Why Scotland's export figures show independence would be an economic horror show - Brian Monteith
It cannot be said often enough that no central economic case for a Scotland divorced from the country we have built over 300 years of political union currently exists, not in terms of financing the massive fiscal deficit nor the challenge of finding a currency that does not cause wholesale pain, if not ruin, to many Scottish families.
Those are, however, only two of the insurmountable obstacles all but a few nationalists would rather not talk about – the other is how Scotland would earn a living to pay off the huge annual deficits and debt we have persistently voted for, and ensure whatever currency was used would not be absolutely worthless.
Who would buy the things we make or services we offer? Given our economy is so immersed and woven into the larger British economy, what would happen to our trade with the rest of the UK and what prospects would there be with other countries, either to supplement or supplant existing trade with our former British family we would undoubtedly lose?
In 2019 Scottish “exports” increased by £3.6 billion (4.3 per cent) to £87.1bn, with some £52bn of goods and services going to England, Wales and Northern Ireland – up £2.5bn – accounting for 60 per cent of our total.
Exports to the EU were 18.8 per cent (up £420 million/2.6 per cent) – with 21 per cent to the rest of the World (up £730m/4.1 per cent).
The fact is if Scotland were to put any friction between the exports of Scottish businesses to the remaining UK, then we could expect that trade to diminish. No answer has been given as to how this can be overcome.
Given the domination of our trade by sales to the UK (mainly England), then even a drop of a few percentage points would see tens of thousands of people consigned to unemployment, becoming an additional burden on the benefit system of a Scotland already unable to say how it would pay its pensions or social benefits.
Something would have to give in Scotland’s ability to fund welfare payments. The poorest, as ever, would suffer.
A Pavlovian response that we could replace any lost trade with Britain with new trade elsewhere is hard to make sense of for it is predicated on Scotland gaining access to the EU single market that, being seven times larger than our British market, could take up the slack.
Unfortunately this approach it is not justified by the facts at our disposal nor does it take account of the many significant obstacles a lonely Scotland would face, not least meeting the Copenhagen criteria for EU membership. But that aside the economics does not make sense.
Also published last week, by Facts4EU.org from official EU sources, was the revelation the UK remains the EU’s most important market despite China being 21 times its size with over 1.4 billion potential customers.
The EU sold £252bn goods to the UK, but only £195bn to China despite the UK population being only 4.8 per cent of China’s.
You see the size of a market does not guarantee how well businesses are able to trade with it. There are many influences and advantages or disadvantages to be considered such as commonalities of language (smoothing the process of selling), beneficial and sympathetic historical ties (we like each other) and an open culture to foreign goods rather than a chauvinist one (try selling even Italian wine in France etc).
In the last year or so, some nationalists have actually taken this problem of preventing a collapse in Scottish-British trade from new frictions head on by arguing a physical border between Berwick and Carlisle would be a good thing, suggesting the employment of border guards and custom officials at public expense would make up for the lost income of people making things and paying taxes from their profits. Seriously?
Well, maybe if there were significant tariffs for goods that are currently tariff-free I suppose the bureaucracy could be paid for, but wait, as tariffs are introduced and then have to rise to make up for the lost business they create, then more business is lost and we end up in an economic spiral taking us to the bottom of the Mariana Trench.
Remember this new Scotland would not have the prospect of gaining a boost in sales by removing tariffs from economic trade to the EU – for Boris Johnson’s Trade and Co-operation Agreement already delivers tariff-free trade.
Indeed the UK is the market to be trading with – for also last week the International Trade Barrier Index, published by Americans for Tax Reform, showed the UK leaping from eighth to fourth after leaving the EU and setting its own, more attractive tariff structure.
The SNP’s Scotland would be struggling to be as attractive, for the SNP is hardly an advocate of free trade – its politicians are protectionists wishing to erect barriers, not dismantle them.
For example, 19 per cent of palm oil production globally is certified sustainable and 86 per cent of that goes to Europe, predominantly used in biofuels, yet the EU is looking to phase out the use of palm oil in biofuel.
This will remove any incentive for sustainable production, with countries like China being the main beneficiaries at the environment’s expense. This is the protectionist bloc the SNP wishes to embrace.
The SNP has no fiscal, currency or trade policies for a lonely Scotland to make ends meet and last week’s trade figures pointed to scenes scarier than any Halloween movie.
- Brian Monteith is editor of ThinkScotland.org and previously served in the Scottish and European Parliaments for the Conservative and Brexit Parties respectively.
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