Modelling impacts of free trade agreements on the Scottish economy: policy summary

Conclusion

While the analysis explores the UK-EU TCA and four non-EU FTAs agreed or under negotiation by the previous UK Government, the current UK Government is largely continuing with the FTA programme of its predecessor.

Economic analysis carried out through this project demonstrates that the generally negative effect of the TCA significantly outweighs any small positive impacts of the new FTAs.

While this analysis has only considered four non-EU FTAs, it is expected that the cumulative impact of the four deals analysed in this report combined with trade agreements with other non-EU partners, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), New Zealand and others, would still likely be outweighed by the negative impact of the UK–EU TCA.^[11] Fundamentally, for Scotland, as for the rest of the UK, the current UK FTA programme has not made up for the lost trade as a result of EU exit.

This analysis therefore again highlights the significance of UK-EU trade among the suite of the UK’s trading relationships, demonstrating the importance of maximising opportunities to build upon the existing TCA and improve trade ties with our nearest neighbour.

Non-EU FTAs do show some benefits for output and employment, although at a sub-sectoral level this can mask wider winners and losers. This shows the importance of the Scottish Government continuing to engage constructively in the UK FTA programme. Results show that Scottish manufacturing sectors are among those expected to benefit most from UK FTAs with Australia and India, while more granular level results focused on the agri-food and textiles sectors demonstrate a pattern of winners and losers from these agreements. These kinds of results will inform our engagement with UK Government on FTAs, supporting our efforts to ensure that Scotland’s interests are protected and opportunities for our businesses are promoted.

The findings also confirm the importance of the Scottish Government’s work to understand and address the differential impacts of trade. For example this supports our efforts to address the gender export gap in Scotland, work which also draws on the findings of research commissioned by Scottish Government. That research aims to better understand the difference greater participation of women in exporting could make to the achievement of wider trade and economic targets, and how we could encourage and support that participation.