THE experts have spoken (again). Some of it, to be honest, you don’t need experts for, such as this: “Scottish independence would create a new international border between Scotland and the rest of the UK, leading to higher trade costs”. But some of it you do, such as this: “The combination of Brexit and independence would reduce our incomes by up to £2,800 per person.” It’s the £2,800 number that’s making the headlines.
But I have some thoughts. First: the experts (in this case the LSE’s Centre for Economic Performance) are going to be subject to what is now known as The Govian Response, or “What do experts know anyway?” The report will also be subject to the Look Over There! Response, which involves ignoring the central conclusions by talking about something else instead.
This, in effect, is what Fiona Hyslop, the Scottish Government’s Economy Secretary, did when she was presented with the findings. “As an independent member of the EU,” she said, “free from the damage of Brexit, Scotland would be part of the huge single market, which is seven times the size of the UK.”
But that completely ignores what the LSE report actually said – what they call the independence paradox. No one denies that Scotland, if it rejoined the EU, would be part of a huge single market, but what Ms Hyslop ignores is that the EU is a much less important trade partner for Scotland than the rest of the UK and would remain so for a long time to come, even after rejoining the EU.
READ MORE MARK SMITH: The dilemma every unionist is about to encounter
It is this fact that sets up the paradox. Yes, rejoining the EU as an independent country would boost trade with the EU, but it would also lead to an increase in trade costs with the rest of the UK. What this means is that, in order for Scotland to be better off inside the EU, independence would have to destroy a sufficiently large share of our trade with the rest of the UK to make the EU Scotland’s most important partner. This is the paradox: for joining the EU to be economically desirable, independence would have to damage our current economy.
Sadly, a lot of that would happen naturally, which is the other part of the report that jumps out at you. When neighbouring countries, or regions, or countries in a close union, set up borders between each other, trade between the two starts to decline big time and this is what would inevitably happen to Scotland for reasons that aren’t just economic. Look at this bit of the report: “border costs result not only from economic policies, such as tariffs, but also from cultural and social differences between nations that reduce the effectiveness of international communication or lead consumers to prefer domestically produced goods and services.”
The logic of that is undeniable – you put up a fence, it’s harder to talk to the guy on the other side and miscommunication develops. The bit about consumers preferring domestically produced goods and services is also disturbing, isn’t it? I can see it now: “Buy Scottish!” “Buy English!” And the English would have much less to lose – trade between RUK and Scotland accounts for 3.9% of RUK output compared to 44% of Scottish output.
The SNP would say (indeed, they already have) that the lost trade with the rest of the UK would be made up by increased trade with the EU – just as Brexiteers said lost trade with Europe would be made up by trade with the rest of the world. But the LSE report makes the reality of that clear: the rest of the UK would remain our biggest trading partner for a long time to come, except that, under independence, the trade would be in terminal decline.
In a way, I think that’s the hidden sadness of this new report. No doubt, some of the economic damage of independence would be countered by increased trade with the EU, but those cultural, social and personal differences the report mentions are a different matter altogether. How would we deal with those? How would we deal with the fact that a once-close relationship was becoming a little more distant and difficult every day?
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