© SCER 2017
If Scotland becomes independent in the EU, then the border between Scotland and the rest of the UK (rUK) will be one of the EU’s external borders. Having control of your own borders might look like one of the most obvious, and even positive, aspects of independence (not least after the experience of the Covid-19 pandemic).
But the border question has been mostly tip-toed around by the Scottish government and SNP with a lack of serious analysis of its implications. The reason for this caution is clear: the impact of Brexit and the fear that gaining control of borders might rather be negative.
In 2014, the debate was whether an independent Scotland could have stayed in the EU – thus ensuring open borders for people, goods, services and capital with both Scotland and rUK in the EU’s single market and customs union. Now, under the hard Brexit of the Trade and Cooperation Agreement, independence means a harder Scotland-rUK border. It is a big change and challenge.
But avoiding a challenge won’t solve it. Certainly, the economics of the border are difficult for the pro-independence side. In 2018, Scotland’s exports to the EU were only 31% of its exports to the rest of the UK (while its total international exports were 66% of its exports to rUK). And Brexit is making very clear how damaging a harder border between the UK and EU is. Even before leaving the EU’s single market at the start of 2021, one study estimated that the UK’s goods trade with the EU was 10% lower than it would have been without the impact of Brexit on business behaviour and the economy.
Another study calculated that, even before leaving the single market, the impact of Brexit was to reduce UK services exports over 2016-2019 by £113 billion, compared to what they would have been otherwise, while Ireland’s services exports were around £126 billion higher than they might have been in the absence of Brexit.
And since the new trade deal came into force this year, exports have been lower again – with some sectors notably fisheries/seafood and the wider food and drink category very hard hit, and smaller firms particularly struggling with the new bureaucracy and rules of trade. The hit to the UK’s trade with the EU from Brexit will translate across, in many ways, to an independent Scotland’s trade with rUK – it will be the same border. Nor are the border issues in the context of the Northern Ireland protocol a good comparison, since Northern Ireland is still part of the UK and the border controls, while problematic, are specific to the protocol and less intense than for trade with Ireland and France, for instance.
Where does this leave the case for Scottish independence in the EU? There are both political and economic arguments to make in the context of the border challenge.
On Brexit, there is a set of political arguments to consider. Brexit is an ideological project that was inevitably going to involve deliberate self-damage to the UK economy (something EU observers continue to be rather baffled by as they have watched successive Conservative governments in the last 5 years). Moreover, the behaviour of the UK government during these Brexit years has further undermined and weakened UK-EU relations, damaging trust and confidence. That impacts not only on the economy but on foreign policy relations, security, cultural links and more.
Politically, an independent Scotland would be leaving a UK that has chosen a relatively isolationist and belligerent approach to its neighbour, the EU – the political and economic bloc that it was so recently a leading member of. Unlike the UK, an independent Scotland would be re-joining the 27 member state EU, with its population of 450 million, with all the political, social, cultural, and economic benefits that offers. Politically, it would be the opposite of an isolationist Brexit.
Scotland would also be cutting its constitutional ties to a UK political system that has allowed such a self-damaging and fundamental change to the UK’s position in the world. The counter-argument often made is how could Scotland then equally cause itself economic damage akin to Brexit by leaving the UK. This suggests that however irrational and substantial the damage the UK does to itself, there is never a reason for Scotland to leave due to the economic ties with rUK. This is where there needs to be a reasoned argument made about all the benefits of independence in the EU – including the political, social and cultural, not only the economic issues. Self-determination with, crucially, a rational as well as democratic government that aims to promote well-being in Scotland, in alliance with European and international partners, can be set against the ideological self-harm of Brexit.
Migration and Free Movement
Borders are an inevitable part of becoming a sovereign state. Depending on choices made, they can operate in different ways. Independence in the EU would mean re-joining free movement of people in the EU, with all the economic, cultural and social benefits that can bring, and has brought Scotland while it was in the EU. At the same time, if an independent Scotland remains in the UK/Ireland common travel area, there will still also be all the benefits of having free movement between Scotland, rUK and Ireland.
Remaining in the common travel area would have to be agreed not only between Scotland, rUK and Ireland, but too with the EU, to get a Schengen opt-out, as Ireland has. This looks straightforward but nonetheless the negotiations will have to happen and the agreements made. With that agreement, then free movement of people both to rUK and to the EU – as Ireland has – would mean positive benefits in both directions, and no need for Scotland-rUK passport controls.
