4.In 2017, total exports from Scotland (excluding oil and gas) were estimated to have been worth £81.4 billion to the Scottish economy. International exports made up £32.4 billion of this while trade with the rest of the UK was worth £48.9 billion. As shown below, the EU was Scotland’s largest international export region accounting for 46% of all international exports, followed by North America at 17%.
As would be expected as part of the UK, the rest of the UK remains Scotland’s largest market and has grown by more than 70% between 2002 and 2017. The EU continues to be Scotland’s largest international market, however trade with non-EU countries is growing at a much faster rate; Scotland’s trade with non-EU countries grew by 96% between 2002 and 2017 compared to 30% for EU markets. This growth has been driven by an increase in service exports to non-EU countries; particularly in financial services and professional, scientific and technical activities. The UK Government estimates that 90% of global economic growth in the next two decades is set to come from outside the EU.
5.Scotland’s trade with the rest of the UK relies more heavily on services compared with international exports. The two largest industries exported to the rest of the UK are financial services, and wholesale and retail trade. The other top export sectors to the rest of the UK in 2017 are shown in the graph below:
The two largest industries for international exports in Scotland are the food & drink manufacturing sector and the professional, scientific & technical sector, accounting for 29% of all international trade, these sectors were our primary focus during this inquiry. The other top exporting sectors from Scotland in 2017 are shown below:
6.While Scotland has many similarities to the rest of the UK in its international exports, Professor Graeme Roy, Fraser of Allander Institute, told us there were a number of sectors which were of greater relative importance to Scotland than the rest of the UK. Notably the beverages, seafood and natural gas sectors make up a greater proportion of Scottish exports than they do for the UK as a whole; the graph below sets out these differences in more detail.
James Withers, Chief Executive of Scotland Food & Drink argued that this was also reflected in the wider food and drink sector, with Scotland having built itself an identity as the “land of food and drink” at a time where the sector was not as high a priority UK-wide. The Scottish Government said these differences were “distinct”, and argued that the UK Government needed to consider the importance of these sectors to the Scottish economy when negotiating future trade deals.
7.During the inquiry, we also heard concerns from representatives of Scotland’s main exporting sectors that they might lose out in future trade deals in favour of sectors that were of greater importance to the UK’s economy as a whole. Scotland Food & Drink, told us that there was a “real fear” amongst the industry in Scotland that the automotive, aviation and financial service sectors would be prioritised over them when the UK came to negotiate future agreements. Similarly NFU Scotland told us that the farming and food processing sectors must not be treated as “expendable” in future negotiations, with Jonnie Hall, their Director of Policy, saying he was concerned that UK agricultural standards could be “thrown away” in order to secure new free trade agreements outside the EU, which would be a “disaster” for the sector. CBI Scotland told us it was important that the UK Government took a “whole UK” approach to future trade policy and ensure the “different economic strengths and weaknesses” of the devolved nations were reflected within it.
8.When the UK Government published its Trade White Paper in October 2017, it stated that future UK trade policy would be developed in collaboration with the devolved administrations and would reflect the “needs and individual circumstances of all the devolved nations”. However Dr Michael Gasiorek, UK Trade Policy Observatory expressed concern that the Government lacked a fully-formed UK trade strategy and had started consultations on individual free trade agreements without having reached a national consensus of what the UK wanted to achieve from these agreements. The Law Society of Scotland argued that the Government’s Trade White Paper was “too general” and did not establish how it would address specific Scottish issues.
9.When we heard from the Rt Hon David Mundell MP, Secretary of State for Scotland, he sought to alleviate concerns that sectors of importance to Scotland would not be prioritised in future trade policy, telling us he was dedicated to ensuring future trade deals worked for the whole of the UK and reflected the needs of Scotland and its exporters. He added that the Government was in the process of engaging directly with Scottish stakeholders via recent consultations it had launched on future trade agreements.
10.While there are many similarities between the trading patterns of Scotland and the rest of the UK, there are differences in the relative importance of different sectors and markets. As the Government negotiates future trade agreements, it must ensure that sectors of vital importance to the Scottish economy such as the food, drink and fisheries sectors are not traded away to secure preferential agreements for other industries.
11.We welcome the Government’s commitment to establish a UK wide trade policy which reflects the needs and individual circumstances of all the UK nations. However, the Government needs to provide more clarity on how it will achieve this and what that will mean in practice. One way to achieve this would be to increase the involvement of the devolved administrations in setting UK trade policy. We explore how this can be done in the next Chapter.
5 Scottish Government, , 2019
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22 Department for International Trade, , 2017
Published: 10 March 2019