Trading Up

The Wellbeing Economy approach lies at the heart of the Scottish Government’s trade strategy, Scotland’s Vision for Trade. Recognising that trade can create winners and losers, the Vision aims to improve our understanding of its impacts in Scotland and to consider policy measures that can be developed to address those impacts.

In leaving the EU, the UK Government became responsible for its own trade policy for the first time in several decades.

In the context of the resultant rapid shifts in the UK’s trading relationships, the Scottish Government published its Vision for Trade (the Vision) in 2021. The Vision sets out the principles, including wellbeing, which guide the decisions we make on trade.

The First Minister has set out three interdependent missions as we transition to a Wellbeing Economy: Equality – tackling poverty and protecting people from harm; Opportunity – Building a fair, green and growing economy; and Community – delivering efficient and effective public services. In doing so we will continue to take action to embed equality and human rights into the daily activity of government and the wider public sector. Understanding and addressing the differential impacts of trade is a tangible way to support those aims and the transition to a Wellbeing Economy through our approach to trade.

What are the differential impacts of trade?

The benefits of international trade are well documented, such as faster growth, higher wages, increased consumer choice and lower prices. However, as well as those broadly positive impacts, there is evidence that there are winners and losers from trade, and that costs and other negative impacts tend to be concentrated among particular industries, regions or societal groups. For example, certain domestic firms may lose out to foreign competition, with associated consequences for their workers. Access to new export markets may make particular regions more attractive places to set up business, given their proximity to ports or airports, but this can divert activity from other regions.

A commonly cited case study of this phenomenon is the impact of China’s integration into the global economy on manufacturing workers in the United States, frequently referred to as the ‘China shock’. A rise in cheaper imports from China into the U.S. market throughout the 1990s and early 2000s made certain goods produced in the U.S. less competitive, leading to job losses and associated wider negative socio-economic impacts. Combined with automation and technological innovation, this had a significant impact on manufacturing workers and their communities across the United States.

How is the Scottish Government working to address these impacts?

Economic growth and activity should serve a purpose, as a sustainable means to improved health and wellbeing for all, rather than simply an end in itself. The Scottish Government is therefore exploring ways we can strengthen our understanding of how international trade impacts people in Scotland and what options there are to mitigate or address any negative impacts. We are seeking in particular to understand the impact of the UK’s changing trading landscape, post EU-exit, and the negotiation of a suite of new Free Trade Agreements (FTAs).

In June 2023, we published our second Vision for Trade Annual Report, detailing the progress we have made so far. To date, our work has focused on understanding these impacts and building our evidence base. For example, we held a roundtable with key stakeholders to gain insights from experts and have engaged with other governments, including the Office of the US Trade Representative (USTR), New Zealand’s Ministry of Foreign Affairs and Trade and Global Affairs Canada, to understand how they have tackled the issue and what we can learn from their approach. The stakeholder roundtable provided important insights on key data sources, as well as data access and availability issues and international comparators we could learn from. Our engagement with other governments has helped us to identify common challenges and potential solutions – for example, Canada’s approach to modelling labour market impacts of FTAs to help ensure trade negotiations lead to more inclusive outcomes.

What are the next steps to deliver the Wellbeing Economy through trade?

In the coming year, we will further develop our evidence base.

Through our engagement with a new research centre on trade policy The Centre for Inclusive Trade Policy and in-house analysis, we are exploring options to address gaps in available data. That includes identifying how we can improve data relating to the characteristics of businesses and workers involved in international trade, and on how specific trade agreements could affect Scotland’s economy.

An improved evidence base could better inform the Scottish Government’s engagement with the UK Government on individual trade deals and on specific sectors, allowing us to seek better outcomes for Scottish stakeholders. Similar recent Scottish Government research on the Impact of Future UK FTA Scenarios on Scotland’s Agricultural Food and Drink Sector is already informing how we engage with the UK Government in those areas.

Better identifying the differential impacts of trade is of course only one half of the story. The Vision also outlined potential levers to mitigate or address those impacts. One way to do this would be to support the greater involvement of under-represented groups in trade, as the Canadian Government have done, recognising the opportunity presented by international trade to address gender-inequality in business ownership and exporting rates and developing services designed to support female-led and owned businesses expanding into global markets.

However, trade or export policy alone cannot mitigate or address trade’s differential impacts. The Vision therefore highlights the intersections between trade and domestic policies which can help maximise trade’s benefits. Key policy areas with levers that could support this more holistic approach include regional development policy and measures in line with a place-based and people-centred approach.

Traditional methods of research and analysis can of course only achieve so much, and we are committed to hearing the voices of those who are, or will be, affected by changing trading arrangements. We therefore welcome inputs from individuals, businesses, academics and other organisations on ways to improve our evidence base on the differential impacts of trade, or to mitigate and address those impacts.

 

Ronan McLaughlin, Policy Adviser – Trade Strategy, The Scottish Government