5.7  Migration and trade

The ties that immigrants have to their home countries can play a role in fostering trade. Immigrant ties include knowledge of home-country markets, language, preferences, and business contacts that have the potential to decrease the transaction costs of trade. Migrants may also prefer products from their home countries, which implies more imports.

The empirical studies to date almost exclusively point to a positive impact of immigration on trade between the immigrants' host and home countries (see Law and Bryant forthcoming). A study of ethnic Chinese networks, as proxied by their population shares, found that these networks increased bilateral trade both within Southeast Asia and for other countries (see Rauch and Trindale 2002). Where ethnic Chinese communities are relatively large fractions of a country's population and have relatively numerous direct connections across international borders, Rauch and Trindale found that they facilitate trade by helping to match international buyers and sellers. Where ethnic Chinese communities are small fractions of their countries' populations, and they are close-knit, they facilitate trade by enforcing community sanctions that deter opportunistic behaviour.

Research being undertaken by Law and Bryant (forthcoming 2004) using New Zealand data indicates that there is a link between immigration and trade. The results of the data analysis concern the relationship between migrant stocks in New Zealand and New Zealand’s trade. As table 3 shows, there has been very little change in migrant stocks from traditional sources, such as the UK, Australia, and Europe, but there have been large changes in migrant stocks from other sources such as Asia and the Pacific.

* These calculations deduct ‘unspecified / undefined’ from the total. This assumes that the proportion of ‘unspecified / undefined’ people who are foreign-born is the same as that of the rest of the population.

Source: Law and Bryant (forthcoming 2004).

Foreign born as a proportion of the New Zealand population have risen by a third in the 20 years to the 2001 (see table 3). In addition, the number of countries from which New Zealand has received significant migration has risen by several-fold (see table 4).

Note – ‘Migrant’ here means foreign born.

Source: Law and Bryant (forthcoming 2004).

The percentage of the New Zealand population that is foreign-born (19.5%) is high by international standards (see table 5). Australia, Luxembourg and Switzerland are the only countries in table 5 with a higher percentage of foreign-born. Many OECD countries have foreign-born percentages well below 10%.

Tables 3-5 together suggest that, at least in terms of migration flows, New Zealand is already unusually well connected globally at the people-to-people level.

* Foreign citizenship rather than foreign-born

Source: Law and Bryant (forthcoming 2004).

Analysis by Law and Bryant (forthcoming 2004) suggests that immigration increases New Zealand’s trade. Specifically, a 1% increase in migrants from a given country leads to an approximately 0.2% increase in both imports and exports. These results for immigration and New Zealand trade are broadly in line with those of previous studies in other countries. The data is still being analysed, as is whether these linkages between immigration and export flows exist for all countries or for all export sectors.

Given the targeting of the Pacific-Rim countries for FDI, trade, services and R&D, those countries also should be targeted for greater people linkages. The UK also should be targeted so as to lever off existing strong relationships in all dimensions. The horizon countries for people linkages including immigration would be India and Pakistan. South Asia has a growing and well-educated middle class and fluency in English is common.

5.8  The Kiwi diaspora

Another people-to-people link is New Zealanders living aboard. These Diaspora ties may increase knowledge of markets, languages, preferences, and build business contacts that all have the potential to decrease trading costs. New Zealanders living abroad may prefer products from their home country, which implies that more trade. However, research being undertaken by Treasury is suggesting that Kiwi Diaspora links may be overstated.

Source: Law and Bryant (forthcoming 2004).

Table 6 is based on census data from 7 countries. The data in table 6 concerns the birthplaces of usual residents of the 7 countries. The table shows, approximately, the global distribution of the New Zealand-born and Australian-born populations. It is only approximate because the table only covers some of the countries in which New Zealanders and Australians live (though they are probably the main countries.)

The main conclusion from table 6 seems to be that around 15% of the global New Zealand-born population lives outside New Zealand. Of these, over three-quarters live in Australia. The proportion of the Australian population that lives overseas is much smaller by comparison. The Diaspora is less geographically diversified than is sometimes assumed. Expectations about the opportunities the New Zealand Diaspora may offer as trade, investment and technology links may need to be tempered. The opportunities that the New Zealand Diaspora offer to their homeland as trade and technology links may be beneficial but should not be overstated.