Scotland, Trade and Brexit Contents

Conclusions and recommendations

How Scotland trades with the world

1.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. (Paragraph 10)

2.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. (Paragraph 11)

Role of the devolved administrations in trade policy

3.We are pleased that the Government has committed to publish a concordat outlining the role of the devolved administrations in future UK trade policy. As the UK approaches the date of EU Exit, we ask the Government to provide an update on the status of this concordat in response to this Report. (Paragraph 16)

4.The Government should explore new options to facilitate extensive consultation with the devolved administrations when setting negotiating mandates in the future. One of these options should be the establishment of a JMC sub-committee on international trade. This should be supported by a fully resourced JMC secretariat responsible for ensuring the sub-committee meets regularly and that the devolved administrations have a role in setting the agenda for meetings. (Paragraph 24)

5.We recommend that the Government commit to including representatives from the devolved administrations in the UK negotiating team for future trade agreements where commitments are being sought that will impact on devolved competencies. This would have to be done with the understanding that devolved ministers would not deviate from the UK Government’s negotiating position. (Paragraph 29)

6.The Scottish Government must have a meaningful role in future trade negotiations including in the setting of negotiating mandates and participation in the negotiations themselves. We believe a model based on cooperation and trust would be preferable to one of formal consent of the Scottish Government on a final deal, but it will require goodwill from both Governments to make it work. We recommend that the Government, in response to this Report, set out the steps it will take to involve the devolved administrations in every step of the trade negotiation process. (Paragraph 33)

Scotland’s trade priorities for future trade deals

7.We are encouraged that the Political Declaration commits to no tariffs on goods being the basis of the future trading relationship between the UK and EU. Maintaining tariff-free trade is crucially important for the food and drink sector in Scotland which would be most susceptible to the EU’s WTO tariffs, with some sectors’ exports to the EU likely to become uncompetitive overnight. (Paragraph 40)

8.Scottish manufacturers have benefited immensely from frictionless access to the EU Single Market and require assurances that trade with one of their largest international markets will not be disrupted in the future. We welcome the Political Declaration’s ambition for a “comprehensive” free trade area, but this must minimise non-tariff barriers for goods and provide continuity for businesses which rely on EU supply chains and perishable products. If the Government no longer wishes to align with an EU standard in the future, it should clearly state its rationale for diverging and provide businesses with ample opportunity to comment on the proposed changes before they are agreed. (Paragraph 46)

9.Whilst we welcome the announcement from the Government that small and medium sized businesses will now be able to apply for two new grants to help them prepare for post-Brexit customs declarations, they are narrow in scope focusing on training and IT improvements only. The Government should urgently look to extend the remit of the grants to cover additional areas of export support for businesses such as the movement of labour, goods, currency management and legal advice as is the case for the Brexit voucher schemes operating in the Republic of Ireland and the Netherlands. (Paragraph 49)

10.Scotland’s service sector has benefited from its ability to freely offer services to customers in the EU, which accounts for 41% of service sector’s trade. We were told that any agreement to provide the sector with continued market access to the EU needed to go further than the EU’s existing equivalence regimes. We therefore recommend that the Government ensure that any new equivalence regime covers the broadest range of activity conducted by Scotland’s service’s sector. This agreement must not be vulnerable to sudden revocation, instead a dispute resolution mechanism should be established to resolve disagreements about whether the two regimes are equivalent, which would need to be followed before either side could withdraw from the agreement. This should provide confidence to businesses that they can make long term decisions with the knowledge that their access arrangements will not suddenly change. (Paragraph 57)

11.Scotland’s service sector currently benefits from its ability to operate throughout the EU due to the mutual recognition of professional qualifications within the single market. We heard this was particularly important for the legal and financial services sectors. However there remains uncertainty as to the future recognition of UK professional qualifications in the EU post-Brexit. We welcome the provisions included in the Withdrawal Agreement which will provide continuity, but the Government must confirm and deliver on its intention to negotiate a long-term agreement with the EU which maintains similar market access for UK qualifications. This will provide clarity about what the future arrangements will be for Scottish professionals operating in the EU after Brexit. (Paragraph 64)

12.Scotland exports more to the rest of the UK than it does to the rest of the world and ensuring free and frictionless trade with Scotland’s largest trading partner will be important to its future economic prosperity. We welcome the UK Government’s commitment to protecting Scotland’s trade with the rest of the UK and recommend that the UK Government ensures that as powers currently held in Brussels return to the UK and Scottish Parliaments, every effort is made to ensure no new barriers to trade between Scotland and the rest of the UK are introduced. Establishing UK-wide common frameworks is one way to address this, as it will allow all of the UK’s governments to agree where the same rules should apply across the UK and how to manage areas where flexibility for the UK’s four nations is desirable. (Paragraph 70)

13.We are disappointed that some existing trade agreements will not be rolled over by the time the UK leaves the EU. While we welcome the government’s publication of a register outlining the status of outstanding agreements, this does not offer practical advice to businesses on the steps they should be taking to minimise disruption. We recommend that the government outline the practical steps it will take to support Scottish exporters who rely on these agreements. (Paragraph 78)

14.Scotland’s success in trading with other countries is based on its reputation for high quality and high standards. We welcome the absolute commitment from the Minister that the UK’s future trading arrangements will not lead to any undermining of these standards. (Paragraph 84)

15.The European Union’s system of geographical indications has been crucially important in protecting the provenance and quality of many high-profile Scottish products, and we support the Government’s decision to establish a domestic scheme. However, with Exit Day fast approaching we recommend that the Government bring forward this legislation as a matter of urgency to assure businesses that their products will remain protected in all Brexit scenarios. (Paragraph 88)

16.Creating a UK GI register will not protect iconic Scottish products in foreign markets unless those counties agree to recognise and protect these GIs. In negotiating the UK’s future relationship with the EU, the Government must ensure that it agrees a comprehensive mutual recognition agreement which protects existing and future Scottish geographical indications indefinitely. The Government should also ensure that its trade agreements with other countries include robust protection for these products. Ensuring Scottish producers enjoy the protection of GI status must be a red line in all the UK’s future trade negotiations. (Paragraph 95)

Promoting Scottish Exports

17.Scottish business benefit from having two Governments able and willing to promote their products in overseas markets. While many businesses felt they benefited from this arrangement there is room for the two Governments to improve how they work together. We recommend that the UK and Scottish Governments redouble their efforts to coordinate their trade promotion activities, so they can complement rather than duplicate each other. This could be achieved by arranging regular meetings at ministerial and official level to discuss ongoing and future campaigns and to identify where joint-working may be possible. We ask that the Government provide us with an update on what steps it has taken to improve this coordination in response to this Report. (Paragraph 102)

18.How Scottish products are branded was an issue that a number of our witnesses felt strongly about, and we heard passionate arguments about the benefit of both Scottish and British branding in promoting products abroad. It is clear to us that there is a benefit in Scottish businesses having access to both British and Scottish branding. The choice of branding must be a commercial decision for companies to make based on what they feel will most benefit their products. (Paragraph 103)

19.We welcome the comments from the Secretary of State that he would be supportive of organising joint trade missions with the Scottish Government. The Government should publish a list of Joint-Trade Missions it expects to undertake with the Scottish Government for the rest of the year and report back to us on how successful they have been. (Paragraph 105)

Published: 10 March 2019