and Settle. Our Minister was sympathetic, but the high numbers of students suggested by Kapil Sibal were more than our tertiary education system could handle. On the recent (2020) Trade Mission to India, Education Sector reps did not even manage to get a seat, until the sharp eyed Minister, Hon David Parker, noted the absence and insisted to New Zealand Trade and Enterprise that an International Education rep needed to be included in the party.

Private providers have been to the fore in trying to build successful partnerships in India for over 20 years. We have aimed at building viable and profitable export education businesses which then supply job-ready graduates with the vocational skills listed on the Job Shortage List. Information Technology programmes and Business/Management programmes, both providing qualifications on the Job Shortage List, made up the bulk of the student enrolments.

Students who come to Study, Work and Settle make ideal migrants. They bring skills from their own country, contribute significantly to the economy through their fees and general spending, work in part time jobs while they are studying and coming to grips with the Kiwi way of life, and then find employment in NZ in our skills shortage areas.

However, the concept of Study, Work and Settle became a contentious battleground in our country’s immigration debate, especially when Immigration New Zealand (INZ) consistently refused visas to students who mentioned they intended to get jobs in New Zealand. It took over ten years for INZ to finally admit that Study, Work and Settle was a viable pathway and perhaps encouraging students to follow this might assist with New Zealand’s skill shortage.

When the Helen Clark government introduced post-study work rights in the mid 2000’s, the International Education industry took off. Students were then able to work for up to two years following their graduation and, hopefully, find work on the Shortage List. Many did. It was estimated by the industry that around 50 – 60% of students studying between 2000 and 2020 managed to complete their study, find jobs and gain a residence visa.

From being the only training provider in 2000 enrolling Indian students, our business suddenly found ourselves surrounded by new and interesting competitors, many of whom quickly realised that NZQA quality oversight of their operation was close to zero. A small number of these moved to exploit the weaknesses in the system. It was a case of ‘no traffic cops and some ingenious speedsters.’ We struggled for over 10 years with dodgy competitors who evaded the monitors with ease and, in a number of cases, exploited the students, took their money and abandoned them.

The issues were exacerbated in 2014 when the Hon Steven Joyce facilitated the Rule 18 change to English language requirements. This allowed students to provide their own ‘proof’ of English proficiency and was controversial. Industry reps alerted NZQA to the potential problems, but nothing was done and some students entered with poor quality English. It wasn’t until 2015 that a new NZQA Deputy Chief Executive, Quality Assurance, Grant Klinkum, introduced more effective quality control mechanisms. These have weeded out many of the poorer operators. Grant is now CEO of NZQA.

However, the public image of the industry was significantly affected by a minority of shonky operators and comments in the media began to note that students seemed to be using their education programmes as a backdoor to residency and citizenship.

I should make it quite clear. The business we established in 2000 was a front door designed to bring Indian students to NZ specifically for the purposes of studying, working and settling. The front door was a pathway that conformed to both NZQA and Immigration NZ requirements, and
constituted a government supported and promoted pathway to residence. Promoting the idea that legitimate, potential migrants are actually deviously rorting the system via a backdoor, is not a healthy or fair approach to ensuring we have effective and safe migrant pathways. Students were especially vulnerable to exploitation in other spheres of their stay in the country, particularly in the labour market. Such exploitation is being addressed by the current government in the Worker Protection Bill which Hon Priyanca Radhakrishnan is shepherding through Parliament and the significant increases in numbers of Labour Inspectors.

Following Covid, the government has taken the opportunity for a reset to our approach to International Education and all in the industry have accepted and supported the need for a review. The ‘new’ approach is to develop a ‘high value’ international education offering. Unfortunately there is no clear definition of what high value means. It can be interpreted in a variety of ways, but the government’s initial strategy is to target degree level students who indicate they are returning to their home country. This is despite the fact that we now have a burgeoning skill
shortage in the areas that were on the earlier skill shortage lists i.e. IT and business skills.

Recent announcements by Australia that they are changing their visa and residency status for New Zealanders will encourage more Kiwis in key skill areas to move to Oz and will put significant additional pressure on these sectors; especially IT. Because of the belief that students were coming in “through the backdoor”, the government has restricted the numbers of students eligible for post-study work rights, a key component of the Study, Work, Settle equation. Unlike our main competitors, Australia and Canada, post-study work rights have been removed for these students. Few will come and recent data has shown that international students are flocking to our competitors. One might have expected that a reset might include a strengthening of the Study, Work and Settle approach – given we are now experiencing skill shortages to such a degree that many businesses are working shorter hours or closing for specific periods.

Recently the Indian External Minister, Dr. Subrahmanyam Jaishankar, criticised New Zealand for not being fair and sympathetic on its immigration policy because Indian students who have partially completed studies in New Zealand are being refused return visas. This comment may have been unfair in itself, given that the reluctance to reinstate visas applies to all international students, not just Indians. The Minister of Foreign Affairs Nanaia Mahuta has ‘said she had noted Mr Jaishankar’s concerns and would be passing them on to the Minister of Immigration Michael Wood.’

So our relationship with India is not as warm as one would hope it to be, especially in the International Education sector. As skill shortages increase, we await Minister Wood’s announcements in February 2023 with some confidence, given he has quickly moved to amend the Green List settings. Hopefully the next reset will address the need to welcome International students to Study, Work and Settle and our relationship with India can start warming.

Paul Chalmers
Board Member – Independent Tertiary Education NZ (ITENZ)
Founder – Africa New Zealand Business Council