The Brexit deal and Scottish independence
This article was commissioned by Wikiscot from Ben Wray and an anonymous second author at https://www.linkedin.com/in/ben-wray-4a08765a/ @ben_wray1989. A fee was paid.
The "Brexit deal", properly known as the "Trade and Cooperation Agreement", is the agreement which sets out the terms of the future relationship between the UK and the EU, now that the UK has left the EU. It follows on from the Withdrawal Agreement of January 2020, which marked the beginning of the one-year transition period that ended with the UK's departure. The Trade and Cooperation Agreement was published in Brussels on December 25th 2020, and took effect on 1st January 2021. The EU is the UK's largest trading partner, and this Agreement casts a new perspective on the debate about Scottish independence.
- 1 The Agreement
- 2 Implications for Scottish independence
- 3 The Agreement overall
- 4 References
The most important provisions of the Agreement are set out below.
Trade in goods
There are to be no tariffs and no quotas on goods traded between the UK and the EU; securing this clause was an important negotiating aim for the UK Government. However, goods to the EU make up less than one quarter (22%) of UK exports: only 43% of UK exports go to the EU, and half of that 43% goes to the EU in the form of services, for which the provisions are very different.
The provisions for trade in goods also bring restrictions and costs. Products will be tariff-free only if they are made primarily from parts sourced in the UK or the EU: cars, for instance, will need to have 55% "local content". And exports in either direction will have to show that they meet EU regulatory requirements - a major increase in paper-work for businesses on both sides.
The EU fishing catch in UK waters will be reduced from 59% of the total catch (in 2018) to 45% of the total, phased in over five and a half years. The UK catch will therefore increase, over this period, from 41% of the total to 55%. The UK Government did not achieve its negotiating aim here, which was to double the UK catch to 80%.
Further elements in this part of the Agreement make it even less attractive: quotas can no longer be swapped or leased; the reduction in quotas for species that are of high value to Scotland (haddock, cod, and coley, also known as "saith") outweighs the gain for other species; and if the UK seeks to change the quotas at the end of the five-year phasing-in period, the EU can impose tariffs.
The two sides have agreed not to seek to undercut each other's regulatory standards (i.e. the legal conditions that control economic activity); if they do, tariffs can be introduced. The EU sought a ratchet clause forcing the UK to improve regulatory standards at the EU's pace, but this has not been included.
The state cannot give an unlimited guarantee to a company; all state aid must be accompanied by a restructuring plan, and states must be transparent about the business subsidies they are providing. These rules are binding on both sides, and bring UK practice closer to that of the EU.
A Partnership Council between the UK and the EU has been set up to resolve disputes pertaining to the Agreement. If the Partnership Council fails to resolve a dispute, the case will go to an independent arbitration panel, which can approve time-limited tariffs if it deems that the Agreement has been breached. The EU courts do not have a role in the dispute settlement process.
There is no agreement on "equivalence", an arrangement which allows the City of London to conduct financial trading across the EU on the grounds that the regulatory regimes of the UK and the EU are of equivalent standing. This means that UK financial institutions can no longer trade in the EU.
This provision is likely to significantly damage the UK economy: the City of London financial services sector produces 7% of UK GDP, and the lack of equivalence deprives it of a significant part of its market. The UK had already taken measures to allow EU banks to continue trading in the City on the same basis as before, but this was not reciprocated. Boris Johnson has admitted that the lack of agreement on financial services is one of the big disappointments for the UK side in the Agreement.
The UK is no longer part of Europol or Eurojust. It has however been agreed that the UK and EU law-enforcement agencies will automatically exchange three types of information: DNA, finger-prints and vehicle registration. These are the three most important types of information for law-enforcement purposes. The UK will also have access to EU passenger-name records for terrorist-prevention purposes.
The European Arrest Warrant has been replaced with a fast-track system of extradition called "Surrender". This is the same as the EU's arrangement with Iceland and Norway. It is more limited than the European Arrest Warrant in that states can refuse a warrant for political offences, and can refuse to surrender their own nationals.
Gemma Davies from the think-tank "UK in a Changing Europe" comments: "The UK and the EU have secured cooperation that is as close as conceivable, without crossing any of the UK's red lines or undermining the EU's internal legal order."
There is no agreement on the mutual recognition of professional qualifications, so a UK doctor, for example, will not automatically be able to work in the EU. Business rules mean that a person from the UK will need a work permit if they wish to conduct regular, paid work in the EU, but not for specific short-term assignments such as attending meetings or setting up a firm.
The UK sought to include mutual recognition in the Agreement, but the EU refused. Since mutual recognition, on the face of it, benefits both parties without disadvantaging either, it is difficult to understand why this was not agreed.
