Ministerial Trade Board minutes: December 2017

Attendees and apologies

Chair

• Keith Brown MSP, Cabinet Secretary for Economy, Jobs and Fair Work

Present

• Eric Balish
• Martin Bell
• Russell Dalgleish
• Rachel Jones
• Prof. Ferdinand von Prondzynski
• Jane Richardson
• Linda Steedman
• James Withers

Apologies

• Karen Betts
• Michelle Crossan-Matos
• Ian Donnelly
• Afzal Khushi

Also in attendance

• Mark Hallan, SDI
• Ewan Mearns, Scottish Enterprise

From Scottish Government

• Kevin Quinlan
• George Burgess
• Sharon Donnelly
• Jamie McGarvey

Items and actions

1. Welcome and introductions

1.1 Mr Brown welcomed everyone to the third meeting of the Trade Board.

1.2 Mr Brown welcomed Professor Ferdinand von Prondzynski as a new member of the Trade Board, and added that his wide range of experience and knowledge would be a valuable addition to the Board discussions. Mr Brown informed the Board that since its last meeting, Nora Senior had accepted the position as Chair of the Scottish Government’s Strategic Board for Enterprise and Skills and, as a result of this, stands down as a Trade Board member.

1.3 Mr Brown introduced four people who had not previously attended a Trade Board meeting:

• Kevin Quinlan, recently appointed SG Director for International Trade and Investment
• Martin Bell, Deputy Director for Global Affairs, Scotch Whisky Association
• Mark Hallan, SDI Senior Director, Europe, Middle East and Africa
• Ewan Mearns, Scottish Enterprise

1.4 No additional agenda items had been notified to the Secretariat.

2. Notes of previous meeting and matters arising

2.1 The note of the previous Board meeting had been circulated in advance and had been agreed by all members.

2.2 The actions from the previous Board meeting were completed with the exception of:

• Scottish Government paper on work being undertaken to examine how public sector expertise and assets in Scotland can be used to promote business and investment opportunities in and from overseas markets. This paper is currently in development.
• Mr Brown again raised the possibility of holding the Trade Board meeting in Scotland House in London during 2018.

Actions

• SG to bring forward a paper to the next meeting covering risk and the interaction with UK government regarding investment projects, including work being undertaken to examine how public sector expertise and assets in Scotland can be used to promote business and investment opportunities in and from overseas markets.
• Secretariat to explore feasibility of holding a Trade Board meeting in London during 2018.

3. Update on key issues

3.1 Three papers were provided to members in advance of this meeting:

• a Key Issues Update which covered the topics of Brexit, Trade Envoys, Berlin Hub, Local Economic Partnerships and Enterprise & Skills Review
• a paper from Board member Linda Steedman – ‘Using innovation to boost international trade in a Brexit landscape’
• a hand-out for the Board meeting and a copy of the Tradescape evidence pack to support today’s presentation from Ewan Mearns - “Tradescape 2025: Understanding the implications of future global drivers of trade for Scotland’s Trade and Investment Strategy.”

Mr Brown invited any observations or comment on the update papers. The following points were raised in discussion:

• the increased prominence of the economy in Brexit discussions where previously much of the focus had had been on immigration issues
• the need for business to clearly communicate to the UK Government the consequences of a hard Brexit and for government to engage directly with sectors and businesses rather than just through representative organisations
• the perception of a lack of proper understanding within the UK government of the implications of withdrawing from the Single Market and Customs Union
• anecdotal evidence of UK Brexit negotiators being unprepared and concern around a continuing lack of clarity in the UK negotiating position
• the complexity and time implications involved with renegotiating or “grandfathering” the large number of international agreements relevant to trade which the EU is presently a party to

Note: The EU has Preferential Trade Agreements with 52 countries and is negotiating trade agreements with another 72 countries. After Brexit, UK would need to re-negotiate or start new bilateral negotiations on 124 trade agreements. Focusing only on the top-50 UK trade partners (who account for 92% of all UK trade), 41 have some trade agreements or ongoing negotiations with the EU.

