The Lowy Institute’s Interpreter blog were kind enough to publish a few thoughts of mine on Malcolm Turnbull’s decision to walk away from Tony Abbott’s commitment to an India-Australia Free Trade Agreement. Full text below.
Lessons from India on migration’s role in trade policy
Prime Minister Turnbull yesterday carefully signalled a potential India-Australia Free Trade Agreement is not a priority for his government. This comes after the Abbott Government set a very public benchmark for concluding an India-Australia FTA by the end of 2015, an overly optimistic commitment that likely harmed the ability of Australian trade negotiators to make any substantial progress.
There appear to be two major stumbling blocks. The Australian government wants greater agricultural access for Australian farmers into a protected Indian market while the Indian government seeks further opportunities for its citizens to work in the Australia.
Tussles over agricultural protection in trade talks are common. Concessions on both sides get smoothed out during negotiations and eventually lead to a deal presented as a ‘win-win’ outcome using the language of comparative advantage. Regardless of whether the actual deal leads to economic improvements, and there is strong evidence to suggest bilateral deals can be ineffective, the political side of the equation is solved.
Migration is more difficult. People are not equivalent to goods and services. The labour market is more complex and workers, unlike resource exports, can vote. To make matters more complicated, migration does not have a clearly established tradition within trade agreements compared to goods and services. The norms are weaker and tethered to political winds, making what may seem fair in a DFAT negotiating room less so out on the stump in marginal seats at election time. We only need to reflect on the bitter public debate over the migration regulations in the China-Australia Free Trade Agreement (ChAFTA) to see how this plays out in practice.
What exactly does the Indian government want from Australian immigration policy under an India-Australia Free Trade Agreement? The negotiation floor is likely concessions at least equivalent to those in ChAFTA:
- the removal of advertising job requirements for Indian nationals on 457 visas
- the removal of mandatory skills assessments for a range of trades-related occupations
- a framework for Indian companies to enter into bespoke labour contracts with the Australian government to better facilitate concessions around English language proficiency and lower skilled occupations.
In all likelihood, the Indian government may demand additional concessions. Unlike China, India sees migration as a first-order priority as Indian labour emigration is significantly more prevalent than Chinese labour emigration. In Australia, Indian nationals represented 25% of all 457 visa grants in 2015-16 compared to 6% for Chinese nationals. Large multinational Indian companies such as Tata, Infosys and Wipro are among the largest sponsors of skilled migrants in Australia.
This difference in priorities makes concluding an India-Australia Free Trade Agreement more difficult than perhaps any previous bilateral trade deal. Abbott should have been aware of this before he promised action. It is entirely unsurprising Turnbull has had to walk back this commitment as the concessions demanded will be politically difficult. Across the world, anti-migrant sentiment is a potent political force with clear evidence immigration played a primary role in both the election of Donald Trump and the Brexit result.
While the Australian electorate to date appears less susceptible to anti-migration populists, up to 25% of voters have extremely negative attitudes to immigration. Depending on the salience of the issue during the next election, this will manifest itself in support for far-right parties such as One Nation or more mainstream politicians who seek to tap into the discontent. Perhaps a strong, confident government could choose to emphasise trade deals with large implications for migration and appeal to the broader Australian electorate. But the Turnbull government has little political capital to spend and a plethora of domestic issues to contend with.
While Turnbull was right to place this on the backburner at this time, it remains a shame as a careful look at the industry and occupational composition of Indian nationals on 457 visas reflects the opportunity for Australia. Over half of Indian migrants on 457 visas work in the IT or Professional, Scientific and Technical industries. These are skilled people doing skilled work, helping the Australian economy continue a slow transition. As up to three quarters of migrants on 457 visa holders help to train and upskill other workers, the program is an important, if niche, part of the labour market (migrants on primary 457 visas make up less than one per cent of the total labour market). The Turnbull government’s mantra of ‘jobs and growth’ should be ideally suited to building a higher skills base for Australian workers. The tension comes from the need to ensure young Australian skilled workers are afforded opportunities in the labour market while maintaining a flexible migration framework.
We need to recognise migration will play an increasing role for Australian trade and strategic policy in the future. To better manage this, Australia would be well placed if it established a set of principles for migration when negotiating trade and other deals. This would assist in bridging the gap between public attitudes and elite decision makers, removing the possibility of big surprises. The public debate over ChAFTA demonstrated there was a poor understanding of exactly what changes were being made. A set of principles could help to demonstrate what type of migration concessions are available and what should be regarded as non-negotiable. Did ChAFTA hit the sweet spot or did it go too far? If this is too difficult to conclude within the context of a trade deal, there is no reason stand-alone labour migration agreements cannot be forged, including on a regional basis to reinforce migration norms on Australian terms. The Working Holiday program is one example, a migration program built on a series of agreements governing backpacker visas.
In the current global environment, Australia stands to benefit greatly if the last two decades of migration policy change can hold up in the political environment. An India-Australia Free Trade Agreement may assist on the margins of migration policy but it is a long way from the main game. Working to redress and mitigate what drives anti-migrant sentiment will help underpin our migration status quo and with time, further advancements like a set of migration principles will help governments of all persuasions to continue to promote sensible Australian migration policy.