Energy and climate change
Unusually for trade deals, this Agreement contains binding commitments on climate change, with the Agreement suspended if either side fails to meet the 2015 Paris Agreement targets on reduction of emissions. The UK will not be part of the EU's internal energy market, but there will be new arrangements in place by 2022 to make sure that energy interconnections between the UK and EU continue to operate efficiently.
When taken in conjunction with the Withdrawal Agreement of January 2020, the Agreement brings other changes into effect. The most important of these is that there will now be customs checks on all goods passing between Northern Ireland and the rest of the UK; the checks are made when the goods reach mainland Britain, rather than at the Northern Ireland border. The Agreement also means that the UK Government is free to introduce its own points-based immigration system.
Implications for Scottish independence
Overall the Agreement is a bad deal for Scotland. The Scottish Government calculates that it will lead to a fall in Scottish GDP of 6.1% - £6.10 in £100 - over the next ten years. Independence may not recover that shortfall, but a boost for independence is likely because voters will believe that an independent Scotland would have made better choices.
Economic damage will come from the UK's new points-based immigration scheme, which it could not introduce while it was a member of the EU. Under this scheme a person needs to be earning £23,040 a year before they can apply for entry to the UK. The regime disadvantages Scotland because Scotland has different demographics from England: a smaller proportion of its population is of working-age, and the median income is lower. The scheme will exacerbate skills shortages, especially in Scottish social care, where already many existing vacancies are unfilled and salaries frequently fall beneath the new threshold. More than 5% of staff in this sector are EU citizens, so the sector relies on EU workers being available.
If the new system causes a fall in the Scottish working-age population, that will have a major impact on Scotland's rate of growth, and on its ability to provide public services for an ageing population. This in turn is likely to increase support for independence, on the grounds that it would bring control of immigration back into Scottish hands.
Border with UK
One effect of the Agreement is that different parts of the UK have different border relationships with the EU. The most important difference is the one established by the UK Common Travel Area, which the Agreement leaves unchanged. This comprises the UK, the Republic of Ireland, the Channel Islands and the Isle of Man, and allows all citizens of that area to reside, work, study, vote and receive social benefits in any part of the Area, even though part of that Area - the Republic of Ireland - is in the EU. As a result, the UK's relationship with the Republic of Ireland is different from its relationship with other members of the EU. It seems certain therefore that the Common Travel Area would include an independent Scotland, whether or not Scotland were in the EU. This lays to rest claims that independence would remove the right of Scots to travel to the UK, breaking up families and destroying long-standing connections.
The Agreement also means that Scotland in the EU would have tariff-free access to the rest of the UK. This matters, because currently 60% of Scottish exports and imports are with the UK, and the two economies are highly integrated. There would however be non-tariff regulatory barriers between the UK and a Scotland that was in the EU: both Scotland and the UK would need to certify the origin of goods and show that they met EU standards, and this paperwork burden on exports and imports would depress the two economies. If an independent Scotland were not in the EU, it could of course make its own trade deal with the UK.
The Agreement confirms that Northern Ireland is within the EU for the regulation of trade in goods, but is otherwise a full member of the UK; customs checks are made at the first point of delivery rather than at the border. If this arrangement works satisfactorily, it will demonstrate that a similar regime could be applied to the Scottish border, weakening the Unionist claim that independence will "rebuild Hadrian's wall".
The Agreement will please Scottish farmers, since agricultural products are mostly covered under "Trade in goods", and are therefore free of tariffs and quotas. However, there are specific problems: seed potatoes are excluded from a list of products which can be exported to the EU. Seed potatoes are a tiny part of the Scottish economy - 0.07%, or 7p in £100 - but three-quarters of the UK crop is grown north of the border, so this change has a disproportionate effect on Scotland.
Regarding fishing, the UK has failed here to deliver a symbolic part of its objectives, to "take back control of British waters". This is not unexpected, since from a UK perspective fishing is of marginal importance, making up just 0.1% - one part in a thousand - of total UK GDP. But the fishing industry in Scotland is six times larger, as a share of the economy, than it is in the UK, so these changes disproportionately affect Scotland. And whilst the Scottish fish industry amounts to only 0.6% - 60p in £100 - of the Scottish economy, it forms an important aspect of the national culture, and rouses high emotions.
