Who’s kidding who on two way trade with England?

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Derek Bateman goes in search of facts on Scotland’s supposed trade deficit with England and what might happen in the event of independence.

Disclaimer. I’m pretty much innumerate and have come to rely on my eight-year-old to work out my change in the shop. I believe in regulated markets and the incentive of reward. I believe economic exchange is a civilising influence and mankind is better for it.

Derek Bateman

But I still can’t count for tuppence – or to tuppence for that matter. Therefore I am literally the last person anyone should look to for advice on numbers or economics beyond barter. It’s because of this vacuum in my learning that I’ve become puzzled by recent arguments over the viability of Scotland’s economy and future prospects.

For example, I hear that that Scotland sells £50 billion of goods and services – not including oil and gas – to the rest of the UK, several times the value we export to the EU. (Therefore we’re mad to leave the UK for the EU because, presumably, we’d lose all that business as we’d no longer trade with England at all…thousands of jobs lost, companies closed, shortage of money circulating, hardship and national poverty).

GOODS

So my first thought was from my history classes where it was explained that countries trade with each other – that is, they bought and sold each other’s goods. It was an exchange. Yet, no, it seems that in modern Britain that concept has been abandoned in favour of cul-de-sac trading in which goods only flow one way – Scotland sells its goods to England where they are prepared to buy them. They don’t have to, it is implied. They can just stop, or be stopped, and that’s that. The Money Tap will be turned off and England will say: there you go, Jock. You wanted to be on your own. Now you’ve got it. See you at the Last Night of the Proms.

Well, I’m not having that. Mrs Crabtree in History did a better job than that. There MUST be trade in the opposite direction. And of course, I’m right. It’s just that trying to quantify how much is a job for a super computer.  One of you bright lot out there will have this information I’m sure and will be shaking your head at my inadequacy. But every time I Google sentences like How much does England Sell to Scotland or English exports to Scotland etc and other variations, the links all transpose my question into Scotland exports billions into England. I assume this is because virtually all of the articles ever written are asked on that same one-way assumption – England buys from us. English money pays for Scottish goods. England has economic power over Scots.

So I emailed  the government, I asked a professor of economics – and I drew a blank. Where can be found this tantalising answer? And if it’s so hard, how come everybody from Jackie Baillie to Gordon Brown to Lulu can tell you exactly how much flows the other way? Are you getting suspicious?

STEWARDSHIP

You see we hear we have a massive unsustainable deficit that can only be handled, like the oil industry, by clever folk in Whitehall wether it was incurred under their stewardship or not. Now we are told that the bulk of trade is also utterly dependent on the largesse of good English people, a benevolence that will be terminated if we get above ourselves and try to do things for ourselves.

We have got ourselves into a right mess, haven’t we? As Melanie Reid wrote in The Times…’spoilt, selfish, child-like fools’. Us Scots, eh? What are we like?

Then  I came across Scoland’s Global Connections Survey published by the government (ours) in 2014. Amid  it’s morass of numbers it makes clear it is, as it says, just a survey so it is not definitive. It is voluntary exercise so a few thousand firms were asked to estimate their sales and just over 2,000 companies responded. Adding to the vagueness of the findings are the following sentences:

Issues with the organisational structure of the company refer to situations where companies are part of large international corporations, possibly functioning as a subsidiary or a franchise operation within Scotland. The Scottish part of the business may not know the sales figures or be able to split Scottish figures from the UK company account or be able to influence the company strategy for exporting. Furthermore, some companies use separate distributors to exports goods, who work independently.

Thirty one companies mentioned how difficult it was to split Scottish sales from UK sales or had difficulty determining visitor’s normal place of residence (particularly for the retail and hospitality sectors). For those companies having difficulty splitting Scottish sales from UK sales, this was mostly because accounting was done at a UK level.

CIRCUMSPECT

Trying to identify accurate figures for trade in goods and services within the UK is notoriously circumspect. It doesn’t mean Scotland isn’t indebted to English consumers.  We just don’t appear to know with the kind of precision that allows one side of the argument to state with conviction how much that is.

With a little further digging I came across an unimpeachable source, one I know you will all endorse – BBC Scotland. When the survey was published the Beeb ‘s report produced a figure for English sales into Scotland, one I have to confess I can’t locate in the document myself. (Must ask my eight-year-old)

They claimed to find that Scotland sells £50 billion to the rUK (mostly England) but they, the rest of the UK, sell £62 billion to us. £62billion! They sell more to us than we do to them. I just asked my eight-year-old and she says that’s about 25 per cent more than we sell to them. Suddenly it looks rather different, doesn’t it? It means we too have a money tap of our own and, if we’re playing silly games over trade, well, we can threaten to stop buying English  goods. It may not be as high a percentage of their exported goods as £50b is of ours, but it’s still a stonking amount of trade that England won’t want to lose.

Look at it another way, between us we have £110billion pounds of mutual business and somehow we’re supposed to believe it is either going to stop altogether or will be so degraded by borders and imports that it will slide away in to nothingness. A mythical border will eliminate all trade.

EXCHANGE

As I said at the start, I believe in markets and the incentive of economic exchange. Transposed on to this cross-border conundrum, it means I don’t see thousands of businesses allowing this to happen or indeed governments letting the tax revenue stop or accepting the closures and unemployment that would follow. To go further, in my experience businesses will sell to whoever has the money to pay and no questions asked. They won’t be prevented by a political border.

Now it’s true that a border in a different jurisdiction can mean checks, delays or tariffs. And that can be a drag on business, if a long way from elimination. But none of that is insurmountable and no one is going  to give up on sales that have been long established just out of political disagreement. Heaven and earth will be moved to keep trade flowing within the British Isles whatever decisions are made on EU membership. The Commission would meet with a very tough response if it tried to impose heavy duty on trade between Scotland and England.

And of course there is a way out, proposed by the UK itself. Britain doesn’t want a hard border with the Republic, something that would severely weaken the EU’s legitimacy were it to insist since peace is enshrined in the EU treaty detail. Can either the UK or the EU seriously argue in light of that they can still impose such a border on Scotland and England with £100billion of business at stake? The Common Travel Area provides another template for progress allowing a distinct and tailored solution for a particular problem withinin the archipelago.

This is one of those areas where common sense tells you there is a solution, one that not only can effectively guarantee cross border  trade but, with independence, can grow Scotland’s connection directly with our European neighbours.

One reason we haven’t been able to export more is explained in the paragraphs above about the interlinking of company ownership and accounts that concentrates exports in English ports and airports. Doing it for ourselves obliges us to engineer new contacts, new ferry routes and air routes and promotes Scotland and her produce without a UK middleman. If there is a chance of bigger markets through the EU, how many companies already got trading with Scotland will take the decision to move here and use Scotland as the platform for an EU export drive?

The fundamental point is that we trade with each other and that is destined to continue out of both economic and political necessity. Scotland holds key cards of its own. The Euro separatists are being  disingenuous if not downright dishonest and this is just the latest barb from Project Fear.

When next you’re told we’d lose £50 billion trade with England in an EU Indy Scotland, tell them : Aye. But you’d lose £60 billion. If you’re daft enough…

Useful Links:

HMRC: UK regional trade: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/595757/RT

Scottish Government Statistical Bulletin: S_Q4_2016.xlshttp://www.gov.scot/Resource/0044/00442854.pdf