EU market key for Scottish business

Ladies and gentlemen, first of all I would like to say that it is a very great pleasure to be visiting Tallinn today. This is my first official visit to Estonia, although I have visited before as a tourist to your spectacular capital city. Whilst preparing for this trip, I was struck by the number of connections there are between our two countries, many of which have their origins in football.

Scotland and Estonia

Indeed the so-called 'Tartan Army', comprising our friendly football supporters, has been visiting Tallinn ever since Estonia joined FIFA. The first game between the two sides took place in 1993. I am delighted to say that Scotland won. But the Estonian and Scotland fixture shot to international prominence around 'the game that never was' in October 1996, Tallinn – a qualifier for the 1998 World Cup. The game was one sided – literally. Scotland, after complaining about the floodlights, managed to get the kick of time brought forward to three o'clock. The Estonian team – contrary to popular belief – did turn up. But making the point that they couldn't feasibly make the three o'clock kick off – many had other jobs, as did their fans – they turned up to start the match at the original kick off time. Scotland had long gone. The match kicked off at three with Scotland the only team in attendance. It lasted a full three seconds. It was a good omen. Scotland qualified for the 1998 World Cup and opened the tournament in France against the mighty Brazil. We haven't qualified since.

But through successive visits and often through the medium of football, many Scots fell in love with Estonia and many settled here – growing successful businesses, and generating employment, opportunity and trading links between Scotland and Estonia. The list of Scots with business interests here is long and varied. Yesterday afternoon I visited John Ross' Interconnect factory based here and supplying the renewables industry. Scots have also been active here setting up software businesses, bars, a pest control business, a luxury hobby business and consultancy services. I am keen to see that trend continue and for the relationship between our two countries to deepen.

The Nordic Baltic policy statement

Engaging with the Nordic and Baltic countries is a key priority for Scotland. Our ambition for that engagement – to promote trade links, cultural exchange and knowledge exchange – is formalised in the Scottish Government's Nordic and Baltic policy statement which the Scottish Government launched back in 2014.

We recognise Estonia as a world leader in digital technology and information communication technology (ICT). Estonia gave the world Skype; was the first country to allow online voting; has a paperless Parliament, some of the world's finest programmers and one of the world's quickest broadband speeds. There is much we in Scotland can and want to learn from you. Only today I had a fascinating insight into the digitally based work that Estonia is doing around e-Health – an area in which the Scottish Government is also active. Scottish Government officials are already in contact with the Estonian Government to learn from Estonia's successful digital transformation and we look forward to deepening those links.

Key messages

Ladies and gentlemen, whilst I appreciate that the EU referendum result is dominating the EU agenda, I have two key messages to communicate today.

The first is that Scotland, in the broadest sense, remains open for business. It remains more important than ever to us that we continue to develop outward looking relationships with countries of the EU and beyond. We will not be turning inwards as a consequence of the EU referendum result but pressing on with meeting the aims of our own Economic Strategy, which is all about promoting smart, sustainable and inclusive fair economic growth. EU and indeed international engagement will remain a key priority for the Scottish Government, as will continuing to develop the relationships that our Nordic Baltic policy statement commits us to.

My second message is that whilst the UK referendum may be dominating the headlines, the Scottish Government is acutely aware that the EU and its leaders have a number of other pressing problems to resolve, not least taking steps to tackle the refugee crisis that has engulfed Europe, tackling persistently high levels of youth unemployment across the Union and ensuring the security of the EU in view of the worrying attacks we have seen in both France and Germany. Indeed the latter puts the question of prioritisation into context. The Scottish Government supports the efforts being made in this regard to improve the functioning of the EU and ensure the project remains relevant to improving the lives of its citizens.

Scotland's constitutional journey

However it won't come as a tremendous surprise that I also wanted to talk today about the outcome of the UK's EU referendum and what this means for my country, Scotland.

But to give that context, I also wanted to touch on the constitutional journey that Scotland has been on. It has been a long and fascinating one.

Scotland has a long history, both as an independent nation before the Treaty of Union, then within the United Kingdom as a recognised nation with our own institutions and legal system. The history of Scotland stretches back to the eighth century, but our independence was secured through the military and diplomatic achievements of Robert the Bruce 700 years ago. Thereafter, apart from a period of incorporation into the Commonwealth of Oliver Cromwell, Scotland was an independent country until the Union of the Crowns in 1707.

But much has happened since. The detail would require a separate lecture but a defining moment was the reconvening of the Scottish Parliament in 1999, almost 300 years after its suspension. The Scotland Act which established the Parliament devolved significant powers to it, for example in agriculture, fisheries, health, education and transport policy, and gave the Parliament limited tax varying powers.

The election of a majority SNP Government in 2011 led to a referendum on Scottish independence in 2014. Whilst the yes campaign lost by 45% to 55%, the large support for independence led to an acknowledgement by the UK Government that further constitutional change was required. This was given force through a Scotland Bill which will see the transfer of further powers to the Scottish Parliament, most particularly in the fields of taxation and welfare powers. The process of transferring these powers is on-going.

We indeed will have a powerhouse Parliament when those new powers are implemented, though as an SNP Member, I am bound to say that I would love to see an independent Scotland. But I do not want Scottish independence to be the focus of today. Let me explain why.

EU referendum result

On 23 June, the UK voted by a narrow margin to leave the European Union. The Scottish Government was bitterly disappointed by that result but at the same time proud that the people of Scotland voted overwhelmingly to remain in the EU by 62% to 38%.