Four local authorities - Aberdeenshire, Argyle and Bute, Highland, and Shetland - contribute between them £247 million annually to the Scottish economy. They constitute 10% of the electorate, and in 2014 they all voted "No", providing 12.2% of the "No" vote. If those communities voted for Brexit on the grounds that it would give them back their fish stocks, they will now realise that they have been "betrayed", as Mike Park, Chief Executive of the Scottish White Fish Producers Association, put it. So a change here could lead to a permanent shift in political alignment. One option open to these communities is to press for an independent Scotland within the EEA or EFTA, where the Common Fisheries Policy does not apply. This is the route taken by Norway, Iceland and Greenland, the latter being an OCT ("Overseas Countries and Territories") associated with the EU.
The Agreement overall
The fact that an Agreement has been achieved is no surprise: normal economic considerations - of whatever political colour, and on both sides of the negotiations - meant that an agreement was necessary. Whether that Agreement serves the best interests of the people of the UK, and more particularly the people of Scotland, is less obvious.
Taken overall, the Agreement represents a qualified propaganda success for the UK Government. Firstly, the UK will not be required to maintain regulatory standards in line with the EU. It can adopt whatever standards it wishes, and the change can only be challenged if it creates an unacceptably large discrepancy; and that challenge then needs to go through an arbitration process before sanctions can be introduced. This is looser than the pre-Brexit regime, where regulatory standards were wholly within the power of the EU, and wholly binding on the UK. And secondly, the EU courts will not adjudicate disputes which may arise over the Agreement. As a result, the UK is largely outside the EU's regulatory and legal orbit, while still enjoying a free-trade relationship, with no quotas or tariffs. This combination - free trade and British "sovereignty" (though this is a highly contested term) - allows the UK Government to claim that Brexit has been a success.
A recent poll shows that a good proportion of those who have become pro-independence since the Leave vote in 2016 did so because of Brexit, so the Agreement has to that extent been a boost for independence. However, Brexit may not cause as much economic damage as has been predicted, and its impact may take time to become apparent. If the difficult new economic environment becomes normal and accepted, those who have drifted towards independence may drift back again, fearing that independence would bring yet further economic disruption.
To maintain impetus, the independence movement will need to develop a compelling vision of an independent Scotland's place in the world.
- https://ec.europa.eu/transparency/regdoc/rep/1/2020/EN/COM-2020-857-F1-EN-ANNEX-1-PART-1.PDF ("The Agreement"). Accessed 29/01/2020.
- Agreement, p. 18. Accessed 29/01/2020.
- https://commonslibrary.parliament.uk/research-briefings/cbp-7851/ Accessed 29/01/2020.
- Agreement, p. 266. Accessed 29/01/2020.
- https://www.gov.scot/news/brexit-deal-means-drop-in-key-fishing-stocks Accessed 29/01/2020.
- Agreement, p. 176. Accessed 29/01/2020.
- Agreement, p. 184. Accessed 29/01/2020.
- Agreement, p. 10. Accessed 29/01/2020.
- Agreement, p. 108. Accessed 29/01/2020.
- https://encompass-europe.com/comment/life-beyond-passporting-for-post-brexit-financial-services Accessed 29/01/2020.
- Agreement, p. 287. Accessed 29/01/2020.
- https://ukandeu.ac.uk/law-and-judicial-cooperation-in-the-brexit-deal/ Accessed 29/01/2020.
- Agreement, p. 778. Accessed 29/01/2020.
- Agreement, p. 158. Accessed 29/01/2020.
- https://www.gov.scot/publications/eu-uk-negotiations-outcome-analysis/#Economy%20overall Accessed 30/01/2020.
- https://www.gov.uk/government/publications/uk-points-based-immigration-system-employer-information/the-uks-points-based-immigration-system-an-introduction-for-employers Accessed 29/01/2020.
- https://www.gov.scot/binaries/content/documents/govscot/publications/advice-and-guidance/2020/08/scottish-government-response-migration-advisory-committee-2019-20-call-evidence-shortage-occupation-list2/documents/scottish-government-response-migration-advisory-committee-call-evidence-shortage-occupation-list/scottish-government-response-migration-advisory-committee-call-evidence-shortage-occupation-list/govscot:document/scottish-government-response-migration-advisory-committee-call-evidence-shortage-occupation-list.pdf ("Shortage Occpation List"), p. 45. Accessed 29/01/2020.
- Shortage Occupation List, p. 47. Accessed 29/01/2020.
- https://fraserofallander.org/economic-statisticians-irony-and-scotlands-latest-trade-statistics/ Accessed 29/01/2020.
- https://www.politico.eu/article/eu-grants-third-country-listing-to-british-agri-food-exports/ Accessed 29/01/2020.
- https://www.thenational.scot/news/18971108.massive-sell-out-brexit-deal-sees-scotlands-fishermen-betrayed-tories/ Accessed 29/01/2020.
- https://www.bbc.com/news/uk-scotland-scotland-politics-54542712 Accessed 29/01/2020.