Scotland already has a great trade deal with its neighbours, it's called the United Kingdom

Scotland already has a great trade deal with its neighbours, it's called the United Kingdom

by Ewen Stewart
article from Wednesday 5, August, 2020

SCOTLAND HAS UNFETTERED ACCESS to the wider UK market. The UK is the overwhelmingly critical market for Scotland’s economy accounting for £51.2bn of sales, almost £10,000 per head of population, which accounts for just over 60 per cent of all Scottish trade.  To put this in context trade from Scotland to the entire EU was £16.1bn in 2018, the last available statistics. So for every pound of exports destined to the EU there are over three pounds going to the rest of the UK. 

Moreover, using Scottish Government data the UK is becoming more critical to Scottish trade – not less. Since 2002 trade with the UK is up 78 per cent. Trade with the EU, by contrast has increased by just 40 per cent. Odd then that the SNP is so keen to break up the British Single Market but by contrast is so in favour of the EU one.

The fact that Scotland trades so much with the UK should be no surprise. Apart from obvious geographic vicinity, there is shared language, currency, banking and financial structures, legal system, product standards, media, transport infrastructure, logistics, corporate structures, broadband and IT infrastructure, most aspects of tax regime and law – and of course family ties and close cultural association. While many of these mutually beneficial advantages are simply taken for granted these are deep bonds that make trade freely available and very easy. Working in Barrhead and trading with Bolton is simple, trading with Bremen, not so and never can be.

In this light I was intrigued by a report by Sam MacKinnon, of secession supporting Business for Scotland claiming the UK would have to strike a trade deal with Scotland should Scotland secede.  He misses the point. Of course trade would continue between Scotland and the UK, just as it did with the Republic of Ireland post 1920, but the basis would be different and Scotland’s access to the critical UK market would diminish.

If Scotland joined the EU it would be forced to join on terms largely dictated to it by the EU. It is simply not credible to argue a country of around 1 per cent of EU GDP could have any leverage. So that would mean committing to the Euro, accepting EU standards and the like. No if’s no buts. If Scotland accepts the Euro that would act as a very significant barrier to trade given the currency risk. EU standards are deviating from British standards and the gap will only get greater. That would be another problem for Scotland. 

If Scotland decided to be truly independent there are two options; either a new Scots Currency would act as an export obstacle, or borrowing the use of Sterling (sterlingisation) would be odd as all currency decisions would be taken by the Bank of England and HM Treasury – that really is the ‘no say, do as you are told’ option. Not much independence there. Similarly would Scotland really want to impose its own standards and would that have global credibility?

The truth is Scotland and the rest of Britain is a united market. There is far more that unites us than divides us but breaking that bond via leaving the UK will quickly loosen ties that work to our mutual benefit. Scotland has strong export industries in agriculture, drinks, fisheries, financial services and aspects of engineering, amongst others. All these industries benefit from integrated supply chains, the same currency, law, and standards. 

While I am sure sales of Scotch whisky might be largely unaffected that would not be so for financial services, or engineering. Investment, insurance and other industries would head south with great rapidity given the necessity of accepted regulatory practice but more importantly the lender of the last resort that the Bank of England offers. It would be a hard-nosed decision. Companies simply could not accept the increased risk from the Scottish treasury’s unproven balance sheet, against the Bank of England’s long term record.  Similarly how many warships would the Royal Navy buy from the Clyde? 

This is not the same as the EU-UK Brexit debate: Scotland’s relationship with the rest of the UK is hugely different from the UK’s relationship with the EU. It is different in the scale of mutual trade, different in maturity, different in the demos, the shared history, the shared community and family ties – and in economic investment. 

Trade is complex. Doubtless some accommodation would be found should Scotland separate from the UK but in law, in currency, in supply chains, in standards, in financial services and banking and so much more it would not be the same. Some innovative Scottish companies that add so much to the UK and aid Scotland would leave and current Scottish exports would soon become Scottish imports.

That really would be a tragedy for Scotland.

 

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