While much has been written back home about the apparent economic bounce the UK has enjoyed since the referendum and whilst not wanting to talk our economy down, it would be fair to say that industry in the UK has serious concerns for the future; I think we must remember also that Brexit has not actually happened yet.

Leaving the EU is likely to weaken the Scottish and UK economies. According to the UK Government's own analysis, leaving the single market could lower Scotland's GDP by more than £10 billion. There is a real risk that the UK is facing a lost decade that will do deep, severe and lasting damage to our economy and society.

The Scottish Government is acting decisively to help counter economic uncertainty. We have announced a £500 million Scottish Growth Scheme and a £100 million Capital Acceleration Programme to stimulate our economy.

We have also set up a dedicated Post-Referendum Business Network service to provide information and support to businesses affected by the referendum result. We will also implement a four point plan to boost trade and exports, ensuring that our European friends, including Estonia, know that Scotland is open for business.

I remain of the view that more could have and should have been done at a UK level to make the positive case for EU membership during the referendum campaign. I think it deeply regrettable that so much of the campaign to leave the EU focussed on the perceived threats of inward migration without acknowledging the very real contributions EU citizens living in the UK make to its economy, culture and diversity. The Scottish Government values the contribution that the 181,000 EU nationals – including 747 Estonians – make to our economy, our society and our culture. My message today is that EU citizens are and will remain most welcome in Scotland.

Reassuring our fellow EU citizens about their future right to continue living and working in Scotland remains of vital importance to the Scottish Government. We do not have power over immigration policy. But we continue to press the UK Government to end the uncertainty EU nationals face. Using human beings as bargaining chips cannot be justified. The UK should take the lead and end this uncertainty now.

The five tests

So what now for Scotland?

After the EU referendum result, the First Minister set out five key interests which must be protected after Scotland voted overwhelmingly in favour of remaining in the EU.

The first relates to our democratic interests – the need to make sure Scotland's voice is heard and our wishes, expressed through the referendum result, are respected.

The second focusses on our economic interests – safeguarding free movement of labour, access to a single market of 500 million people and the funding that our farmers and universities depend on.

The third relates to our interests in social protection – ensuring the continued protection of workers' and wider human rights that owe their origins to the UK's EU membership.

The fourth concerns our interests in solidarity – the ability of independent nations to come together for the common good of all our citizens, to tackle crime and terrorism and deal with global challenges like climate change.

And the fifth concerns our interests in having influence – making sure that we don't just have to abide by the rules of the single market but also have a say in shaping them.

Ongoing work

In pursuit of these five key interests, the Scottish Government's most immediate priority is engaging the UK Government to ensure that Scottish interests are firmly embedded in its EU negotiating strategy before Article 50 is triggered. We want at all costs to avoid a so-called 'hard Brexit'. Critically, we need the UK to make its aims clear and to take action to ensure we remain within the single market.

The UK has committed to triggering Article 50 no later than the end of March 2017. The UK Prime Minister has committed to ensuring there is a UK-wide approach before that point is reached. Time is short and we will judge the negotiating position that the UK adopts on the extent to which it adheres to the five interests or tests that I have just set out.

In parallel, the Scottish Government has also convened an independent Standing Council comprising experts from the world of business, academia, the scientific community and former diplomats to provide it with independent advice. The Standing Council and officials are exploring the possible options open to Scotland to enable it to protect its EU relationship as well as conducting detailed work on a number of sectoral themes – for example, maintenance of EU funding and social protections.

That work will culminate in the publication, before the end of the year, of a Scottish plan setting out the Scottish Government's own detailed proposals for protecting Scotland's EU relationship. I hope very much that we can demonstrate that these proposals could be good for the UK as well as Scotland – but we shall see.

While the detail of that plan will require to be worked up, a key part of it will cover ways in which we can maintain membership of the single market for Scotland, even if the rest of the UK leaves. Single market membership is a key priority for Scotland with over 40% of our exports going to the EU.

We have also been engaging with member states across the EU so that it is well understood how Scotland voted and the work the Scottish Government is doing to protect its relationship with the EU. That has been the purpose of my visit to Estonia today and I have received a warm welcome here.

Today's discussions have also emphasised to me the responsibility that the Estonian Government shoulders as it prepares to take on the Presidency of the EU in July next year, by which time Article 50 will have been triggered by the UK Prime Minister.

Independence

Let me be clear that the starting point in our deliberations is how to respond to the EU referendum result. But if the UK Government is not constructive in its approach, then a referendum on Scottish independence remains an option that is on the table. The Scottish Government did not wish to find itself in the position it is now in, with the very real prospect of Scotland being dragged out of the EU against the will of the majority of its people. If at the end of this process we conclude that is simply not possible to protect Scotland's interests within the UK, then the Scottish Government reserves the right in principle to hold an independence referendum, if it has the support of the Scottish Parliament.

Conclusion

Ladies and gentlemen, in conclusion, in spite of the EU referendum result, the Scottish Government is determined to do all that it can to ensure that Scotland remains open for business.

That means remaining an open nation, working with our neighbours, and playing a positive role in the world. Our friendships and partnerships with other nations are important to us and we will ensure that whatever the outcomes are of the UK leaving the European Union, these partnerships are not damaged.

And my trip today has emphasised to me that there is much that we can do to deepen links between Scotland and Estonia, building on those that already exist.

In spite of the uncertainties that lie ahead I will head back to Scotland tomorrow in good heart at what I have learned here and I wish Estonia every success in its forthcoming role in holding the EU Presidency.