May’s Indian journey is a hard test on immigration

Posted on November 6, 2016

If Theresa May hopes to return from her trip to India this week with evidence of substantial progress on trade, she has her work cut out. Her job is tough for several reasons — some specific to India, some more general. India will impress on the UK prime minister, if she is not aware of it already, that the trade-off between free trade and movement of people is not just a dilemma to be faced in negotiations with the EU. In 2016, trade and immigration are everywhere intertwined.

Brexit supporters have championed trade with the Commonwealth and its 2bn or so citizens as a natural target for Britain after it has left the EU single market. They are right to do so, even if the reality may prove more difficult.

India, where half of those citizens live, has a highly regulated and inward-facing economy. One of India’s chief trade negotiators in the Doha round of World Trade Organisation talks was dubbed “Dr No”.

Indian firmness played a big role in the collapse of those talks in 2008. An example of Indian inwardness is its high whisky tariffs which, given India’s prodigious thirst for the stuff, distresses Scotch distillers. Liam Fox, the UK trade secretary, will accompany Mrs May and has made reduction in these tariffs a priority.

Whisky and other material goods, such as cars, may be the easy part. The particular strength of the UK and India, as trading nations, is services. Put aside the British shortage of curry chefs. A much better example is India’s huge consultancies, such as Tata and Infosys. These do much more than operate call centres in India for cost-conscious western firms. They are engaged in high-value technology work across the globe — work that often involves having engineers on-site. The Indian government will be keen — as it was in its trade negotiations with the EU — for liberalisation of rules for intra-
company transfers. The UK’s competitive advantages are in finance, law and other professional services. Regulations effectively close many of these markets in India. If the Indians made work visas easier for UK workers to obtain, and the UK made them cheaper for Indian workers to obtain, both countries would be the richer.

The reasons bilateral trade between the nations has fallen over the past half-decade are clear enough, then. All the same, progress should be possible. But cutting mutually enriching deals will be difficult for a prime minister who has taken a hard line on immigration; who appears to have interpreted the result of the Brexit referendum as a mandate to prioritise tight border controls over free trade; and whose party’s last two manifestos promised to keep net migration under 100,000.

Instead of reducing the migration issue to hard numerical targets, the government must be open to flexibility on work and student visas, and make it as easy as possible for highly skilled workers to come to the UK. The UK, after all, wants to sell its own skills abroad. This is crucial not just in the case of India. If the Conservatives want to make sure that the City of London remains a world financial centre — even as the sector contracts globally — they must see that a message of openness and reciprocity rings out.

Neither Mrs May nor her party invented concern about uncontrolled immigration. It is political fact on the ground. But Mrs May is no longer in the home office. She is responsible for the prosperity of the country as well as its security. It will prove impossible to build a vibrant, free-trading nation outside of the EU if she does not demonstrate more flexibility on immigration than she has to date. India would be a good place to start.

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