4. Discussion: “Capturing the real life challenge of international trade.” – Russell Dalgleish

This item was carried over from the previous Board meeting at Mr Brown’s request and he welcomed any practical actions the Board might identify in their discussions.

RD provided thoughts on boosting SME impact in international business opportunities and shared feedback he had received on his travels since the last meeting. He noted that overseas markets are baffled that Scottish companies have issues with exporting. He had attended a weeklong series of events arranged by the Institute of Directors, which had identified three main areas of concern: Lack of Ambition, Lack of Market Knowledge and Poor Sales Skills.

These topics generated a great deal of board discussion around identifying areas to strengthen these weaknesses or shortfalls. Board discussions noted:

(i) Lack of ambition

• It was generally accepted that it can be difficult to teach or encourage companies to ‘be ambitious’ and to also recognise that some SMEs simply do not wish to export.
• There are certain sectors where ambition is not a problem – e.g. food & drink sector, where many companies have the ambition to export however, their issue is confidence.
• Companies are often deterred at arrival in a new country with worries over where they start and how they integrate and become part of the business or cultural scene. A ‘soft landing’ for companies can be helped by digital/online research on material prior going to market.

(ii) Lack of market knowledge

• Many SMEs are using ‘gut feel’ on markets rather than proper research. RD recommends and uses universities to assist research.
• Ideally we would choose higher education institutions for their particular experience in a certain area or sector and this would specialise their offering to industry, avoid duplication of effort and share inward investment budget across institutions.
• The Board had concerns over trade data and the measurement of exports, in particular, ‘exports’ to England which then go outwith the UK. There are several sources for statistics but the general feeling was that true exports from Scotland are higher than reported. Mr Brown agreed that obtaining reliable and accurate figures is essential for decision making on this scale. He has written to the UK Government on this matter.
• Consider SME events which bring together experienced exporter and new companies within the same sector.
• The use of social media to get to ‘hard-to-reach’ SMEs is important and this is where SMEs are talking to each other.

(iii) Poor sales skills

• There is a perception of Scottish companies as trustworthy and hardworking, which obviously should be promoted. However, Scots are often not good with presentation or persistence in the selling process. There is a need for improved presentation skills by SMEs especially in the tendering process for international contracts.
• At times, lack of research into local selling customs can cost sales. These sales skills and awareness of other cultural norms and differences can be coached. The universities sector can support in all of these areas and in utilising graduate alumni as willing ambassadors for Scotland and to boost export market
• Utilising graduate alumni (not just Scots) as willing ambassadors for Scotland. Mr Brown gave his recent visit to Kazakhstan as an example where Kazakh students spoke warmly of their time in Scotland.
• Mr Brown commented that, during his visit to Kazakhstan, he had seen that Scotland had a recognisable brand which should be used to our advantage with the greater trading opportunities which should be available following Brexit (such as Canada). However, Ireland has a more aggressive approach in pinpointing opportunities, for example, ‘hunting’ possible inward / outward targets at airports.
• There would be merit in individual Ministers visiting countries to build up a relationship, also using sporting events and chambers of commerce opportunities.

Other issues raised by the Board in discussions included:

• Fear of not being paid is one of the major deterrents to exporters. Businesses should not be walking away due to fear of non-payment. There are bank specialists in this area to advise SMEs on methods of payment for particular countries. However, some Board members commented that they had been unable to find these specialists in the past. Helping businesses to link to specialists who can help on international finance could be a quick win.
• Notable in this area were Iran and Russia where there are many opportunities but banks will not risk any accusation of breaking sanctions for fear of US action.
• How do we “de-risk” exporting ? Dairy sector had recent examples of collaborations to de-risk and foster a group approach.
• There is greater tourism from developing markets and Scotland needs to be ahead of the game by developing cultural awareness in businesses to welcome guests from growing markets.

Action

George Burgess and Eric Balish to bring paper to next meeting examining support for businesses on international finance issues, including how best to link businesses with expertise available in banks.

5. “Using innovation to boost international trade in a Brexit landscape.” - Linda Steedman

Mr Brown thanked Linda Steedman for submitting her paper noting that this is an important policy area and that the Scottish Government’s long term ambition is to boost Scotland’s innovation performance to match the levels of the best performing countries in the OECD.