Trade and Borders
The trade impacts of the border, unsurprisingly, look the most challenging. In 2018, Scotland’s exports to the EU were £16.1 billion compared to £51.2 billion to rUK. Removing the barriers to trade between Scotland and the EU, arising from the Trade and Cooperation Agreement, and putting them instead between Scotland and rUK would inevitably have a net cost in terms of this comparison alone. One recent study suggested a cost of between 6.5-8.7% in lower income per head – though this study did not look at wider impacts such as on migration, investment or productivity. Moreover, as Brexit hits UK including Scottish exports to the EU, Scotland’s dependence on trade with rUK trade compared to the EU is likely to grow in the coming years (which will make the comparison starker).
This is, though, a static comparison. Serious analysis is needed of different scenarios. Would an independent Scotland in the EU attract more foreign direct investment (quite likely so, just as the UK did while it was in the EU). Might Scotland benefit from a rapid expansion of services exports to the EU as Ireland appears to have done in the context of Brexit – or would its services exports to rUK be harder hit? And if these scenarios are considered, then timing is crucial – how long would potential adjustments and transitions take and what would be the costs and benefits in the meantime?
One notable issue on trade is that the structure of Scotland’s exports to the EU are very different to those to rUK. Scotland’s exports to the EU are 61.5% manufactured goods. But manufactured exports to rUK are only 22%, and 58% services – almost a reverse image. This means that Scotland’s manufactured goods exports to the UK are not that much higher than to the EU – £11.3 billion to rUK in 2018 and £9.9 billion to the EU. If we add in EU neighbours that the EU has close trade deals with (Norway (in the European Economic Area), Switzerland (with good access to the EU single market) and Turkey (in the EU’s customs union)), then Scotland’s manufactured exports to Europe (the EU and these three countries) are £10.7 billion.
The interesting point here is that taking the barriers to manufactured goods trade away from Scotland-EU and wider European trade and putting them instead, after independence, between Scotland-rUK trade is still slightly negative but with a much lesser impact than the overall export figures suggest (Scotland’s manufactured exports to rUK are only 6% higher than its manufactured exports to Europe in 2018). The real economic challenge from the border to rUK is then notably in services (58% of Scotland’s exports) and also in utilities (11% of Scotland’s exports) – though this is not to say that sensitive deliveries such as supplies to supermarkets (as seen for Northern Ireland) will not also be affected.
The Trade and Cooperation Agreement is particularly weak in giving UK preferential access to EU service markets, so an independent Scotland in the EU would face potentially serious barriers in services. But there is more analysis that needs to be done here, not least on where there would be scope for bilateral Scotland-rUK discussion on conditions for access in some parts of services not covered by the EU single market for services. Analysis is needed too on how being part of the common travel area, with free movement of people (crucial for many services), might lessen the impact of some of the barriers to services trade that would intrude otherwise.
There are much bigger questions here too. In the end, independence is about a series of political, constitutional and economic transitions. The wider economic case for independence needs to include detailed scenarios for the main potential transition paths.
For instance, the 2018 Growth Commission report set out a number of targets including doubling Scotland’s overall international exports. If that happened, and if Scotland’s share of exports to the EU (currently 48%) increased to match those of Denmark or Finland (at around 60% of exports) or even to that of Slovakia (at 85% of exports to the EU), then the impact of a harder border to rUK would be substantially lessened or disappear over time. But there are tough questions here: how could this shift be achieved, is it feasible, how long would it take – and under what different scenarios and assumptions on key variables including: growth rates, investment, migration, services trade with rUK, time to re-join the EU and so on.
It has been obvious since before the Brexit vote, that the UK leaving the EU fundamentally changes the implications of Scotland becoming independent in the EU. The political, economic, security, social and cultural impacts of this need much more detailed analysis.
On the trade and border challenge, detailed economic analysis and scenario-building is needed of under what circumstances, and over what time period, and through what types of transition, the costs of having an EU external border between Scotland and rUK can be off-set against benefits of independence in the EU. Now that Brexit has happened, there is a clear trade deal to examine which would condition Scotland-rUK trade in the case of independence, and every month brings new trade data on impacts of Brexit on EU-UK trade. It is time to face up to the border challenge.