LS noted that her primary reason for writing the paper was seeing companies’ lack of confidence stemming from uncertainty and their hesitation on fears over investment and what to do in the near future. Whilst fear was making some companies stand still to await outcomes, US companies are stealing a march on us and are booming.

In discussion of the paper, the following points were noted:

• It is important to get the message to the business community that innovation can make your business leaner and that companies need to see innovation as R&D.
• Suggestion for possible marketing campaign to lift the economic gloom – it would need to be a short and sharp one similar to drink driving campaigns with possibility of getting Ministers involved to help ramp up the message.
• Linking a government Minister with a key market area and building a close relationship (i.e. not sending different Ministers to countries previously visited by another Minister)
• Nevertheless, trying to sell a message on productivity and innovation would be difficult.
• Government agencies have excellent programmes available but many companies uncertain of what is out there.
• Students can play a greater part in business R&D however large companies, in particular, can have difficulty in hiring students – e.g. due to internal HR problems

The group agreed there should be a strong focus on innovation to be discussed at the next meeting, areas to link to:

• Innovation Communications Action Plan
• two or three key actions that could be transformational (suggestions from Board members welcomed) e.g. the action described above on facilitating access to international finance expertise
• consider a Productivity Export Month
• tradescape
• digital opportunities (blockchain)
• role of globalscots
• the Irish model - what do we have to do to emulate their strong areas
• SG update paper to include a summary of innovation activity already in place

Actions

• Prof. von Prondzynski to provide a paper on the Digital Entrepreneurship Hub developed by Opportunities North East (ONE)
• Prof. von Prondzynski to approach delegate from the Irish Investment Network to present at a future Board on how Ireland approaches trade and investment opportunities
• SG update paper to include a summary of innovation activity already in place

6. “Tradescape 2025 – Understanding the implications of future global drivers of trade for Scotland’s Trade and Investment Strategy” – Ewan Mearns

Mr Brown introduced Ewan Mearns from Scottish Enterprise and thanked him for offering to present this item to the Board. Ewan spoke about Tradescape 2025, the future of global trade and the potential implications for our trade support to companies. After the presentation there was wider discussion by the Board which noted:

• Tradescape 2025 was an excellent piece of work and that its findings were relevant to companies both large and small.
• The ‘TeamScotland’ idea has not yet been fully mastered. If we can package Scotland’s potential overseas in the way those “best practice” countries have done (e.g. New Zealand and Iceland) then transformational change is possible.
• At present there are some branding problems with external uncertainty as to what Scotland offers. Recent attendance at the Kazakhstan Expo, where Scotland shared exhibition space at the UK pavilion, highlighted this problem. However, it was also noted that the costs of funding a separate pavilion for Scotland ( in the upcoming Dubai 2020 Expo) would be extremely high.
• We have certain datasets that are not used nearly enough – data which tells us where Scots companies want to go to / export to which has not been used but is valuable data.

7. AOB

7.1 No other business was raised.

8. Next meeting

8.1 The Chair indicated that the Secretariat would seek a suitable date for the next meeting and invited members to suggest matters they would like to discuss at the next meeting.

Actions

Secretariat to correspond with Board members to agree a suitable date for the next meeting and to produce agenda for the next meeting incorporating any topics suggested by members and action points agreed today:

• a paper for discussion covering risk and the interaction with UK government regarding investment projects, including work being undertaken to examine how public sector expertise and assets in Scotland can be used to promote business and investment opportunities in and from overseas markets
• An oral report on the feasibility of holding the Trade Board meeting in London during 2018
• George Burgess and Eric Balish to bring paper to next meeting examining support for businesses on international finance issues, including how best to link businesses with expertise available in banks
• a paper for discussion on the Digital Entrepreneurship Hub developed by Opportunities North East (ONE)
• SG update paper to include a summary of innovation activity already in play

At a future Board, a delegate from the Irish Investment Network to present on how Ireland approaches trade and investment opportunities.